The Battle for Bentonville

Two vendors are slugging it out big time over a power user's storage business. (See Cisco, McData Spar at Wal-Mart.)

This bout has already gone two rounds, and there's a third round in the offing that may decide the Battle for Bentonville, as Byte and Switch's Dave Raffo so aptly puts it.

What may be less evident after reading his story is how very carefully everyone involved is picking their words. McData denied any equipment of theirs had been replaced at Wal-Mart. Cisco wouldn't confirm its recent win, but they didn't deny it either sort of a non-confirming confirmation, to butcher a Watergate-era phrase. Wal-Mart didn't return calls.

Cue speculation in the marketplace.

Is McData faltering as it tries to regain momentum? That's possible, I guess, but doesn't tell the whole story. Maybe Wal-Mart wanted competitive suppliers (wouldn't be the first time). Or perhaps Cisco's John Chambers really turned on the West Virginia charm.An alert B&S reader posting on our message boards theorized that Wal-Mart put pressure on McData to lower its prices as part of its standard operating procedure with its vendors.

That could be. You think those "everyday low prices" just happen of their own accord? The world's largest retailer and private-sector employer is plenty shrewd about how it manages its costs – in this case from the data center all the way out to the billions in credit card transactions it handles. On a separate but related track, Wal-Mart's drawing lots of opposition to its desired entry into banking, a move that the company says will reduce (or eliminate) the processing fees it pays to third parties for credit transactions.

Whether you like or disagree with Wal-Mart's tactics, it's hard to fault a company for aggressively controlling its costs. And I can already hear the blue-state response that those same controls also are anti-competitive and reduce choice. And this to me is where the marketplace reveals what an imperfect machine it is. No vendor is in business to help its competitors thrive – quite the opposite. Where haven't you worked where the point wasn't to crush or kill the competition?

These same sorts of issues played out closer to the data center and enterprise IT department a few years ago when Microsoft was defending itself against antitrust charges. Is there such a thing as a company that's too successful? Where does that line get drawn, and who draws it? And that's why, a red-stater might argue, we should leave that decision to the marketplace. But that's not wholly satisfying either.

These issues are getting played out on a much more micro level inside Wal-Mart's Bentonville, Ark., data center. Maybe Cisco will emerge with most of the storage business, or maybe McData will reassert itself. Or perhaps Wal-Mart will take a page out of General Motors' playbook and split the difference between the two – though that seems unlikely. There's no real cost or competitive advantage for Wal-Mart to be so egalitarian about this. In storage, as in retail, to the victors go the spoils... even if there's a bit of blood on the data center floor.— Terry Sweeney, Editor in Chief, Byte and Switch

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