VANCOUVER – For the third year in a row Cisco Systems has come up with a new channel program based on partner profitability.
At the company’s annual Partner Summit here this week the networking giant unveiled Solution Incentive Program (SIP), which rewards partners who move from an integration
model to a full-blown solution provider. It will work along side the Value Incentive Program (VIP) and the Opportunity Incentive Program (OIP).
According to Edison Peres, vice president, advanced and core technologies, worldwide channels for Cisco, the goals of SIP are to improve partner profitability, increase business relevance of the network, encourage collaboration with independent software vendors who currently do not have a route to market, reward solution creativity and enable partner differentiation.
“”This is a non-prescriptive program,”” he said. “”We are not telling you what is wrong or right about (your) applications. Partners can develop their own applications to see incremental benefit.””
For this program, Cisco has gone through the trouble of defining a solution: Software that has an application attached to it and life cycle services. At least one part of the solution must have advanced technologies such as voice and security, and it must be repeatable (meaning the partner has to sell it more than once to qualify).
To join SIP partners must submit a business plan showing they have the resources or the capabilities to build solutions. From there, partners will be paid when deals close. The SIP program is also stackable with VIP and OIP, Peres said.
Base margin on SIP is between two and four per cent of list price depending on the solution. However, when combined with VIP and OIP a partner may be able to reach 27 per cent margin on the product alone. If a partner adds services the margin level may be more than 50 per cent.
One of the main reasons for this kind of program, Peres said, is that partners are struggling to differentiate themselves.
Peres believes 20 to 30 per cent of Cisco partners are ready for SIP. He added that the company would like to double that amount within 18 months.
Cisco Canada has paid out more than $15 million to partners who have participated in the VIP and OIP programs, according to Steve Simmons, the company’s vice-president of Canadian channels.
Simmons added that the 18-month goal in the Canadian market is not set in stone, but was something to aspire to. “”This is early on and it takes time to work with partners. SIP is highly complex. It is a business model shift and some partners may say no. We will know more in the next six months,”” he said.
Key to this program working in Canada, Simmons said, is the collaboration with ISVs and, possibly, even Microsoft Canada solution providers. “”SIP will help partners to gravitate to this (solutions) model,”” he said.
Cisco has also recognized it needs to help partners in the SMB market. So through a wholly-owned subsidiary called Cisco Capital, the company is expanding global credit capacity for channel partners by adding US$750 million in short term growth capital. Also part of this initiative is a streamlined leasing program called Commercial Easy Lease that would finance new solutions that compliment Cisco initiatives.
According to Paul Mountford, vice-president of worldwide channels for Cisco, this money will be refreshed every month, so there is potential of more than US$3 billion available each year.
In Canada, Simmons said that regardless of growth capacity the subsidiary will write the business. “”We’ll work with Canadian partners so they have the credit capacity they need. We are currently working with them to find out what the right SMB financing model is,”” he said. This plan, Simmons said is tentatively scheduled to start in August.