Cisco’s stake in Parallels ramps up rivalry with VMware

Cisco recently announced it has purchased a 1 percent stake in Parallels, a virtualization and cloud services company. In the virtualization world, Parallels is perhaps best known for its desktop virtualization software on a Windows PC or a Mac computer, which allows a user to simultaneously run Linux, Windows, or Mac OS X operating systems and applications on a single machine without having to reboot.

No financial details were disclosed in the official announcement; however, the company insisted the investment would not preclude Parallels from a possible future initial public offering. As part of this new investment, Cisco will get a seat on Parallels’ board of directors. That, in itself, might be enough of a wake-up call to VMware.

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The investment is an interesting move for Cisco, with a lot of implications. It shows that Cisco firmly believes in Parallels’ overall offering. Beyond its desktop virtualization technology, Parallels offers its Parallels Cloud Server solution made up of the company’s Cloud Storage technology with Parallels Container and Parallels Hypervisor. The technologies are primary aimed at hosting companies — an area where Parallels has enjoyed much success, allowing hosting providers with containers to easily and more cheaply deliver Windows Web servers to multiple clients.

Parallels has also seen success within the small-to-midsized businesses, both great markets for Cisco to expand its presence into by selling its own brand of servers, networking, and WAN optimization equipment.

“Parallels is committed to enabling our service provider customers to offer the most comprehensive, seamless and flexible set of cloud services for their SMB end-users,” said Birger Steen, CEO of Parallels.

“By strengthening our collaboration with Cisco, Parallels is focused on accelerating its growth and offering an end-to-end solution for cloud service providers,” he added.

Cisco and VMware have been close partners for many years, with Cisco relying heavily on VMware’s virtualization and cloud software, as well as storage products from VMware’s parent company, EMC. The three have been collaborating on a successful joint venture known as VCE, which sells a popular data-center-in-a-box called a Vblock, providing customers with a complete hardware and software solution stack that eases the process of virtualizing the data center. But more recently, there have been signs of a slight fracture in that relationship.

Back in July, VMware bought network virtualization startup Nicira for $1.26 billion. Nicira, which helped to nurture the field of software-defined networking (SDN), offers a disruptive technology that puts VMware and Cisco on a collision course as companies build their networks in the future. This new technology is aimed at transforming Cisco’s core networking industry in much the same way as VMware’s server virtualization technology has transformed the x86 server industry.

That acquisition may have been a bit more than Cisco was prepared to swallow. The move was obviously a challenging proposition to Cisco’s sweet spot, and it goes against everything the networking vendor has been telling its own customers for years.

This latest investment in Parallels wasn’t Cisco’s first move in building some separation between itself and VMware. In October 2012, Cisco announced the release of an edition of OpenStack that ultimately competes with VMware’s cloud operating system, vCloud. Even more recent, Cisco acquired Cloupia, a cloud management company that gives Cisco yet another piece of the cloud puzzle to compete with VMware head on if and when it so chooses.

Cisco vice president for corporate business development Hilton Romanski said, “In collaboration with Parallels, we are focused on offering a more efficient and easier-to-use cloud services delivery model for service providers. We are particularly excited about Parallels global presence — including its operations in Russia — which affords Cisco a continued opportunity to fuel innovation there and around the world.”

As VMware expands into Cisco’s domain, Cisco will now further expand into VMware’s domain with the help of a few select acquisitions and a small investment in Parallels.

A 1 percent stake in Parallels certainly won’t break the bank at Cisco, but it is obvious that this small investment can have far-reaching implications in the ongoing complicated relationship between Cisco and VMware.

Expect to hear more about this news one week from today at the Parallels Summit event in Las Vegas, Nev.

This article, “Cisco’s stake in Parallels ramps up rivalry with VMware,” was originally published at InfoWorld.com. Read more of David Marshall’s Virtualization Report blog and follow the latest developments in virtualization at InfoWorld.com. For the latest business technology news, follow InfoWorld.com on Twitter.