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In March, on the day Cisco Systems Inc. announced it was entering the server market, the company posted a YouTube video championing its impact on future data centers. The head cheerleader: EMC Corp. chief executive Joseph Tucci.
“Without a doubt, Cisco is one of EMC’s most strategic partners,” Tucci said in the video.
Indeed, EMC (NYSE: EMC) has tethered its horse to the virtualized data center and, in some ways, to the success of Cisco’s (Nasdaq: CSCO) networking prowess. Hopkinton-based EMC will provide storage and data management systems to Cisco’s product line as well as co-develop new products for cloud-based data storage and management.
The two companies have worked closely before, but recent events are showing each company will likely need to rely on the other even more in order to preserve their stature in a rapidly changing IT landscape. And as product and market strategies intertwine, the partnership fuels speculation of whether the two could sometime become one. While officials at both companies deny recent movements as a trial marriage, both see the other as critical to long-term dominance.
“The key thing for us is, as the world has moved, our companies’ visions are very well aligned. As a consequence, our relationship over the last couple of years has grown,” said Simon Hayes, vice president for strategic alliances at Cisco, based in San Jose, Calif.
Analysts say the partnership is a logical step as both firms align themselves more vertically in the IT space.
“As data centers get more complex, a lot of these solutions will be sourced through a single vendor,” said Bob Laliberte, an analyst with Milford research firm Enterprise Strategy Group. “Does (EMC) need Cisco to be successful in cloud-based storage? Probably not … but it may be that aligning makes more sense.”
Any partnership relies on close, constant contact — and for EMC and Cisco, that begins at the top. Tucci and Cisco CEO John Chambers have been friends since both worked at Wang Laboratories in the 1980s. “A significant number of people are charged with making the relationship work, but when the CEOs are close, they’re really setting the level of enthusiasm,” said EMC vice president of technology alliances Michael O’Neill.
Massachusetts has been a key link to making that happen.
Cisco has steadily built up its presence in the Bay State since consolidating technology work on its New England Development Center in Boxborough in 2003. The campus is a relatively short half-hour drive along Interstate 495 from EMC’s Hopkinton headquarters, and some of its workers directly collaborate with EMC staff on its unified computing systems products.
Cisco’s Boxborough facility chief, Paul Bosco, said he is in regular contact with EMC chief technology officer Jeff Nick on various projects, and O’Neill and Hayes also communicate frequently on the West Coast.
The two are also investing in future data center product development, teaming up with a consortium of academic institutions to open a $100 million high-performance computing center in the city of Holyoke, in western Massachusetts.
“It quickly enables you to look into applied research and R&D together,” O’Neill said. “The opportunity we have with the high-performance computing center in Holyoke is just the beginning of what we can offer in the future.”
The companies’ interactions are just as frequent in Silicon Valley. Much of the work at EMC’s Santa Clara Innovation Center, a mere three miles from Cisco’s San Jose headquarters, is dedicated to product developments to meet specific customer needs, and O’Neill said the group is involved in developing interfaces and specialized applications for joint EMC-Cisco product systems.
Yet such a close alignment nonetheless fuels speculation of what this could mean for both firms’ futures. Waves of chatter about Cisco’s desire to acquire EMC have ebbed and flowed over the years, and the launch churned the rumor mill. Neither firm would discuss the acquisition talk, but both O’Neill and Hayes said such talk had little impact on the day-to-day interactions.
Ultimately, the success of the partnership will be measured by specific returns on investment, O’Neill said. He added the company regularly measures performance in various areas of the relationship on both quantitative, such as new leads and sales, and qualitative results.
Analysts say any potential impact on either firm’s balance sheets is years off.
“We believe (the partnership) could present a promising opportunity for EMC if Cisco is successful, but we would be surprised if it moved the needle over the next couple of years,” wrote Barclays Capital analyst Jeff Kavaal in a June research note.
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