Earlier this week I saw an article from the Motley Fool advising investors to be bearish on Brocade (to sell), highlighting the competitive challenges facing the company. Then, this morning I saw the challenges only get worse for Brocade, as HP and QLogic announced an OEM pact for Fibre Channel edge switches.
It seems to me that Brocade is getting hit from multiple angles all at the same time. It doesn't yet appear that their HBA/CNA business is a significant revenue driver as Brocade is still trying to grab traction in the market. The acquisition of Foundry has made them an Ethernet switching competitor to the OEMs they seek to service, and their edge switches just got the smack down from HP and QLogic in this newly announced OEM deal. It seems that while Brocade has been spending a majority of its time making sure its FC Directors ahead of the pack--which they unquestionably are--the focus on its edge switches seems to have been a secondary priority.
Today's news brings 8Gb stackable FC switches to HP enterprise accounts and gives them levels of flexibility and simplicity that were not available with their existing offerings from Brocade and Cisco. In fact, the analysts over at Wikibon performed a detailed analysis of stackable switches vs. non-stackable switches and found that the TCO for non-stackable switches is a massive 74 percent more expensive than for stackable switches. This news doesn't bode well for Brocade, whose 8Gb FC edge switches are non-stackable. It will be interesting to see how Brocade counters this move by QLogic which appears to be designed to expand their market share in Fibre Channel switching.
While Cisco has a stackable capability with its edge switches, there is no 8Gb FC connectivity option, which currently puts them a generation behind. Cisco will need to step forward quickly with 8GB FC in order to stave off competitive pressure now being applied. While it remains to be seen just how much traction HP and QLogic will gain with this new OEM pact, a few things seem clear at the moment:
Tier 1 vendors will increasingly thin out their technology portfolios in 2010, eliminating or marginalizing those suppliers that pose some form of competitive threat, whether in servers, storage, software, services or networking.
