Could Cisco and BMC become more than partners?

Analysts predict the networking giant could be in the market for one of four big management software makers

As Cisco makes an aggressive play for data center market share with its California blade server, industry watchers speculate whether the vendor might also consider acquiring one of the big four management software makers to strike a potentially bigger blow to competitors HP and IBM.

Cisco's decision to incorporate BMC's management and automation technologies into its Unified Computer System (UCS) strategy has industry watchers thinking Cisco might be the vendor to displace one of the long-running management market leaders. BMC, CA, HP and IBM earned the moniker "big four" years ago and have all have managed to maintain their market dominance. Yet advanced data center technologies such as virtualization are driving the need for more control, management and automation technologies in enterprise IT departments -- something Cisco seemed to realize when it decided to partner with BMC, among several other vendors, with its latest data center play.

"I could be wrong, but I'm thinking there will be no hardware-only computing vendors by the end of this recession. The perceived customer value for hardware-only is too low and therefore margins are too low," says Jasmine Noel, co-founder and principal analyst at Ptak, Noel and Associates. "For customers with large data centers and server farms, the perceived value is having agile, policy-based computing and capacity management. Cisco, using next-generation Intel chips, could by itself deliver the first two parts, but not the management system."

With BMC, Cisco adds platform-agnostic management and automation technology. Competitors HP and IBM, despite managing heterogeneous systems, also sell servers, which analysts say could appear to bias their software toward their own gear. Also HP's recent data center overhaul pitch suggested customer also "rip and replace" their existing hardware to support HP's vision of an advanced environment.

"HP is pushing distributed server blades, IBM is working to reestablish the mainframe as key, and Cisco is setting itself to be an alternative approach to the provisioning of compute power," says Rich Ptak, managing partner of Ptak, Noel & Associates. "Cisco is setting itself up as the network-based provider of compute services, and BMC's approach to managing services doesn't concern itself with the underlying architecture, whereas HP and IBM seem to have a vested interest in specific platforms."

According to BMC, Cisco's UCS Manager product will be tightly integrated with BMC's Atrium CMDB and BladeLogic Service Automation offerings. Cisco is licensing the technology from BMC, meaning the BMC technology will ship as part of Cisco's product. Such product integration now could also lend itself to an acquisition later, analysts say.

"There is strong reason to believe the rumor that Cisco would acquire BMC is well founded, though it is still pure speculation at this point," Ptak says. For one, BMC's valuation is around $6 billion, a figure that could be offered by Cisco or Microsoft, yet this latest partnership points to Cisco becoming closer to BMC than other potential suitors. Analysts have suggested might also be shopping for advanced management capabilities.

"All the evidence points to the collaboration and work between BMC and Cisco going very smoothly and that kind of buy today would benefit Cisco dramatically. It makes all kinds of sense," Ptak adds. "The only hiccup is that Cisco has only recently indicated it understands the importance of managing everything in the network."

Cisco's move into data center blades puts it in direct competition with BMC competitors HP and IBM. While Cisco partners with both server vendors, the OEM deal with BMC would add another layer to that competitive relationship.

"Until recently Cisco never really appreciated that IT management is a set of complex, collaborative, interdependent processes which require more sophistication than their device monitoring and configuration tools. This is where BMC comes in -- they've been working on management issues forever," Noel says. "[As for competitors HP and IBM,] just as they had stopped worrying about Sun in the data center, they are faced with Cisco, and they can’t even use their knee-jerk response about not understanding heterogeneous IT systems management because BMC is tagging along for the ride."

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