Cisco: Why we chopped our channel in half

Having gone through a five-month channel partner shakeout, Cisco is promising resellers a profitable, cooperative and highly specialized partnership in 2003.

At its recent Worldwide Analyst Conference in Santa Clara, Calif., Cisco Systems Co.

executives explained why they felt it was necessary for the company to say goodbye to half of its six thousand partners. The company had introduced a rigorous re-certification program, choosing to leave behind any of the partners who did not wish to participate.

It was a strategic move to ensure that those partners who chose to stay hitched to the Cisco wagon would remain profitable, says Paul Mountford, Cisco Systems worldwide channels vice-president. Having emphasized that Cisco feels that it cannot be held ultimately responsible for the profit generation of its partners, Mountford says the company wants to help and a reduction in ranks seemed like a good step in that direction.

“”The fist thing that we did post-tornado was to look at what is really an oversupply in the industry and over-distribution,”” he says.

Re-certified partners would be equipped with better tools to go after the market, and a smaller number of players would mean less competition for them. This is all part of a strategy to help out partners during a difficult time, he says.

IDC Canada director of enterprise network services Dan McLean says that although it does tend to rock the boat from time to time Cisco is usually pretty clear about what it wants from its partner base.

“”The fact of the matter is that if you’re in a networking equipment business, the company you want to partner with is Cisco,”” he says. “”So there’s a lot of demand on the partner side to be a preferred Cisco partner.””

It’s not a partnership without internal strife, however. Mountford addressed an issue of conflict in the channel last year, with traditional partners feeling encroached upon by service providers. He says a switch away from a volume-based channel program towards a value-based one has been able to resolve some of the tension. The rest can be fixed by realizing the potential of cooperation, he said.

“”Say you were selling one of our pops and . . . AT&T’s managed router service. If you are a partner, (and) if you sold that product on its own with no service attached you’d probably make $200 to $300 of gross margin,”” he says. “”If you sell it as a managed service through AT&T, you get $400 a month, taking it up to $15,000 over a three year period,”” Mountford says.

Mountford also explained that Cisco is newly focussed on early engagement, working with partners and internal teams to drive sales early in the cycle.

The opportunities may have seem fewer and further between lately, says senior vice-president and general manager of product development Charlie Giancarlo, but Cisco is a firm believer in the coming turnaround. In the meantime, he says, rolling out new intelligent solutions, which offer unique value to customers, is the key to both Cisco and its partners’ success.

“”The fact that we have a very comprehensive portfolio is important not only to our customers but it’s also important to our channels who need to carry our product,”” he says. “”(They) need to carry one vendor and know that they have a consistent set of features, capabilities, management abilities and training across all of those products.””

Cisco’s most recent channel program was introduced in April 2001.


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