Brocade and Cisco focus on channel partner profitability

I have posted on this before, Cisco need to overhaul the partner program to make partners more money. Until they come out with a new program, Cisco partners will not make that much money and neither will Cisco. Give more rebates on the back end does not fix the problem nor does it help Cisco make money. It is a really bad business decision from Cisco.

 What they should do is remove all rebates from every program for partners. Come up with a deal registration that gives Gold 30%, Silver 28%, Premier 25% and Select 20% off when a deal is registered. Then all other partners who want to try to sell to the customer get 5% off the products. This would allow all partners to make money and hold off other partners who want to try to get a sale. This would also allow smaller partners who have done all of the work to make money while telling the big partners you cannot sell to the customer unless you only want 5% off product. Also stop Gold partners from selling product at cost or zero percent off and just getting the rebates. I see this allot.

Right now you have every customer who buys Cisco knowing what the partners discount is and that they will demand to get almost all of it but a few points. Cisco Partners cannot live on a few points and then rebates. I have other vendors who I make 30% on with deal registrations; yes the whole 30% since other partners get below 8% they don't want to waste time on trying to sell into my customer. Why can't Cisco fix the issue and have partner make more money?

If you think about my idea above, Cisco would make more money on the bottom line by lowering discounts to partners and removing all rebates. This would still allow a partner to make 20% or more on Cisco products, this is not heard of in today's market. Maybe Chamber's should have called me to fix his channel program.

You imply that Brocade's IP business is growing, while Cisco's switching business is declining, with the proof being that the revenue contribution for Brocade's IP products grew from 12% in Q1 to 24% in Q2. However, Q2 was the first full quarter that Foundry's revenue has been included in Brocade's total. Assuming all of Brocade's IP product revenue comes from Foundry products, then that amounts to $121M (24% of $506M). Seems to me that Foundry was reporting > $125M in quarterly product revenue a year ago. It's too soon to say that Brocade is the only company in the business with growing switch/router sales. Let's give them another quarter.

Disclaimer: I have long position in CSCO

Personally when a vendor starts focusing on the rebates, in an attempt to control the price floor of the market....they have become a retail brand.....(might as well be selling TV's or printer toner..)
The value part of the transaction... is leading the design and POC phase of the process....This is what should be rewarded (unless the vendor is giving this away for free). VMWare for example, does a good job of this..., and if for commercial rules, the client goes to market in a multi bid for supply process, there is always some partner who will buy the deal at a loss.... (As to how these people stay employed....is a separate discussion).
I haven't yet seen a good way for a major vendor to manage this issue, apart from rewarding the lead up activity at the point the transaction gets booked.....(lets face it.. a rebate for the design in work, with nil cashflow exposure when the supply is done at nil margin...is not a bad deal..? Let some other idiot company lose money on the supply if they want to transact it for a loss....we know where they will be in 2 years...)

...however IMO, when you are number one in a market, and your partners live on crumbs if they are lucky.....you only have one direction to go...