Rob Lloyd to CRN: VCE is a Huge Success

If you haven’t seen it, Rob Lloyd, the Cisco EVP for Worldwide Operations and Global Sales sat down with our good friends at CRN and gave a very insightful “state of the organization” interview.  It’s a fascinating read in many ways, particularly to see how some of the promised changes at Cisco are coming to fruition, and how they feel that positions them with regards to the competition.

Also interesting, and gratifying, are his expansive comments on VCE, our success and our close relationship with Cisco.  Since there’s a lot to dig through, I’d like to look more closely at some of the questions, and his responses.

Q: The big question I have is that based on what’s publicly available in your various filings, VCE is continuing to be operated at a loss. Cisco has a share of that loss, obviously. So how long do you keep funding VCE?

A: The answer to your question is, this is an investment we made in building a unique value proposition that is second to none. The success of VCE, going past $800 million in annualized run rate, that’s clearly going to drive $1 billion in data center infrastructure at the high end, and has been well worth the investment. We are extremely committed to the VCE model and extremely committed to the value we brought to customers. We think there’s a whole runway to expand the reach of VCE and our capabilities much more through the data center partnerships we share. We are committed 100 percent and achieved exactly what we wanted to, which is a unique model that no one else has. You will see announcements from others beginning to emulate the model that VCE established, and that adds credibility to the fact that we did the right thing.

Wow.  We’ve all heard the public comments from Joe Tucci and John Chambers, talking about how committed they are and how happy they are with the investments they have made in VCE, but it’s very gratifying to hear such a strongly worded statement from someone rooted in the tactical side of things.  Even better is that it seems to be an overwhelmingly positive, enthusiastic response to an unprompted, negative statement made by the interviewer.  There has been so much talked about with regard to the way that the principal investors report both their investments and their revenue from VCE it seems very strange that the interviewer hadn’t done enough homework to understand that his basic premise was incorrect.  Kudos to Mr. Lloyd for setting the record straight!

So, with a completely positive, forceful statement, you’d think that would be the end of the VCE questioning, right?  Well, no.

Q: But do you really need VCE? You’ve had astounding success with UCS and you get it as part of a package with the FlexPod model and other configurations, too. So why does Cisco need VCE at all?

Interesting follow-up question.  Despite stating that Cisco supports VCE 100%, the interviewer directly questions Cisco’s choice of business model, and completely misses the value to the customers that comes from a separate company driving the product.

A: I know what the difference is, and it’s a different value proposition. We are committed to that value proposition and expanding the options we have for partners.

There we go, back on track with that word “committed” again.  Surely that’s the end of the VCE questions…

Q: What is the big difference? Partners get the model and there’s no question they like the idea of the integrated stack, but why do you need the VCE company at all considering all the headaches VCE caused in the channel? Why do you need them when you can have a similar relationship to what’s there with NetApp for FlexPod?

My goodness.  Mr. Lloyd can’t possibly come out with another enthusiastic VCE response can he?  At this point he’s answered more questions about VCE than he has about HP!

A: The committed resourcing we put behind the level of integration with multiple platforms. The level of automation we’re trying to drive here is a differentiated offer, and I’ll come back to it one last time, the uniqueness of the Vblock offer is that customers are asking us to commit to that long-term integration and that’s reflected in the investments in VCE that we’re all going to continue to make and opening up that experience more in the future to offer options of consuming that. That’s why we’re going to mainstay the investment.

Bravo!  If I ever get to meet Rob Lloyd, I promise you he won’t be paying for his own bar tab.  Despite the interviewer not having done his homework on why Cisco invested in the original joint venture, why it makes sense for customers or what the difference is between a Vblock and a reference architecture, Mr. Lloyd continues to calmly turn away every pointed question.  But of course there are more.  Three more to be exact…

Q: So Cisco will continue to fund VCE?

A: Absolutely.

Q: You told me last summer that you had been personally involved in fixing the logistical headaches we’d seen from VCE, especially regarding the channel execution. What work did you do there?

A: You know, I think they solved a lot of the problems that existed themselves. We provided the feedback we heard from partners, and there has been huge progress. The No. 1 progress area has been the huge turnaround in Vblock delivery, the level of partner engagement, and we have some very successful stories we’d love to follow up with you on about how partners have been building VCE Vblock capabilities right into their core offers.

Q: VCE is a success?

A: VCE is a huge success. We made a market and achieved all of the objectives we set out, and achieved them probably faster than we expected.

In the final tally, CRN mentioned HP in three questions, Huawei in one, Dell in one and VCE in six.  I apologize if I find that incredible, especially with the huge impact that Cisco has in the competitive landscape.  I guess any press is good press, and while I’m extremely happy to see Mr. Lloyd’s comments and to see that CRN is obviously interested in the VCE story, I can’t help but think we, the readers, missed a chance to learn a lot about where Cisco is, the pressures they are facing and the state of their organization.  Maybe I am too close to VCE to understand why we’d be such a focus in this article, good press or not.

In the end, I want the take-away to be how much value and faith Cisco has in their partnership with VCE, and how successful that partnership has been in such a short period of time.  Mr. Lloyd said publicly what we have heard over and over from all of the parent companies and the VCE executive team from Michael Capellas down: we are unique in this space, what we do wouldn’t be possible from a partnership with a set of documents, the customers see that value as well and we are a strategic asset and GTM vehicle for the parent companies with a lot of commitment to increasing our scope and reach.

VCE is a huge success.  And there’s more to come.