Bloodied In Bentonville

Looks like Cisco vs. McData will go at least three rounds

February 18, 2006

1 Min Read
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3:20 PM -- As we reported this week, two vendors are slugging it out big time over a power user's storage business. And the carefully chosen wording on all sides tempts speculation. (See Cisco, McData Spar at Wal-Mart.)

Is McData faltering as it tries to regain momentum? That's possible, I guess, but doesn't tell the whole story. As an alert B&S reader posting on our message boards theorized, Wal-Mart may have put pressure on McData to lower its prices as part of its standard operating procedure with its vendors.

Disagree? You think those "everyday low prices" just happen of their own accord? The world's largest retailer and private-sector employer is plenty shrewd about how it manages its costs -- in this case, from the data center all the way out to the billions in credit card transactions it handles. After all, this is a company with banking ambitions.

If Wal-Mart is aggressively controlling its costs, we can't fault them. No vendor is in business to help its competitors thrive -- quite the opposite.

One thing is clear, though: One vendor will eventually win a dominant place in Wal-Mart's Bentonville, Ark., data center. Maybe Cisco will emerge with most of the storage business, or maybe McData will reassert itself. In any case, Wal-Mart's unlikely to split its business between the two, General Motors-style. (See GM Goes for New Outsourcing Model.) There's no real cost or competitive advantage for Wal-Mart to divvy up its SAN switch business. In storage, as in retail, to the victors go the spoils, even if there's a bit of blood on the data center floor.Terry Sweeney, Editor in Chief, Byte and Switch

Organizations mentioned in this article:

  • Cisco Systems Inc. (Nasdaq: CSCO)

  • McData Corp. (Nasdaq: MCDTA)

  • Microsoft Corp.

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