The joint venture between Cisco and EMC to create and sell Vblock converged infrastructure, now known as VCE, formerly Acadia, the VCE Coalition and the VCE Company, has been difficult to fully understand. A Vblock takes the pieces from the parent companies, integrates them and wraps them with software and services to deliver a solution that simplifies IT. The money trail between the parent companies, funding salaries of more than 1,400 employees and profit or loss is a bit more complex. While it is often said that the investments are losses, Wikibon Chief Analyst Dave Vellante said years ago that EMC only bleeds green.
VCE is without question in the vanguard of pushing convergence to the marketplace, yet despite all of the buzz that this segment of the market gets, VCE is one of the quietest $1B companies in tech. The ownership of the company and governance model is now simplified as VCE is moved into the EMC Federation, answering any questions about dissolution or exit strategy.
According to the news release, EMC increases its share in VCE and Cisco dials back from 35% to a 10% ownership; VMware maintains a small investment, while Intel has completed its involvement and is no longer an investor. VCE will maintain its brand, full complement of employees and management. VCE President and CEO Praveen Akkiraju now have a seat at the EMC Federation table, reporting to EMC II CEO David Goulden, similar to RSA. With an updated $2B revenue run-rate, six quarters in a row of over 50% year/year growth andupdated product portfolio including the latest Cisco UCS offerings, it’s clear that VCE provides a substantial portion of UCS revenue and GTM strategy. That being said, Cisco is partnering with a broad spectrum of storage partners; perhaps Cisco is getting pressure to reduce investment into VCE. Cisco has signed a long-term resale and support agreement, which will assure that the tight development and support efforts with VCE continue.
As EMC, Cisco and VCE all look to build and deliver solutions for a software-led and cloud-enabled world, there will be plenty of opportunities to work together. Vblock customers are often among the early adopters of technologies such as Cisco ACI and VMware NSX, and it will be in VCE’s best interest to be the Switzerland in such skirmishes, staying close to customer requirements without making too much noise either way. VCE, EMC and Cisco all face threats from open source and hyperconverged (aka Server SAN) offerings; this restructure of ownership should enable, not limit, options at embracing/attacking new opportunities.
Action Item: The question of the long term landing place of VCE is now answered: It is an EMC-led converged offering that includes Cisco components. With a “permanent home” inside the EMC Federation, VCE can continue to grow and mature its offerings that delivers cloud economics by streamlining and simplifying user operations.