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Newsletter Home > May, 2008
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Cisco's High Volume Channel Summit
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Cisco’s Channel Summit 2008 was one of the main highlights of the past month. In addition to discussions around channel program evolution, the vendor also rolled out a number of product announcements, making this year’s summit a very high-volume event in terms of the amount of news being covered.
Services
The discussion around collaborative services was arguably the most significant announcement for the partners, as Cisco seeks to upgrade its services strategy and align that strategy more closely with the worldwide channel program.
According to Cisco, customers are demanding that the vendor play a more prominent role in the delivery of services, and that this demand is the rational underpinning for the move towards collaborative services. Cisco executives stopped far short of saying that channel partners were failing to get the job done, and many responded by saying that the average partner satisfaction score is higher than four on a scale of one to-five. Yet they were unified in saying that there is high customer demand for greater Cisco “skin in the game” as relates to services.
At the high level, this breaks down into two basic service families. Under “Cisco Services for Resale,” partners are compensated for selling services that are then delivered by Cisco through a direct contract between Cisco and the end customer. The widely known “SmartNet” program will continue, and resides in this part of the services structure.
The second service family is known as “Collaborative Services,” which are expected to combine Cisco intellectual property with the partner’s value-add into an overall value proposition that is jointly delivered. Cisco partners can expect a variety of components to be rolled out under the Collaborative Services umbrella as time goes on. This category is expected to eventually replace the “Shared Support” program which currently provides partners with replacements, spares and third-level TAC access.
Beneath the Collaborative Services umbrella, we find “Smart Services,” which will have different offerings to provide services at the device level, the network level, the operations level, and the application level.
Beneath the network support segment of Collaborative Services is a new program called “SmartCare,” the first major component to be rolled out under this new architecture. This is a network level offering involving technology through which Cisco can monitor the performance of the customer’s network, identify up-sell/cross-sell opportunities, and also help to remotely resolve most technical issues that might arise. Targeted at the mid-market level, the information will be shared only with the partner who sold the SmartCare contract.
Pricing and channel uplift opportunities are still undetermined because much of this overall strategy remains a work-in-progress. Similarly, any attach rate requirements and operational metrics are still pending. Ultimately, Cisco services pricelists will be published to end users, but Cisco’s prices to channel partners for collaborative services are expected to be published only within the channels so that partners can be more free to add margin plus their own incremental services.
A number of partners attending the summit expressed concern that the channel’s profit opportunities may be lost in Cisco’s zeal to maintain its own growth rates, especially given the fact that end user price elasticity may be substantially restricted in a down market. Furthermore, Cisco earlier encouraged its partners to invest in services practices in response to hardware margin erosion. Any act by Cisco that reduces those partner margins will not be viewed in a positive light. Cisco executives reply that they are highly sensitive to those needs and have been given no corporate mandate to grow their services revenues.
Empowered Branch
Cisco announced that it is opening its Integrated Services Router (ISR) and Cisco Wide Area Application Services (WAAS) platforms to customers and third-party application developers. The move enables ISVs and channel partners to build new solutions and further differentiate themselves against competitors. The company also took the opportunity to roll out a number of new products deemed particularly significant to the channel, including Linux-based ISR modules for application development and hosting to support a tighter integration of the network and applications, a new WAN optimization platform, and new fixed configuration ISR routers for improved support of 802.11n wireless, 3G wireless, and wireless support for managed services.
Data Center Rollout
Cisco also continued to stake its claim in the data center market, unveiling the Nexus 5000 Series of data center-class switches, which are designed for data center consolidation.
The development of the Nexus 5000 Series was a collaborative effort between Nuova Systems and Cisco, which also announced its intent to acquire the remaining interest that it does not yet hold in San Jose-based Nuova, which is a Cisco-invested start up.
A number of ecosystem partners are helping to create an end-to-end unified fabric solution with the Cisco Nexus 5000 Series, including 3PAR Data, APC, Broadcom, Dell, EMC, Emulex, Intel, NetApp, Netxen, Panduit, QLogic, and VMware.
To further augment the channel in the sale of the data center solution, Cisco announced enhancements to its Data Center Networking Infrastructure (DCNI) specialization, recognizing and providing incentives to partners who develop a highly qualified data center practice.
The vendor is also extending its /value Incentive Program (VIP) to partners who build comprehensive data center practices. A Data Center Practice Builder and “steps to success” are also being developed in order to help channel partners make an effective transition to a data center practice. Other program features, such as financing through Cisco Capital, have also been put into place.
Recruitment Assistance
The vendor is also trying to help connect its channel partners with technical talent – something that many partners say is now at a premium, and difficult to find even under the best of circumstances.
Cisco’s new Partner Talent Network uses advanced social networking capabilities and interactive video to transform how channel partners attract, develop and retain employees. Scheduled to launch in the U.S. during second quarter of calendar 2008, the tool uses Web 2.0 collaboration capabilities involving interactive video. Replacing the existing Partner Talent Portal, the new platform will provide targeted candidate matching, interactive talent maps and personal branding capabilities as well as career-exploration tools. Cisco is also offering channel partners in most geographic theaters access to IT-specialized recruitment firms at reduced rates. Career fairs and co-branded recruitment collateral are also planned.
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Is Juniper's Services Strategy Aimed At Cisco Partners?
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In conjunction with Interop-Las Vegas, Juniper networks held its annual partner summit, accommodating a few hundred of their closest VARs, integrators and other partners.
Worldwide channel vice president Frank Vitagliano outlined several key priorities for the coming year, including growth and mutual revenue and profitability, investments in programs/infrastructure, a commitment to making Juniper easier to do business with, plus a commitment to enhance the ways that channel partners can work more closely together with the Juniper sales team.
But one theme kept recurring throughout the presentation: Juniper is actively promoting a hands-off approach to professional services as a differentiator in their channel strategy. A few weeks prior to the Juniper summit, Cisco Systems held a summit of their own, in which they mapped out plans for a collaborative services model through which partners can deliver services in conjunction with the large, San Jose-based vendor. The downside from the channel perspective is that the revenue would need to be shared. Numbers are Cisco’s expectations and the channel’s uplift opportunity, however, are not yet available.
At various points in the Juniper presentation, company executives repeatedly stressed that the channel was instrumental in their approach to services at all customer levels. "Our services element is built around the channel from the largest accounts down to the bottom of the period," said Blaine Raddon, vice president, U.S. channels.
Furthermore, Juniper vowed to help partners establish and strengthen their own brands in the minds of customers.
"Some of our competitors talk about helping their partners build the brand, but at the end of the day that's not what they're doing at all," said Donna Grothjan, vice president, worldwide channel strategy and operations. “We think this will be a strong differentiator for us. Let the partner put their brand first in a services perspective.”
During his speech, CEO Scott Kriens noted that Juniper is looking for three types of channel partners: small situationally-focused partners; specialists, who are functionally focused around specific technologies such as security; and network infrastructure partners.
Juniper also announced plans to establish specializations around the various components of lifecycle support, including planning, design, implementation, operation, and optimization of the solutions. While many of the details around in this strategy are still forthcoming, Juniper executives promised to build their specializations around offering the channel "a carrot, rather than a stick."
Other announcements from the Juniper Summit included various enhancements to the deal registration program and enhanced configuration and quote tools to speed turnaround.
To further drive sales, Juniper has recently added 70 new sales teams, including sales representatives and sales engineers, to help drive demand and establish opportunities for the partners. However, certain key large accounts will likely remain primarily direct.
3Com and Crossover Distribution.com Announce North American Channel Agreement
3Com Corporation and Crossover Distribution.com Corporation have entered into a new distribution alliance to deliver 3Com's Secure Converged Networking solutions to resellers and service providers in North America.
Crossover specializes in delivering solutions of wireless broadband, in-building cellular, telecom and CATV technologies to the North American marketplace, particularly across Canada.
Crossover will be offering the 3Com Asterisk Appliance, the MSR Series Multi-Service Router platform, 3Com's wireless networking equipment, the Baseline Switch 2900 switch family, and the OfficeConnect Managed Gigabit PoE switch family.
Ventureforth Names Pat Rudolph Head of Global Sales
Ventureforth, Inc., an Atlanta-based mobile technology company has named Pat Rudolph their new vice president of global sales.
Prior to joining Ventureforth, Rudolph was the Vice President of Technology at 3Com Corporation, where he was responsible for technology and sales strategies to provide converged communication applications to the enterprise space. Prior to 3Com, he was Director of Global Strategic Technology at CommWorks Corporation. Rudolph has also held a number of senior sales and technical positions at GE Capital IT Solutions and Inacom.
In his new role, Rudolph’s duties span both direct sales and indirect sales.
Nortel Appoints Michael Pangia as Global Sales Operations Leader
Nortel Networks has announced that Michael Pangia has been named to the newly created position of senior vice-president, Global Sales Operations and Strategy. Pangia is currently president of Nortel's Asia Region and will remain in this position in the short term until a successor is named. Prior to leading Nortel's sales organization in Asia, Pangia held senior level global roles in both finance and operations.
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On The Other Hand - Cisco SmartCare Examined
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By: Ken Presti
The most interesting thing about Cisco’s new SmartCare announcement (see lead story) is not the fact that it can help prevent network outages before they emerge. It’s the way that the contract binds customers to the specific channel partner who sold it to them.
Leveraging "phone home" capabilities built into the equipment, Cisco will receive ongoing reports about the health of the SMB network. The vendor will then forward that information to the channel partner who sold the SmartCare contract, who can then make the necessary adjustments, plan network upgrades, etc. By purchasing the contract, the end customer in effect selects that partner as the only recipient outside of Cisco to receive that data. Other partners cannot receive it, regardless of whether the customer’s wants them to. In fact, even the customers, themselves, cannot see the data unless the contracting partner decides to show it to them.
Cisco would be well-advised to revisit this single-access framework. While I agree that you don’t need multiple channel partners to respond to a network that merely needs to be tweaked, the long-term sales implications go much further than that. Many decision-makers in the small-to mid-market range prefer to work with two or more partners on a relatively equal footing. Since the decision-makers, themselves, may/may not be technology gurus, they like being able to compare different proposals, validate pricing, and generally keep everything balanced.
There’s nothing about SmartCare that contractually forbids customers from working with more than one partner, but consider this: Channel partners are always playing for the long-term customer relationship. Even if they are there to accomplish one objective, they want to parlay that single objective into a long-term relationship. But if a vendor entrenches the incumbent through greatly enhanced access to information, that opportunity for competition within the channel becomes disrupted.
Until the competitor convinces the customer to transfer the SmartCare contract to them, they will always be at a major disadvantage with respect to their knowledge of the customer’s network performance. And if they’re going to be at a major disadvantage, wouldn’t they be better off spending their time on other sales opportunities? After all, helping this customer with the issue at hand does not necessarily mean the customer will transfer the SmartCare contract to them, thereby making them the incumbent. Should the competing partner demand the transfer up-front, in order to justify their time? What about the impact on the customer’s relationship with other partner? Is the customer who’s now caught in the middle still happy that he bought the contract? Or will the customer try to play one partner off the other by passing the contract back and forth like a hockey puck?
There are enough potential headaches in this for Cisco to lead us to conclude that the vendor did not design this potential situation purposefully. They likely assumed that a customer does not need more than one partner to maintain the network. In that limited context, they would be correct.
But there’s a lot more at-stake here than the delivery of services. This current version of the program will have a huge impact on account control, whether Cisco intended it that way or not.
It seems as though a solution should be within reach. Perhaps Cisco should consider leaving the access decision to each respective customer. If the customer wants to leave everything to one partner, so be it. If they want to look at the data themselves, why not? If they want multiple partners to be able to eyeball the data, that should be fine too.
Despite all of its complexity, the Cisco channel program has, over the years, done a pretty responsible job of rewarding partners who grow with technology and maintain customer satisfaction. No doubt the vendor wants to entice partners to jump on their new collaborative services bandwagon, but the current rendering of the SmartCare program has extensive ramifications worthy of reconsideration.
Despite all of its complexity, the Cisco channel program has, over the years, done a pretty responsible job of rewarding partners who do the right things for their customers, and for Cisco. No doubt the vendor wants to entice partners to jump on their new collaborative services bandwagon, but the current rendering of the SmartCare program tilts the playing field too much.
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