Analysts say the move makes sense for HP, which has not been strong inthe burgeoning CRM space from both product or service standpoints. "Whatis perhaps more significant, however, is the turnover of the Smart Contactassets," says Rich Young, analyst at The Yankee Group (www.yankeegroup.com). "This move signals that HP isdeparting the CRM technology space, while beefing up services, and Cisco ismoving into the contact center ever more deeply." IBM Corp. (www.ibm.com)made a similar move late last year when it abandoned its own CRM product andpartnered with Siebel Systems Inc. (www.siebel.com), Young points out.

Cisco, however, has some competitive challenges in this market, anotheranalyst points out. In fact, it's unlikely that Cisco will become a dominantleader in contact centers in the next 12 months, says Bill Lesieur, director ofTechnology Business Research Inc. (www.tbri.com). He says the industry leader in this area,Lucent Technologies (www.lucent.com) "still has the trust of, and apolitical foothold on, the telecom departments of Fortune 500 customers, whoare unlikely to rapidly migrate away from their highly reliable, circuit-basedvoice systems in spite of the pressures to expand call centers to supportWeb-based communications with customers."

Lesieur explains that, "Cisco also is challenged to buildcredibility as a software player with enterprise customers, who may questionCisco's ability to deliver and support software based on its roots as anetworking hardware vendor."

Cisco, which is well-known as the leading networking hardware company,has been attempting to expand beyond its reputation as a provider of bridgesand routers. For example, Cisco's Internet Communications Software Group(ICSG), composed of several acquired contact center management vendors,represents the company's first push into the market for software-basedpersonalization and CRM solutions. Cisco does not intend to get directly intothe applications business, but rather to provide the software underpinningbeneath specialized applications.

"This deal should bolster HP's services and Cisco's productofferings in CRM, and provides Cisco with an enhanced go-to-market strategy forits recently launched ICSG," Yankee's Young says. "Customers willbenefit if the alliance is successful in delivering solutions in the shared IPcontact center marketplace, but the companies will also benefit from theenhanced focus these moves bring."

Cisco has been aggressively promoting a single IP network infrastructureto replace separate voice and Web networks. The joint initiative with HP isdesigned to enable companies to support multiple customer contact channels,including the Web, phone and chat, voice over IP, interactive voice response,fax, and e-mail. IP-enabled call centers are expected to grow from 8 percent in1998 to more than 40 percent by 2003, according to Datamonitor (www.datamonitor.com).

"The emerging contact center market represents a convergence ofcommunications equipment, Web infrastructure, and front-office applications,including CRM," Lesieur says. "Cisco is riding upon the success ofits router and switch business to penetrate the enterprise contact centermarket based on various acquisitions and industry partnerships."