The End Of Pretend? Cisco Looks Set To Partially Exit VCE Joint Venture

Technology commentators, and especially those who cover cloud computing, have long scratched their heads over the long term prognosis for VCE. VCE is a joint venture between VMware , Cisco and EMC and seeks to take technology from all three companies (compute, networking and storage respectively) and package up as a kind of "one stop shop" for enterprise IT.

Which all sounds nice but ignores the increasing competitive tensions that exist - EMC now plays in the compute space (having recently acquired OpenStack vendor Cloudscaling) and VMware, post it's acquisition of Nicira is a strong networking vendor. Cisco, since its acquisition of OpenStack vendor Metacloud, also competes on many levels with both VCE itself and its co-owners.

I've long suggested that in an industry awash with so-called "frenemy" arrangements, this is one that tops the lot. Three vendors that frankly spend as much time tearing each other up in competitive deals as they do collaborating.

So it was interesting to read a scoop on Bloomberg that suggested that EMC is going to buy out much of Cisco's stake in VCE. Citing unnamed sources, Bloomberg reported that the suggested deal, due to be announced tomorrow, will still see Cisco involved, but at a much smaller level. EMC refused to comment on the rumor. The company however has announced a conference call tomorrow to discuss a "new business development".

VCE reported sales approaching $1.8 billion per annum a few months ago, up 80% from the year before. Cisco has invested some $716 million in VCE up to July 26 and held a 35% stake at that time.

EMC is, of course, looking at some pretty major structural changes. At the same time many other legacy vendors are looking at structural separations. The splitting up of VCE, in light of competitive tensions, makes perfect sense.