Both companies are likely to continue building their forces through acquisitions, UBS Warburg analyst Nikos Theodosopoulos wrote in a research note. "We expect the competition between Cisco and HP to be intense over the next few years," he wrote. They are likely to use aggressive financing deals to win customers, he wrote.
As HP bulks up to take ground from Cisco, the latest development hurts it more, according to a research note by Ovum. "It appears that HP needs Cisco more than Cisco needs HP, with the 3Com acquisition expected to still take some time to be completely integrated," the analyst company said.
However, both Cisco and HP are smart enough not to let their rivalry hurt customers who bought into the two vendors in happier times, analysts said.
"Customers will not be forced to choose between one and the other," Schuchart said. However, "They might be asked," he added.
Both companies are likely to "strongly encourage" their customers to standardize on their gear, said analyst Gordon Haff of Illuminata. The good news is that encouragement will probably come in the form of financial incentives in many cases, he said.
For its part, Cisco said it will honor Cisco customer service contracts with HP customers and has contacted HP about crafting a new agreement that better reflects the companies' new relationship. "We will continue to work with HP wherever our customers expect it and where it makes sense for our business," said Keith Goodwin, senior vice president of Cisco's Worldwide Partner Organization, on the webcast.
Agreements under which Cisco resells HP products on an OEM basis will not be affected, a Cisco spokeswoman said.
The consolidation of enterprise IT companies that helped drive Cisco and HP apart is likely to affect customers of all major vendors but may not be all bad, the analysts said. The "re-verticalization" of IT is the latest stage of the cycle that saw computing move from totally proprietary systems such as mainframes and minicomputers to the decentralized, open architectures of PCs and Ethernet LANs, Haff said. IT departments have benefited from the high volume and falling prices of standard components over the past several years, but those parts are increasingly hard to piece together into working systems, he said.
As vendors including Cisco, HP, IBM, Oracle and Dell try to supply all parts of a data center, on their own or through tight partnerships, they will probably help to ease some of the pain of that complexity, Haff said. This could be bad news for some third-party system integrators that have done some of the heavy lifting, he said. And all is not lost from the era of "best-of-breed" IT, he added. Anyone who wants to build their own systems in-house can still do so.
"We're not moving back to the old days, really," Haff said.