Cisco expanding channel strategy, looking for breadth and depth 19 December, 2006 By Chris Talbot

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As usual, many of the changes to the company's channel strategy were announced at the Partner Summit, which was held in San Diego this summer. Cisco started conversing with its partners about how intelligence has been moving into the network at the Partner Summit in 2005, but the conversations have expanded to things like voice, security and storage.

"This has created great opportunities for our channel partners. Looking back financially from a company standpoint, we feel like our business is in a good position," said Andrew Sage, senior director of worldwide channels marketing at Cisco Systems. "We feel pretty strong that our company's going to do well in the future, and we've had a couple of strong quarters of growth, which our partners have really helped us drive."

Looking ahead to 2007, Cisco is expecting 15 per cent growth in the area of intelligence in networks, which could mean an extra $3 billion to $4 billion (U.S.) in revenue per year for partners on a global level, he said. The idea of intelligence has really taken route in the market, so Cisco is evolving its channel programs and its strategy to better align with its partners to take advantage of new opportunities.

A big part of this is the move from a three-tier channel program (Premier, Silver and Gold) that was based on technical and sales to create another dimension within those tiers. Breadth of capability is important, Sage said.

"As more intelligence moves into the network, customers want one hand to shake more and more often, and our channel partners' hands are those hands, basically," he said. Certification levels have evolved to address the need for a greater degree of breadth of capability.

Partners are also now being rewarded for the depth of their specialization. As more and more technology moves into the network (remember when storage was a separate topic from networking?), customer requirements are becoming more complex and it's important for partners to have a deep level of skill in specific areas, Sage said. Cisco's goal is to help partners get the expertise necessary to develop in those areas. The company launched the first two of its Master Specialization certifications (unified communications and security) in the latter half of the year.

Cisco is taking all of these channel initiatives and wrapping them together with lifecycle services, which the company has been advocating for the last few years. Customers not only want lifecycle services from channel partners but from the partner perspective, it also means incremental and recurring revenue. Cisco also continues to ramp up its incentive programs. The Value Incentive Program has been expanded to include security, unified communications and wireless, whereas the Opportunity Incentive Program continues to build. With OIP, Cisco exceeded the $1 billion mark this year.

"The partners who participate in OIP and the partners who participate in VIP are more profitable than those partners who do not, so we are achieving the result we wanted with those programs," Sage said.

Although Cisco is currently the undisputed king overall in the networking space, all is not perfect with the networking giant. From the perspective of networking professionals, the company is often seen as arrogant, and it's going against the grain in terms of what companies want, said Bill Trussell, managing director for the networking sector at TheInfoPro, an independent research company offering market intelligence based on IT professional and end-user interviews. Although customers are moving more and more towards open standards, Cisco tends to have a greater degree of proprietary technology in its products.

"Even though they do participate in all the standards bodies, more often than not their technologies are more proprietary than they would be or should be," Trussell said.

Customers like to have a choice, and when it comes to Cisco, it's often an all or nothing choice, he continued. That said, customers who use nothing but Cisco tend to have good things to say about the products and technologies. Others aren't so kind. Overall, the market views Cisco as arrogant with pricing premiums the company is able to set because of its dominant position in the market.

"Cisco is an interesting case, somewhat analogous of IBM in the IT world a few years ago, where they're largely viewed as an organization that if they're selected to provide a technology, nobody ever gets fired because they selected Cisco. The technology is often leading edge. It's often viewed as being very good. The claim that they invented the technology is debated, but what's not debated is, oftentimes, they're the experts on the leading edge of implementation of aspects of IP networking," Trussell said.

According to Trussell, Cisco also has problems with its technical support.

"The other issues that a lot of enterprise customers have, depending on the size of account you present to Cisco, you may or may not get the best technical support, in that it may take you several attempts to get someone who knows the problems you're experiencing. If you're a large account with Cisco, you can get to the right people right away," Trussell said.

One of the issues is that Cisco has done a lot of offshoring for its support, which means customers simply can't call up the company and get a problem solved.

However, there are clearly enough people who like Cisco and its products. The company is on top of the networking market, after all.

"There are more than a sufficient number of people that I speak to that are very much what we call Cisco shops, where everything they do is with Cisco. And they're very pleased in doing that despite of the shortcomings that may exist, and in many cases, a lot of organizations don't see the shortcomings," Trussell said. TheInfoPro does deep interviews with networking professionals throughout the year for its reports, and it asks networking professionals to rate networking vendors. However, the firm doesn't specify which vendors the professionals need to rate; instead, the professionals get to choose the topics of conversation. From a ratings perspective in these reports, Cisco isn't on top. In fact, HP's ProCurve is on top in ratings. Cisco isn't even the undisputed number two, as it's struggling for that spot with Juniper Networks.

The industry and Cisco's role in it continues to change, Sage said. While the company continues to grow at a good pace, the networking industry and the market itself is a lot different than it was even just a few years ago.

"It was about getting yourself connected -- connecting your PCs to servers and running cables across the ocean and broadband penetration rates," Sage said. Now the market is about being connected to other places and other people, he added.

"The whole thing about physical connectivity has kind of fallen away. Now we're talking about interactions, and the way we're characterizing this is using the word 'experiences,'" Sage said. Networking has become the platform that enables new experiences, which will create new opportunities for channel partners over the next three to five years.