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Force10 Gets Big Blue Partnership

Light Reading
News Analysis
Light Reading
10/27/2003

Force10 Networks Inc. announced today that IBM Corp. (NYSE: IBM) will resell its 1-Gbit/s Ethernet and 10-Gbit/s Ethernet switches. The startup also announced the first customer win as part of the new partnership.

The National Center for Supercomputing Applications (NCSA) at the University of Illinois has selected Force10’s E1200 series switches for the second phase of its TeraGrid project. The TeraGrid, sponsored by the National Science Foundation (NSF), is a multi-institutional endeavor, building one of the world’s largest grid computing networks. IBM Global Services provided integration services for the deployment.

IBM has been very involved with the TeraGrid project and other supercomputing research efforts (see Watch for the Grid). So the partnership makes sense, since Force10 was the first vendor to offer true line-rate 10-Gbit/s Ethernet switching in a fully meshed configuration (see First 10-Gig Ethernet Switch Arrives).

Cisco Systems Inc. (Nasdaq: CSCO), Extreme Networks Inc. (Nasdaq: EXTR), and Foundry Networks Inc. (Nasdaq: FDRY) have since introduced products that they claim can run at full line rate in certain configurations (see 10-Gigabit Ethernet Switches and Routers). Cisco began shipping pieces of its new 10-Gbit/s solution this summer. Foundry just shipped its new 10-Gbit/s switch last quarter (see Foundry Revenues Are Up), and Extreme expects to ship its 10-Gbit/s product in December (see Extreme Surprise)

Since Force10 first began shipping product last year, it has been very successful, particularly in the research community. Prior to the IBM deal, Force10 had announced deployments in other locations with the NCSA and the San Diego Supercomputer Center (SDSC). It’s also announced that its products have been selected by Argonne National Laboratory, California Institute of Technology (Caltech), Lawrence Berkeley National Laboratories, and The London Internet Exchange Ltd. (LINX), along with several other research institutions.

While the relationship is mostly geared toward the research community, IBM has also helped Force10 land at least eight Fortune 100 enterprise accounts, says Andrew Feldman, the vice president of marketing for Force10.

“This is a huge deal for Force10 or any small startup,” says Dave Passmore, research director for Burton Group. “Aligning themselves with someone like IBM is almost essential. Many customers have a hard time buying from startups.”

Going through a reseller such as IBM simplifies the sales process, says Feldman. With IBM as the systems integrator, Force10 doesn’t need to go through a separate approval process to get its gear into a network. It also helps simplify logistical details such as billing and payment for installed gear, IBM having already hammered out such matters.

Not only does it simplify the sales process, but the relationship also assures customers that they will be able to get full service and support through IBM Global Services after the gear is installed.

The relationship benefits both IBM and Force10, but it may ruffle a few feathers with some of IBM’s other partners, namely Cisco. IBM and Cisco have been close partners since 1999 when IBM sold off its networking business, which included all its switching and routing products as well as its patents, to Cisco for roughly $2 billion.

On Cisco’s third-quarter fiscal 2003 conference call in May, CEO John Chambers said that IBM was one of its “broadest, most strategic and most effective partnerships,” which has resulted in well over $1 billion worth of business to both organizations in the current fiscal year.

IBM currently resells a slew of Cisco gear into the enterprise, including some storage products and the Catalyst 6500, Cisco’s 10-Gbit/s Ethernet switch, which competes with Force10’s E-Series switches.

IBM’s relationships with Cisco and Force10 are non-exclusive, which means that it has the option of selling either company's product into an account.

“IBM is one of the world's largest technology companies,” says Feldman. “Storage today is still rather separate from IP/Ethernet networking. IBM can comfortably partner with Cisco on storage and Force10 in high-performance Ethernet networking.”

Passmore admits that there could be some overlap between Cisco’s Catalyst switch and the Force10 switch, but he says the two products are really geared for different applications.

“When you get into grid computing and supercomputer clustering, Force10 has a value proposition that Cisco can’t touch,” he says.

Other analysts agree that the relationship could cause some tension between the companies, but they say it’s not enough to destroy the Cisco/IBM partnership.

“Cisco and IBM have a strong relationship,” says Stephen Kamman, an analyst with CIBC World Markets. “I’m sure Cisco would not be happy to lose sales, but these are big companies. And as long as most customers keep asking for Cisco, I’m sure they won’t be too worried.”

Cisco was not available for comment by press time.

— Marguerite Reardon, Senior Editor, Light Reading

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