Almost nine months after gaining U.S. Department of Justice clearance, the $2 billion network and service alliance between Cisco Systems Inc. and IBM Corp. is benefiting both participants.Cisco says revenue gained from sales of switches and routers via the alliance has exceeded expectations threefold. The competitive barriers that once existed between Cisco and IBM have been broken down such that IBM's Network Hardware Division (NHD) customers now have "comfortable" access to Cisco technology.
"There is now an unleashing of the pent-up demand between IBM Global Services and the Cisco field force," says Michael Kay, Cisco's marketing manager for the alliance. Cisco estimates that 50% to 60% of the NHD installed base in the U.S. has completed the migration to Cisco.
IBM reports its massive Global Services integration division is also now free to address the pent-up demand by selling and servicing Cisco routers and switches, and helping the NHD installed base migrate off of the IBM hardware.
Among its major service packages is an SNA/Token-Ring-to-IP/Ethernet migration implementation.
"We have exceeded our business expectations," says Towney Kennard, vice president for strategic alliances at IBM Global Services. "We have embarked on more than 120 networking and e-business engagements worldwide since this partnership was approved by the Justice Department in December. Our customers have been very receptive to our alliance."
One user notes that IBM's Global Services division is selling Cisco products "like crazy."
"In the end, the customers will be better off," says the user, who operates a large financial services network and requested anonymity. "As time goes on, and Cisco takes more and more of the channel connections with their [Channel Interface Processor], the folks who do not move off their 3745s will receive less support, no upgrades, and will have no ability to sell their old [front-end processors], since no one will want them."
Cisco and IBM announced their arrangement in September 1999. IBM sold its NHD routing and switching technology to Cisco and agreed to migrate NHD accounts to Cisco. IBM also agreed to service and support Cisco accounts, including those migrating from NHD products to Cisco gear.
Cisco, meanwhile, agreed to purchase parts and components from IBM for five years in addition to acquiring the NHD routing and switching technology. To date, Cisco has not made use of the NHD routing and switching technology, Kay says.
The alliance with Cisco was an admission by IBM that it could not compete with Cisco in company networks beyond IBM's traditional SNA and Token-Ring installed base.
"I think it gets an 8.5 [score]," says Tom Nolle, president of CIMI, a Voorhees, N.J., consultancy. "It's certainly served Cisco's purpose of gaining an entry into IBM accounts, and it served IBM's purpose of getting them out of a business they weren't winning in."
One big win for Cisco is the United Parcel Service of America Inc. account. At last count, UPS was using 2,000 of IBM's 2210 routers in its global network.
However, UPS will be replacing those with Cisco's WAN-enabled Catalyst 6509 switches once the 2210s have exhausted their useful life, a UPS spokeswoman says.
UPS will replace 75 to 100 of the routers with Cisco switches by year-end, the spokeswoman says.
"We're trying to get the most bang out of what we still have," she says. "But as new deployments are made, Cisco routers are replacing IBM on an as-need-to-be-replaced basis."
There remains, however, some healthy fight between Cisco and IBM, despite the alliance. IBM continues to view Cisco as a competitor when it comes to legacy SNA/Token-Ring equipment - LAN switches, hubs and adapters, and mainframe to network communications products, such as front-end processors (FEP) and IBM Open Systems Adapter (OSA) Express cards. The OSA Express card fits into the mainframe and links its memory to a LAN for high-speed communications.
The FEPs and the OSA Express card compete against Cisco's CIP, which connects SNA mainframes to an IP WAN.
During the next few years, IBM expects to migrate users of its 3746 FEP to the OSA Express card, which will cost less and run IP and other traffic faster than the FEP can. IBM will also continue to offer upgrades for the older 3745 FEP indefinitely, such as improving the device's ability to handle more sessions, which will let users consolidate the number of FEPs in their networks.
Though Cisco's alternative of CIP-equipped routing is compelling from a cost and technology growth perspective - because firms are adopting IP as their corporate network standard - some users are going to be keeping their IBM SNA infrastructure for some time because it will take years before IP can match SNA's quality-of-service features, says David Boyes, an engineer with Dimension Enterprises, a Herndon, Va., data center design and testing facility. The alliance will let users find ways to mix IBM legacy gear with Cisco IP gear and improve performance without sacrificing their investment, he says.
Nonetheless, there are many areas of collaboration and joint development between Cisco and IBM, Kay says, carefully guarding details.
IBM's Kennard says his company and Cisco are also collaborating to address the ISP and wireless markets.