Cisco’s 2007 plans will depend heavily on partners

SAN JOSE, Calif. – Cisco’s C-Scape conference is a changed beast from the analyst/media conference of past years. The company has added outside sources to participate in -– and in some cases run -– its discussion panels, where previously it was all-Cisco speakers, all-the-time. But this change does not hold the impact of the major Cisco direction change announced at this year’s conference.

Touting the idea of “the network as the platform,” chairman and CEO John Chambers laid out the vision of a technology world where the power of new all-purpose networks (voice, video, data and mobility) provides huge opportunities for the design of new applications.

<P In his view, the delivery of the bandwidth will become more commoditized, with service providers charging higher prices for the more robust bandwidth required certain customers.

Cisco’s own high-definition face-to-face videoconference-type meeting tool, TelePresence, is one such application. The TelePresence products, Cisco TelePresence 3000, Cisco TelePresence 1000 and the Cisco TelePresence Manager, are already available in Canada through Cisco and IBM Canada, with more partners to come on board slowly.

To sell such applications as they come on line, Cisco is encouraging its channel partners to either increase the breadth or depth of their expertise in areas where Cisco plays: routing/switching, security, communications and wireless/mobility.

In the past, channel partners would gain certifications by specializing in areas of their choosing, says Andrew Sage, Cisco’s senior director of marketing for worldwide channels, but now if they want to be Gold or Master partners they must meet technology breadth requirements to meet their levels, plus get certifications for the life cycle services around all those technologies.

Or, in cases where customers are looking “for that Jedi partner,” who has a particular technology depth, a VAR can choose to become extremely skilled in one technology or application, differentiating itself from those partners with breadth.

The idea is to align incentives with investments, says Sage. If a VAR invests in a set of broad skills it will earn the top-level front-end discounts. Because of the breadth of skills, it will also get VIP benefits (Cisco’s value incentive rebate). Volume is not connected to any of the programs; they are based purely on value.

The additional kicker for Master partners is that if they bring in and register a new deal, it counts as a new opportunity. It doesn’t have to be with a new customer, it just has to be a sale in an area that is new for that customer.

Michael O’Neil, managing director of London, Ont.’s Info-Tech Research Group, says Cisco’s core business is “arguably better described as a commodity business,” which would typically favour a volume incentive program. However, he admits the nature of the company’s product set is changing.

“Look at something like VoIP, where the current penetration is quite low but purchase intentions are pretty high. Roughly 10 per cent of the people [Info-Tech] just talked to are planning first-time VoIP implementations in the next 12 months,” he said.

“It’s huge growth opportunity. But with that kind of emerging technology, you need a fair amount of handholding and knowledge, and incenting the channel on knowledge rather than volume makes a lot of sense.”

O’Neil argues that if you are already certified in two areas -– and most will have routing/switching and security expertise –- VARs must simply decide if going for that additional margin is worth the training and work it will take to ensure that they can provide a whole suite.

“Security’s kind of a no-brainer for everybody so if you don’t already have that in your quiver then you’re down to really understanding the others,” O’Neil says. “And everyone is going to need voice, so mobility is really what you’re down to here.”

So the question then becomes: Is it worth a VAR’s while to understand enough about wireless and mobility to get additional discounts and the access to better treatment?

O’Neil says for some it is. “For those people who do hunt opportunities, the ability to register leads and get an economically advantageous basis of competition, that’s likely to be compelling.”

In addition, offering this choice of breadth or depth will help Cisco’s channel, O’Neil argues. But he says it’s probably more important to U.S. partners than Canadian ones, since there’s more of an opportunity to apply a depth model in a bigger market. “In Canada, he says, “a breadth model is usually essential if a VAR is going to stay viable.”

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