Cisco constructs programs around partner profitability

HONOLULU — Paul Mountford, vice-president of worldwide channels for Cisco Systems, strutted out onto the Partner Summit stage this week to the tune of AC/DC’s “”Back in Black”” as a way of emphasizing the company’s channel strategy of increased

reseller profitability.

In a six- to nine-month timeframe, Mountford said Cisco will release an Opportunity Incentive Program (OIP), a Solution Incentive Program (SIP) and an upgraded Value Incentive Program (VIP). OIP will be a deal registration program for certified partners only to help them grow business in advanced technologies such as IP telephony.

“”The cost of sales is higher to get new business than to maintain existing business. We all know that. I hear a lot of people say ‘We like new opportunities, but (it is hard to continuing chasing new opportunities) when we create a value proposition for a customer and then someone drops in a high discounted deal taking the deal away,”” Mountford said.

The OIP is expected to stop this practice by enabling the partner to receive the discount, which is between three to eight per cent, as soon as the deal is registered.

Mountford cautioned that all deals have to be qualified as new opportunities and that partners simply will not be able to register “”a laundry list”” of deals.

For VIP, Cisco will be increasing rebates out on advanced technology with flexible enrollment. For example, the pay out will double on IP communications from 10 to 20 per cent. The amount of surveys for these solution rollouts will be capped at 25. A two per cent growth rebate will also be added on a six-month period by period basis.

“”If that does not help you sell IP solutions, nothing will,”” Mountford added.

The SIP plan is still under development, Mountford said. The SIP will be based on helping partners to adopt intelligent information networks and services.

Dave Walsh, vice-president of marketing for Ingram Micro Canada, said Cisco continues to do a good job of aligning and segmenting its channel.

“”This is an evolution of the company’s approach that can be used in a lot of other industries. The partners have to be rewarded for entering into uncharted territories,”” he said.

Ingram Canada is Cisco’s largest distribution partner, Walsh said. “”Ingram’s go to market approach this year is to be more of a value market maker to the channel and Cisco’s strategy lines up perfect.””

Meanwhile, Cisco continued to whittle down its number of certified channel partners from 6,600 to 3,000 worldwide in the last year.

As of last year, Ingram Micro Canada’s base of Cisco premium partners has decreased at the same rate, from 125 down to 60. Walsh said that doesn’t concern him, because he said it makes sense to align the new opportunities to those partners who have committed the resources.

“”It helps Cisco maintain partner profitability. If they do not do this and open it up for all partners to get the business (it impedes) them from maintaining the commitment towards profitability,”” Walsh said.

In his Chambers

While Cisco executives got specific about the channel’s return to profitability, the company’s chief executive predicted a 10 per cent gain in IT-related productivity that will help job creation in both the short and long term.

Speaking to a keynote audience of some 3,000 people, John Chambers said the start of the economic recovery will be in the small-to-mid-market arena and will expand to retail, transportation, manufacturing, financial services and then in IT. However, jobs will lag behind by three to four months, Chambers said.

“”When you look at the future of our industry the four cornerstones for our company have been customers, shareholders, partners and employees. My goal is to lay a framework for the market and to drive the elements that changes the standard of living in companies and for people,”” Chambers said.

To demonstrate how companies and people can change their standard of living, Chambers showed some of the company’s IP telephony solutions. He asked the audience if they would be increaseing outsourcing activities in the next 12 months. A whopping 81 per cent said yes. The audience were equipped with Cisco IP phones which enables them to answer the question and for Cisco to process the information almost instantly.

He also demonstrated videophone capability. Using a USB camera on an IBM Thinkpad notebook connected to an IP switch port, Chambers made a few video calls. Some of them were to non-video equipped phone which shows the intelligence of the network, he said.

“”The network knows enough to not supply video and allot the necessary bandwidth for the call,”” he added.

It takes two for SMBs


In an attempt to accelerate small and medium-size business in the channel, Cisco said it had forged what the company is calling a “collaborative” partnership with Microsoft Corp.

The two firms have already built two solutions that are ready for the channel. The first marries Windows Small Business Server with the Cisco Router 831. The second combines Cisco IP communications with Microsoft’s CRM (customer relationship management) software.

Peter Alexander, vice-president of commercial marketing, said the products will reduce the integration burden on resellers working with small and medium-sized businesses (SMBs). “This frees up resources for them to go after the higher-value services offerings for companies,” he said.

Dan McLean, lead networking analyst at IDC Canada, agreed.

“Both companies are being very strategic with SMBs. They want to be known as technology influencers. They are on the same page here. They want to be advisors of technology. They know more companies are interested in services and they want it to be on their products,” McLean said.

McLean said he anticipates other vendors aligning themselves with Cisco as a “collaborative” partner.

“Why not partner up with other vendors for SMB solutions? It gives Cisco tighter integration with their products,” he said.

Companies such as IBM, Hewlett-Packard and Oracle could potentially partner with Cisco in a collaborative way, McLean said.

The newly upgraded VIP program will only be available on the Cisco IP communications and Microsoft CRM package. VIP now doubles the amount of margin from 10 to 20 per cent and adds a two per cent growth rebate as well. Cisco and Microsoft will also create reference architecture blueprints for Microsoft’s IT Solutions for SMB. According to Alexander, this will enable resellers to provide Cisco-based secure networking infrastructures around Microsoft platforms.

Cisco also announced a Solution Technology Integrator program. This program is similar to most OEM programs but without the private label component, said Edison Peres, vice-president of advanced technologies and worldwide channels at Cisco.

It enables companies such as Network Appliance to integrate Cisco products into its own solutions. It is a volume-based program and should not be confused with system integrators, Peres said.

Cisco classifies these integrators as technology manufacturers that sell, service and support specific vertical market solutions.

To qualify for the program the solution must have no more than 25 per cent Cisco branded products. “If it’s more than 25 per cent of the solution then it becomes a Cisco solution and goes under a different program,” he added.

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