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Cisco's IT services push causes concern

A recent acquisition has broadened Cisco's IT services capabilities, but one analyst says Cisco's partners may suffer as the networking giant looks to master new markets.

As part of its ongoing quest to master new markets, Cisco Systems Inc. last year acquired remote IT management provider NetSolve Inc. According to one analyst, that acquisition could create a ripple effect significantly impacting the IT services market.

According to Gartner principal analyst Eric Goodness, Cisco's entry into this market may compromise IT services pricing, upset partners and strangle outsourcers' ability to compete.

An end user won't care what label is on the box.
Eric Goodness
principal analystGartner

In a statement, Cisco said it plans to offer customers a way to monitor performance of its infrastructure products in real time by leveraging NetSolve's technology, which is focused on monitoring and managing corporate internal networks and Internet systems.

Cisco said it plans to extend the NetSolve services and technology to Cisco products only, which would ensure its partners aren't devalued because they would retain their expertise as multi-vendor service providers.

In a Gartner research note, Goodness said Cisco will position the acquisition as a feather in its partners' caps, especially in the wake of growing remote management of IT infrastructure popularity. On the flip side, he said most system integrators see this as Cisco's hostile attempt to feed off high-margin IT services.

Goodness said he did not believe the strategy was hostile. However, he did consider it disruptive. He foresees Cisco's managed services offering to counter the larger trend of outsourcing enterprise networks, versus IBM's preferred method of reselling products required to add value to the customer.

"An end user won't care what label is on the box," Goodness said. "They care about availability or performance as contracted."

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Learn more about Cisco's purchase of NetSolve

Goodness strongly encourages IT services vendors to directly challenge Cisco's ability to provide multi-vendor network management. He said Cisco partners can still resell Cisco managed services, but use an alternate network and systems management platform for third-party infrastructure.

As Cisco's service offerings become more robust, Goodness forecasts less expensive price tags on networking technology because of recurring revenue streams from those services.

Karl Meulema, vice president of Cisco's customer advocacy group, agrees. He said many customers are currently paying high support costs or incurring significant costs in-house with inefficient, homegrown networking services.

By eliminating those expensive exercises, Meulema said a customer takes an expensive element out of the equation. He indicated a similar effect in store for their partners as the same service becomes much more cost effective to use Cisco's foundation.

Meulema said, in lieu of the trickle down effect, he expects Cisco's partners' customer base to experience a decreased price point as well.

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