Cisco adds data centre to VIP program

Honolulu, Hawaii – Cisco Systems (NASDAQ: CSCO) is adding its Data Center 3.0 initiative, unveiled last year, onto its Value Incentive Program (VIP).

Announced at the Cisco Partner Summit, held here, the Data Center VIP channel program will offer backend rebates between five and 10 per cent, along with a Partner Practice Builder program intended to help partners create a Cisco-based solutions business. There will also be a new specialization for Data Center and more online training and exams.

“Today we have three tracks: unified communications, security and wireless, and now data centre,” said Edison Peres, vice-president of worldwide channel at Cisco.

Data Center VIP will be available in August and it will run for six months. Qualifying partners will receive their back end rebates in February of 2009.

Peres anticipates that the on-going data centre complexity will increase customer reliance on partners, which will lead to a doubling in hardware sales to US$10 billion in a number of years. This growth will grow services to US$4 billion. “Services is growing at a faster rate than hardware and increasing the bottom line for partners. It’s a US$14 billion opportunity for partners in the next five years,” Peres said.

Cisco Canada’s channel chief, Ross Pellizzari, said the data centre is a natural next step for channel partners, especially for Canadian-based Gold Cisco partners.

“The data centre opportunity maybe sitting right in front of them. For partners in Canada the data centre is already a core competency. Now they have a chance to leverage their core competencies in the data centre with their networking expertise to make it more simplistic and lower the amount of cabling,” he said.

Pellizzari also believes channel partners can now go back to their existing customer base and sell them the data centre solutions, rather than recruit new customers. “You can sell them a whole new set of solutions and it will have the same profound effect,” he said.

From a margin perspective, the cost of sales will go down because the partners are already in those accounts and there are more new products and services to sell, Pellizzari said.

With that, Cisco released the Nexus 5000 series of data center-class switches. The Nexus series of products represents a US$1 billion R&D investment for Cisco, said Wendy Bahr, the company’s U.S. channel chief.

Cisco also confirmed that it will build on the 5000 product with more new products over the next 18 months. The Nexus products were co-developed by Cisco and Nuova Systems, which will be acquired by Cisco later this year.

Long time Cisco watcher Ken Presti sees this as an interesting channel opportunity for partners straddling the line between networks, servers and storage. However, he’s unsure what it will mean for Cisco’s long range footing with the channel given that other partners who have no affiliation with Cisco will see this as an entry point and start working with the vendor.

“Partners will see the services component as intriguing and I’m sure they will dig into Cisco during the Partner Summit in terms of how those services will roll-out and what they need to prepare for it now, while other partners already know what they will have to do,” said Presti, president of Presti Research & Consulting in Sunnyvale, Calif.

Peres said the data centre transformation, as an opportunity, is as significant as the voice consolidating with data opportunity of a few years ago.

“Data centre transformation is not for every partner. You need to be competing in services, networking and storage. The partner who is successful can bring all those things together as a unified fabric network. We want to enable partners to go down this path,” Peres said.

Paul Goldman, president of IT Methods, a Cisco premier partner, said the data centre opportunity is an evolving one. “Virtualization will mature and continue to encapsulate more components in the data centre such as servers, SANs, switching and the entire networking fabric,” he said.

IT Methods has built a business around operating and building data centres. It has its own data centre and operate off site facilities for its customers. Goldman added the margin opportunities are in providing services on top of these architectures, such as business continuity and Web services.

“These application services allow our customers to get a strategic and competitive advantage for their business,” he said.

As for the new VIP incentive, Presti said even at five and 10 per cent it all adds up. “I’m sure there will be some terms and conditions with customer satisfaction, but it will help and it’s the right step for Cisco to make to remain consistent with the rest of its channel programs,” he said.

Goldman, for example, uses the backend rebates to fund investment in advanced technologies, rather than use it for his bottom line.

“We like to use these funds to differentiate ourselves as we add to our advanced technologies portfolio,” he said.

CDN‘s full Cisco Partner Summit 2008 coverage

April 9, 2008: Cisco adds data centre to VIP program
April 9, 2008: Blog Golden opportunity in the data centre
April 10, 2008: Cisco unveils Partner Exchange
April 10, 2008: Cisco to push WebEx to the channel
April 11, 2008: Meet Cisco’s Mr. SMB
April 11, 2008: The Canadian market according to Lloyd

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Paolo Del Nibletto
Paolo Del Nibletto
Former editor of Computer Dealer News, covering Canada's IT channel community.

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