When I spoke to Jim Metzler about the hot networking trends to look out for at the show, he concluded our conversation with some market insight: “This is a critical Interop. The fact that Cisco is no longer BFF with HP and IBM is kind of a cloud that overhangs a lot of what’s going on.”

No doubt there is a pall cast over Cisco and its major partners as they gear up for Interop and strategize to keep their top dog status. Logic, and a memo from John Chambers himself, would dictate that Cisco will focus more on core routing and switching, as well as winning back network engineers who make up a significant percentage of the Interop attendee list. Most Cisco users and spectators, yours truly included, are willing to cut Cisco some slack despite recent problems. Any company with expectations as high as Cisco’s is bound to make some missteps, especially during an extended recession.  And, hey, I like my Flip, so I can forgive and forget. But early indicators suggest the company may not be seizing the opportunity to fully redeem itself,  instead allowing the competition to creep in and steal customers and market share.

So we’ve all had our eye on Cisco, and in the past month the company has made some interesting moves, some that seem extremely smart, and some that are just insulting to our intelligence.

Fast forward to today. This morning at Interop, Cisco CIO Rebecca Jacoby has a primo keynote slot and a chance to boost her company’s image with the folks who buy the bread and butter of its existence, networking hardware. The captive audience pensively anticipates her arrival onstage to talk about those boxes they love….Oh, wait, she isn’t talking about switches and routers. She’s talking about IT services, lots of business productivity statistics, and about someone who had a heart attack but can Facebook about it in the hospital. Huh?

Luckily this is not my first confounding keynote, so I can connect the dots here. Yes, IT shops are building private clouds that rely on networks. So networks will be a delivery platform for services, and the networking team will be responsible for meeting certain requirements for applications and service performance. And mobility and access control are important. But we have been hearing this same reasoning for years. What networking pros really want to know is how to build and troubleshoot the nuts and bolts of the network underneath. I can understand conceptually why Cisco might have chosen to talk about this, but I seriously doubt a vague romp through the land of service delivery will help to restore faith in the biggest network equipment maker in the world. Enough vendors are on the cloud/services bandwagon — can’t we get back to networking?

Not only may the Cisco keynote miss the mark on rallying the troops but it’s possible that the company’s show floor booth will  linger under a haze of gloom. Yet I predict quite another atmosphere in the booths of HP, Juniper, Brocade, and Arista, to name a few. These companies — many sporting former Cisco employees at very high levels –could capitalize even more than they already have on any weakness Cisco reveals.

HP has gained significant market share, partly due to its acquisition of 3Com, but no one can dispute its aggressive attack on the networking market. The company yesterday announced its HP Flex Network Architecture, which includes — you guessed it — actual core switches aimed at flattening the campus LAN. And Juniper’s QFabric  is being recognized as a finalist in the Best of Interop awards, as is Alcatel-Lucent for its data center switching fabric. Brocade also announced a new offering (some real live hardware components included) for building data center fabric last week.

The networking marketplace is exciting once again. Cisco may have fumbled the ball, but we should be grateful because that has opened up the field for more innovation and competition, eventually resulting in better technology and products. Attendees at Interop will be able to see the vendors duking it out live for a few days, and we’ll be following it on our Interop 2011 special coverage page.

The memo was long on strategy and vision and short on specifics. I have no doubt the specifics will make headlines very soon.  Chambers warned employees that Cisco will “take some bold steps” and “make tough decisions.” It’s hard to say what that means. Will he sell off or shutter certain businesses that aren’t performing? Will Cisco buy more companies to fix gaps in its product portfolio or replace disappointing products?

I’m not a Cisco customer. I’m just a journalist who talks to a lot of Cisco customers, analysts and Cisco employees. All I can offer are impressions I’ve received from those conversations. I will say this: Cisco is good at talking to CIOs, but it’s stumbled recently in how it talks to networking professionals. And networking professionals are Cisco’s core customers. Cisco has done a good job of presenting architecture to CIOs. Borderless Networks really appeals to CIOs, for instance. But routing and switching needs to be sold to network engineers and network architects. I don’t think that audience is liking the messages it is receiving right now. Usually those messages just lead to more questions.

Just the other day Cisco rolled out a huge slate of data center hardware and software products centered mostly on its Nexus switching line and its Unified Computing System servers. Lots of interesting boxes, like the Nexus 3000. Lots of interesting software and services upgrades, like multihop FCoE support. But overall, there was just too much in the presentation. Too many products at once.

I usually budget 30-45 minutes to talk to a vendor about a product rollout. And most vendors will present me with two or three major hardware or software elements in their news. The presentations are focused. With Cisco, there are 15, 20, 25 different elements. Some of them are completely unrelated to each other. Some products, like the ASA Services Module for the Catalyst 6500, get a single bullet point on a slide. Why can’t that product merit its own press release and briefing? I’d sit down to hear more about it.

When Chambers talks about discipline and focus, this is what I think about. I know that Cisco’s marketing and PR team, which features an army of extremely talented and passionate people, would love to give these smaller products more time – rather than slapping them onto the end of a larger announcement.

I can’t help but think that the same culture that is forcing little ace products to be lost in the shuffle with larger architectural announcements like data center transformation and Borderless Networks is also a problem in the product development and engineering side of the business. And that’s what has many long-time Cisco customers frustrated and worried. That’s why they keep picking on Cisco for buying companies like Pure Digital Technologies, the maker of the Flip camera. Cisco can hand those Flip cameras to VARs at its partner summit and tell them that it’s a good business tool. Maybe Cisco is right about that, but should Cisco really be making the Flip? Network engineers say no.

I’m excited to see what kinds of changes Cisco makes in the coming months. Despite all the doom and gloom, the company is still a leader in most of its markets. It’s still innovating. It still has loyal customers. This is about Cisco staying in that position, not about getting back into that position. To execute on that, Cisco needs to keep talking to the guys who push packets.

Cisco has been top dog in the enterprise networking market for quite a number of years. You can attribute its dominance to a variety of factors. It generally produces good, reliable technology that its customers are comfortable with.  It generates tens of billions of dollars in annual revenue and is highly profitable, which means customers can rest assured that Cisco will be around for the long haul to support and advance its products.

Cisco also tends to stay ahead of the networking industry’s innovation cycle. It has the resources available to drop $1 billion on research and development for a new product line such as its Nexus data center switches. And where it doesn’t lead in innovation, it can pick up a competitor like the wireless LAN vendor  Aironet Wireless Communications.

No other vendor in the networking market has the ability to do all these things, at least in the North American market. There was a time, 10 years ago when companies like Nortel and 3Com seemed poised to bring Cisco down a notch, but neither company executed when they had the opportunity. Nortel collapsed and 3Com retreated.

For much of the last decade, most of Cisco’s competitor’s in the enterprise networking market have been spunky upstarts (Force10, Extreme, Enterasys, etc.) rather than multi-billion dollar industry giants.

Things are changing. HP, which has competed for years on the low-end of the networking industry with its ProCurve brand, acquired 3Com earlier this year. The deal was struck shortly after 3Com reinvented itself with its H3C brand of Chinese-developed high-performance networking products.  3Com was showing some promise with its new products, but at the time of the HP acquisition it had not yet succeeded in establishing a foothold in the market outside of Asia. Given its overall status as a gigantic, profitable IT vendor, HP now has the opportunity to compete with Cisco as a peer in the networking market… if it can executive its 3Com acquisition and convince Cisco customers to consider alternative vendors in critical parts of their networks.

Now we have indications that IBM is leaning toward a return to the networking industry. IBM made news today with its plans to buy Blade Network Technologies, a start-up which specializes in top-of-rack and blade chassis data center switches. It produces switches for both IBM and HP’s blade server chassis lines and it has a close relationship with Juniper Networks, itself an up-and-coming networking vendor which has a venture capital stake in Blade.

You may recall that in December IDC’s chief analyst Frank Gens predicted that IBM would buy Juniper in 2010. This Blade Network Systems acquisition would appear to bring Juniper and IBM closer together than ever before. If Gens’ prediction of an IBM-Juniper marriage comes to pass, networking pros will suddenly find themselves in a position they’ve never been in before: A world where three of the world’s largest technology vendors all have well-regarded portfolios of enterprise networking products. Cisco, IBM and HP.

There’s an old adage in the industry that no one ever got fired for buying IBM. In recent years the term has been adapted by Cisco customers, many of who say “No one ever gets fired for buying Cisco.” Could networking pros soon find themselves saying: “No one ever got fired for buying switches from IBM, HP or Cisco?”

A similar supply chain crunch struck the wireless LAN industry last fall when a surge in orders for 802.11n enterprise wireless LAN gear caught many vendors off guard. Aruba was forced to push back a product announcement by a week, due to this shortage.

Now Cisco is dealing with its own unexpected surge in orders, and its supply chain is struggling to deliver.

Cisco helped create this supply chain disruption, according to Jerald Kolansky, of the consultancy Gerson Lehman Group and a former executive with semiconductor firm PLX Technology. Kolansky wrote on his firm’s website that Cisco cut orders for supplies drastically in the fall of 2008 with little warning for its suppliers. This forced suppliers to make drastic cutbacks of their own and they are now struggling to ramp up production again.  Kolansky wrote:

Firms such as Cisco have reaped what they sowed. If they had been more willing to share the pain and in fact had not overreacted in cutting orders they would not be in the situation they are in today.

Bits quotes IDC’s chief analyst Frank Gens:

Networking, Mr. Gens says, is increasingly part of the package of capabilities the largest technology companies must offer corporate clients. He points to Hewlett-Packard’s recent purchase of 3Com and Cisco’s partnership with EMC as evidence of the trend.

“If you are going to be in the hardware systems business,” Mr. Gens says, “you need network competence.”

This year IBM has stepped up its networking business, first with an announcement in April of a broad OEM agreement to sell IBM-branded Brocade Ethernet products. Then a few months later IBM announced an expansion of that deal with Brocade and added Juniper and Cisco switches to its OEM offerings.

In IDC’s prediction document (which you can download for free), IDC admits that the IBM-Juniper prediction is, in basketball terms a “3-point shot.” But IDC says this prediction is driven by the “growing importance of in the IT world – especially with the emergence of cloud computing and the explosion of mobile devices” which are driving the convergence and integration of the network with computing and storage systems.

A purchase of Juniper seems like a logical step for IBM, if it wants to buy its way back into the networking business whole-hog. Although Juniper is probably best known as a service provider equipment vendor, it has made big strides with its enterprise Ethernet switching and data center networking business over the last year or so. IBM would certainly see the Juniper acquisition primarily as an opportunity to add data center networking into its overall product portfolio.

A IBM-Juniper merger would open the door to a huge three-way data center war among IBM, Cisco and HP. All three would offer soup-to-nuts technology for the data center. Buyers of networking gear would suddenly have three monstrous companies to choose from and companies like Brocade, Force10 and Extreme would be bigger underdogs than ever before.

Cisco’s leap into the server market seems to have some investors rattled. The profit margins on servers are so much lower than on some of Cisco’s core markets (switches and routers). As BusinessWeek quoted one investor who questioned Cisco CEO John Chambers at Cisco’s annual meeting earlier this month: “At what size does Cisco become so big and diverse that its growth and profitability will plateau?” Chambers’ answer: hopefully after he retires.

Analysts and investors are wringing their hands over whether Cisco can remain nimble as it expands into new markets and burns its longstanding partnerships with server vendors like HP, Dell and IBM. BusinessWeek points out that HP’s aggressive expansion into the networking market is in part a response to Cisco’s moves in the server market. However, among the comments on the BusinessWeek story, someone named “CS” disagreed that Cisco fired the first shot. “HP has been (unsuccessfully) targeting Cisco’s core market for years with ProCurve. Was Chambers expected to sit idle while one of his largest partners openly attempts to undermine him?”

I’m not quite convinced that ProCurve has been targeting Cisco’s “core” market for years. ProCurve greatest success has been in selling edge switches to the midsized enterprise market. Does that sound like Cisco’s core market? Prior to acquiring 3Com, did ProCurve have any core routers on the market? Did it have any switches that could creditably compete against the Catalyst 6500 or any of the new Nexus switches?

So who started this food fight? Once the fight has begun, does it really matter? No. It only matters who wins or loses.  Arguing over whether it was Chambers or HP CEO Mark Hurd who tossed the first plate seems like idle gossip.

Right now the winner looks to be enterprise customers. As Cisco expands and innovates, data center buyers have a new high-end server vendor to consider. And as HP integrates 3Com and H3C into its existing ProCurve division, enterprises networking buyers will find they have a truly viable alternative to Cisco to consider. Choice is always a good thing. And increased competition between vendors doesn’t hurt, either.

Network World’s Tim Greene cites an interview with Mario Nemirovsky, the founder and chief scientist at ConSentry, who says that the company closed its offices yesterday and that employees were cleaning out their desks.

ConSentry’s website makes no mention of the company’s failure as of this afternoon… but who knows how long the website will remain active.

Just last month ConSentry was making a modest PR push with its concept of “LAN sprawl,” increased network complexity in enterprises that it claimed was driving the need for smarter network switches. While some enterprises are seeing the need for smarter edge switches, many other enterprises are content with dumb edge switches. In the end, I suppose there just wasn’t enough room in the market for another smart switch vendor.

I received a press release this morning from Juniper specifically detailing the joint work Juniper and IBM are doing in cloud computing, such as Juniper collaboration with IBM to develop a single data center fabric for cloud computing with its Juniper’s Stratus Project.

Juniper also pointed out that the Brocade OEM agreement is only part of IBM’s larger Dynamic Infrastructure announcement today that highlights a new series of products and services from IBM aimed at helping enterprises build next generation data centers and move into cloud computing. Juniper is a critical participant in IBM’s strategy, Juniper points out..

In the Juniper announcement, IBM vice president for enterprise initiatives Jim Comfort said:

Juniper is an important supplier of networking products. IBM is already a reseller of Juniper’s Ethernet switches and routers and we continue to look for opportunities to expand this relationship to provide increasing choice for our customers and the flexibility to support their dynamic infrastructure needs.

Matthias Machowinski, Infonetics’ directing analyst for Ethernet voice and data, said that 10 GbE port shipments in particular are driving overall growth in the Ethernet market. Enterprises are pushing to bring 1 GbE connections to desktops, which requires 10 GbE uplinks to the network edge. Because of this trend, 10 GbE port shipments grew by 78% last year, compared to overall Ethernet market growth of 2%.

The first pre-standard 100 GbE port shipments are expected to begin in late 2009. I’m already starting to hear from a few vendors about how they’re going to position themselves for that.

The ten-year deal was struck between Aviva and EDS, HP’s IT outsourcing business. According to HP’s announcement of the deal, EDS will take over and modernize Aviva’s two UK-based data centers. Both HP and Cisco “will provide select tools, technologies and resources to EDS in support of Aviva,” the announcement stated.

As I’ve mentioned before, HP and Cisco useed to have a friendly relationship when it came to selling into enterprise data centers. HP sales reps often received incentives to sell Cisco networking gear along with HP servers, storage and software. But the data center landscape has changed in recent years. Cisco is increasingly moving in on HP’s territory with its Data Center 3.0 campaign and its rumored entry into the blade server market. Meanwhile, HP has renewed its focus on its networking division, ProCurve. It has launched its own purpose-built data center switches. Clearly these two companies will be battling for data center domination rather than cooperating with each other.

Although HP is trying to compete head-to-head with Cisco in data center networking, deals like Aviva are still going to happen. It’s unclear how much HP’s EDS division will push ProCurve gear over Cisco gear if it affects the EDS’s ability to win a big data center outsourcing deal like this. ProCurve is certainly making a name for itself, but it still lacks the high-performance 10 gigabit Ethernet switching pedigree that other companies such as Cisco, Foundry, Extreme and Force10 have.