"This has left me with a lot of egg on my face because it was my decision to go with 3Com. We are now faced with ripping out £250,000-worth of 3Com equipment."
This was the reaction of one network manager last week who preferred to remain anonymous. The spark that lit his short fuse was 3Com's decision at the end of last month to whip the carpet out from under its high-end customers by announcing its immediate exit from the enterprise networking market.
The unfortunate user, a large UK energy provider, had a policy of standardising the network on 3Com. It is now looking to replace it all after 3Com's sudden decision to focus on consumers, small and medium-sized businesses, and service providers.
Following the flotation of its Palm business in February, 3Com is discontinuing its high-end local area networking CoreBuilder product line from 30 June.
It has expanded its alliance with Extreme Networks to offer a migration path for customers.
The energy provider's network manager was extremely sceptical about Extreme's ability to offer a viable upgrade path: "If I'd wanted to buy Extreme I'd have bought Extreme. Extreme is fairly small in the UK and I wonder how long it will survive without being bought."
3Com is also getting out of the wide area network business, shipping the last of its PathBuilder and NetBuilder products on 30 June, with customers being offered service and support for up to five years after that.
Customers and resellers are stunned by the announcement. "It has messed up our escalation plans for the network: if we want to extend it further, then we'll have to look at alternatives. I find it amazing that 3Com can just drop something that is so central to the way a medium-sized network works," said Alan Wyatt, IT manager at power supply manufacturer PMES.
Wyatt said that while 3Com wants to focus on the small and medium-sized enterprise market in the future, many companies such as PMES still require high-end networking equipment - and will now need another provider. "I have 210 staff here and we use a CoreBuilder," he said.
Another disgruntled financial services IT manager said he was buying-up discounted 3Com products from resellers to stretch out the life of his network. "I didn't pick 3Com because I thought it wouldn't be around tomorrow," he said.
A time to take stock
Analyst GartnerGroup says that customers should not automatically migrate to Extreme's offering but use this opportunity to reassess their core networking strategy. "By itself, 3Com cannot hope to offer large enterprises the end-to-end solutions and support that Cisco and Nortel can, nor can it sustain such a business model," said Gartner analyst Mark Fabbi.
Resellers have been taken by surprise as well. "It's unprecedented to just trash a business like this. 3Com has totally destroyed its reputation in the enterprise market. We'd sold our customers a strategy with a future," said Justin Mackey, technical director at reseller Pervasive Networks.
"'This has sent shockwaves to end-users and the channel. What could have been a gradual migration, 3Com is trying to do in a couple of weeks. If you are a company with a high-end network, it's not just about the product, it's a long-term relationship and now that has gone. Customers will feel exposed," said Richard Foskett, managing director of networking consultancy Rhetorik.
Feeling the squeeze
3Com's announcements are the latest and most visible chapter in an ongoing squeeze in the network market. IDC analyst Pim Bilderbeek said the 3Com announcement and Cabletron's decision to split into four is prime evidence that the market could not support so many large players. "We're seeing a shrinkage in the number of important players out there," he said.
In mid-March Nortel said it is creating a separate subsidiary for its Netgear home networking equipment to target the small and medium-sized business market exclusively.
Lucent also plans to spin off its PBX, cabling and local area network (Lan) business as a separate $8 billion (£5 billion) company by the end of September. The new company will include Lucent's Cajun Lan systems, its Definity products and its call centre business, and will employ 34,000 staff worldwide. Lucent chief executive Rich McGinn will focus on optical networking, wireless and semiconductors.
Cabletron has also split itself into four companies - Riverstone Networks, Enterasys Networks, Global Network Technology Services, and Aprisma Management Technologies. These companies will focus on the service provider, enterprise ebusiness, professional services and infrastructure management markets.
Only Cisco is unaffected by the spin-off mania - a reflection of how well it is targeting its core market. Last month it briefly overtook Microsoft as the highest valued company in the world. "If you look at the strategies of the big players, they are saying Cisco has won in the enterprise space and that rivals can't compete," said Foskett.
Going to Extreme's
Defending the migration path for enterprise customers, 3Com president Bruce Claflin claimed: "Extreme has a high level of performance and its technology is very similar to the CoreBuilder."
The market is going through a change in structure, says the 3Com chief, who argues that investors prefer clearly focused companies. "What has changed is that investors are looking at business segments which have a profile that they want to invest in - and they prefer pure-play companies," he said.
The move is, in part, a response to faster-moving smaller players, says Claflin. "Being good isn't necessarily about being big. What we are trying to do is focus on markets where we know we can lead. These markets we are leaving don't have growth, and we didn't have a strong position in the local area and wide area market."
Whatever the future potential of 3Com, the effect on existing customers has been dramatic. Whether or not it will be able to re-establish its credibility is unlikely - and its behaviour may be costly in the long run.
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