Cisco Just Found A Brilliant New Way To Beat VMware

Business Insider

Cisco just bought a small 1 percent stake in Parallels, best known for its software that lets you run Windows apps on a Mac.

The stake, however, gives Cisco a seat on Parallels' board.

It's an interesting move for Cisco with a lot of implications.

The software that lets you run Windows on a Mac, or more generally multiple operating systems on the same computer, is called virtualization.

That's what VMware does. And Cisco, once friendly with VMware, is increasingly butting heads with it in the data center.

Although Parallels is best known for the its desktop software, the company also has server virtualization technology. VMware's server virtualization software is its bread-and-butter product.

Cisco and VMware had been close partners until last summer, with Cisco heavily relying on VMware's  software and on storage products from VMware's parent company, EMC. The three of them were so cozy, they actually had a joint venture, VCE. VCE sells hardware and services to data centers and was pretty successful, reportedly selling around $1 billion worth of gear in 2012.

Then VMware bought a startup, Nicira, for $1.26 billion last summerNicira plays in the field of software-defined networking that completely changes how companies build networks. Its a disruptive technology that could really hurt Cisco.

The Nicira acquisition drew a line in the sand between Cisco and VMware with VCE caught in the middle.

But Cisco was far too dependent on VMware to declare all-out war immediately. Virtualization is a must-have feature for servers, so Cisco needs it for a popular line of servers it sells. Plus Cisco is a huge VMware customer for its internal IT systems.

This stake in Parallels gives Cisco direct access to alternative virtualization technology to use in its servers, which could set it up, possibly, to sever the VCE relationship.

It's not the first move Cisco has made to cut ties with VMware. In October, Cisco released its own version of a cloud-building tech called OpenStack. OpenStack scares VMware. It competes with VMware's prize cloud operating system, vCloud.

Armed with its own version of OpenStack, and a stake in Parallels, Cisco has way to ditch its internal use of VMware's software.

Plus, last month, Cisco bought cloud management company Cloupia, for an undisclosed sum. That means Cisco is assembling the pieces to not just ditch VMware, but to compete head on.

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