Changes in the Air at Cisco Partner Summit 2012

Pros and cons of Cisco's current relationship with its partners.

Last week, under the sunny skies of San Diego, Cisco held its annual reseller Partner Summit. The setting was fitting as the show itself indicated that there are sunnier skies ahead for Cisco and its Partners.

Cisco and its relationship with its huge reseller base is one of the most talked about topics in the networking industry today. Competitors accuse Cisco of taking too much business from its resellers, and Cisco, of course, steadfastly defends itself. My belief is that the truth is actually somewhere in the middle, where Cisco has a very good relationship with its partners but there are some chinks in the armor.

However, I do think the changes announced at this year’s Partner Summit indicate an improvement to the company’s channel strategy and will smooth out some of those issues.

The first, and maybe most meaningful point, is that the majority of channel partners I spoke to said that Cisco was listening to them better than ever before and addressing many of their issues. Are all there still problems? Sure, but Cisco is taking the time to hear their issues better than they have in the past. Related to this is the work COO Gary Moore’s organization has done in fixing many of the back-end issues. During one of the analyst roundtables Moore talked about many of the issues that were causing Cisco to lose deals to competitors, as the back-end systems wouldn’t let the company or its resellers respond quickly enough.

Also, Cisco has simplified its services partner programs by consolidating the number of programs from 47 to 1. The new program rewards partners based on their level of investment in Cisco. The bigger the investment in Cisco, the bigger the rebates awarded to the partner. This will change the relationship with the partners and Cisco, some for the better and some not. If the partner does want to move its business forward and more into broader services, it will likely do very well under the new program. Partners that are more “box pushers” and want to drop infrastructure in and move on may not like the new program as much.

Cisco also unveiled a number of software-based “smart services” that deal with the lifecycle of running a network and include things like network discovery, network analysis and correlation tools that can provide better insight into network-related performance problems. The Cisco channel partners can offer the services as either Cisco branded, which are preferable to smaller partners, or white-labeled, which would make sense for larger partners with well-established brands.

On the downside, there are a number of channel partners that felt that Cisco’s growth in services came at the expense of the partners, but Cisco executives were clear that for every dollar of service revenue that Cisco earns, the partner earns five. So, if that ratio holds true as the business scales up, Cisco partners should almost want Cisco to do more, as it would bring more business to them.

Proving that these changes are for the overall good of the channel and helping channel partners understand the full value of what Cisco brings will be critical for Cisco as other end-to-end vendors, such as HP, Avaya, Dell and Huawei, get aggressive and try to poach some of Cisco’s massive channel. Overall, it was a good vision for Cisco to lay out, and success will be based on execution.

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