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Newsletter Home > April, 2009
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Cisco's UCS Strategy Aimed at Key Portion of Indirect Channel
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As the initial buzz around Cisco's Unified Computing System (UCS) strategy begins to subside, channel partners, both allied and non-allied with Cisco, are taking a closer look at the announcement to see what it means for their own companies.
Although Cisco went to great lengths to maintain the secrecy of the project until the March 16th announcement date, bits and pieces had been bouncing around the Blogosphere long enough to make UCS a widely known secret by the time that date arrived.
UCS is intended to provide Cisco with a foothold in a number of new spaces, including servers, virtualization, and, ultimately, cloud computing. Such new spaces are especially important for Cisco as it strives to meet the growth numbers and margin numbers demanded by Wall Street.
Because Cisco does not have to protect an installed base in these new areas, the company's engineers were able to start with a clean sheet of paper, and design some technical differentiators aimed at unseating the incumbents. One of those differentiators involves VN Link technology, which was developed jointly by Cisco and VMWare.
"VN Link allows you to get much greater mobility of virtual machines across multiple cores or across multiple physical servers," explained Cisco senior director John Growdon. "The technology allows you to maintain a network profile associated with a virtual machine as it moves between two physical servers. The advantage of that is that you get true mobility across a wide breadth of servers. That tended to be difficult in the past because the network profile did not necessarily follow the virtual machine as it moved between physical servers, thereby limiting the scalability of a virtual machine environment."
Growdon added that other key technologies, such as Data Center Ethernet, Fibre Channel over Ethernet, and unified management will also help to propel the overall value proposition.
Cisco is by no means going this alone. In addition to VMWare, the networking vendor has pulled together a roster of technology partners that includes Accenture, BMC Software, CMC, EMC, Emulex, Intel, Microsoft, NetApp, Novell, Oracle, QLogic, Red Hat, Tata Consultancy Services (TSC), Unisys, Wipro, Worldwide Technology, and others.
Cisco claims that the net result will translate to a 20% reduction in capital expenses and a 30% reduction in operating expenses for end customers who buy the new solutions. Part of the expense reductions comes through the anticipated time/cost savings associated with rolling out new applications across the enterprise.
The go-to-market strategy closely resembles the one that Cisco has used in previous occasions when the company has moved into new areas. Cisco will begin with a substantially direct sales model. It includes specific key channel partners that are familiar with Cisco, the related technologies, and the specific end customer involved in the engagement. About 250 data center-specialized partner organizations are on this list of targeted channels, but wider-scale involvement is anticipated as these engagements become more routine.
"The best candidates tend to be mid-sized to larger channel partners who already have a lot of experience inside of the data center," explained Growdon. "The types of partners who can be particularly successful have an existing network practice, have a practice with servers and virtualization, and also have a practice with storage."
Enhancements to the existing Cisco channel program to support UCS are also planned.
Avaya Launches a New Technology Architecture for Business Communications
Once a stalwart of direct sales, Dell is now selling its Vostro desktops and notebooks to partners and their customers in the United States through Tech Data and Ingram Micro. The company plans to expand the range of products available through distribution in the coming weeks, and also expand into Canada later this year. For customers that require more tailored IT solutions via solution providers, Dell continues to offer its full, build-to-order line of computer systems through PartnerDirect.
Dell Goes to Distribution
Cisco Systems announced that Robert Lloyd, 52, has been named Executive Vice President (EVP) of Worldwide Operations, effective April 26th. Lloyd succeeds Rick Justice, 59, who is stepping down from his day-to-day responsibilities due to an on-going battle with prostate cancer. Justice will remain at Cisco as a part-time executive advisor to Chairman and CEO John Chambers.
Nortel Adds New Channel Incentive Program in Asia-Pacific
Channel Partners working with Nortel in Asia can now take advantage of an updated channel program. Nortel's new Channel Loyalty Program provides rewards for performance against their quarterly revenue targets, enabling them to increase margin. In parallel, a new spares program offers spare parts at reduced prices to accredited partners. In addition, a new element is being added as part of the incentive program. The "Network Design Virtual Bootcamp" is intended to help increase partners' network design capabilities.
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On The Other Hand - Channel Programs' Seven Deadly Sins
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By: Ken Presti
As an analyst and consultant, I get a front-row seat to how vendors direct, and sometimes misdirect, their channel programs. Nothing can take the wind out of the sails as quickly as a poorly planned or executed channel program. These days, a number of channel partners are also stepping up with products of their own, often in the area of network management. This puts them in a somewhat new position of being both vendors and channel partners at the same time.
To those of you in this situation, here are a few common mistakes to avoid:
Pinball pricing. Avoid the temptation to swing prices up or down, based on the sales volume of the moment. Channel partners need to know that the current numbers will be in place longer than a Las Vegas Keno drawing.
Faulty operations. Key functions such as order placement, shipping, forecasting, return merchandise authorization, etc. need to be pretty bullet-proof and straightforward. There tends to be very little patience for issues in these areas, and getting these wrong is similar to yelling, "Everybody out of the pool!"
Over-reliance on direct sales. Typically, vendors must rely on their own sales force until their product (or name recognition) catches on and the channel sees clear revenue opportunity. But by this time, the direct sales effort is usually somebody's fiefdom. I'm not saying they've strung barbed wire around the perimeter, but that stinging sensation is probably a clue. Look out for situations where the best prospects can only go direct, or paying direct reps less money when the channel is engaged. Either of those tends to push channel partners in the wrong direction.
Following dominant vendors too closely. "If Cisco does it, shouldn't we?" Not necessarily. You're probably trying to add a lot of new partners to the mix, but that's not exactly something Cisco needs to do right now. Different circumstances mandate different strategies.
Not balancing regional, national, and worldwide strategies. Many companies want to build worldwide market share. Yet it's hard to centralize all processes, requirements, and benefits while still maintaining a program that makes sense. This requires a delicate balance based on input from all parties concerned.
Go sell it; we'll wait here. Resale agreements with the channel are much closer to the beginning of the process than the end of the process. Vendors must continually work with partners to maintain the necessary mindshare in a highly competitive environment. Smaller, engineering-focused companies are especially likely to forget about this care-and-feeding component.
"I love my product, therefore you do too." This one goes out to those Little League parents who can't understand why Junior isn't in the starting lineup every day. That's okay, Coach. They're like that at work too. Just like Junior needs to hit the ball, the product needs to earn partner confidence.
Distributors, VARs, and integrators have a lot of companies vying for their attention, and adding new products is inherently costly. The vendor's true clout in channel relationships corresponds to end user demand, market share, and the partner's ability to turn a profit. Until these attributes are clearly in place, the vendor is just another kid on the bench, hoping to get in the game.
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