Cisco partners not affected by product transition

Cisco partners say they are not impacted by the product transition challenges, particularly in switching, currently affecting the company. Channel allies pushing Cisco's data center and "Borderless Networks" architectures say their own business models, which include wrapping product sales in blankets of architectural designs and professional services, insulates them from any profit margin disruption.

Cisco's second quarter saw switching revenue drop 7% and gross margins decline because customers adopted new platforms, such as the Nexus 7000, and Catalyst 2960-S, 3560-X and 3750-X. These switches offer better price/performance than the Catalyst 6500 and earlier 2000 and 3000 series models, so the shift to the new switches affected revenue and profit margins.

Channel partners in data center and Borderless Networks say they aren't feeling that pain. They shared their thoughts at this week's Cisco Partner Summit in New Orleans.

"People buy configurations instead of products," says Mont Phelps, CEO of NWN, a Waltham, MA., Cisco reseller. "We've had reasonably healthy margins despite the competitive marketplace."

"Fifty percent of our revenue contribution comes from the services business," says Adrian Foxall, director of Cisco UCS sales at Computacenter in the UK. "It's increasingly more important."

"We've had the same margins for 10 years," says William Padfield CEO of Cisco reseller Datacraft, a Dimension Data company based in Singapore, adding that "solution sales" preserve margins.

The Borderless Networks partners were even more dismissive of the possible trickledown effect of Cisco's margin pressure:

"We grew double digits in Borderless Networks," says Steven Reese, director of solutions marketing at Nexus IS in Valencia, CA. "At the product level, (resellers) are affected when going box-to-box because of HP and Juniper forcing down price points. But we'll see normalization (through volume/price balancing). Our margins are not based on box sales. We're not feeling the impact."

"We sell the platform and we don't partner with a customer that doesn't share that vision," says Andrew Cadwell, senior vice president of sales and field operations for INX, in Lewisville, TX. "We're experiencing a little bit of pressure from HP but the customer is putting platform pressure on Cisco. The platform customer is doing themselves a huge disservice by purchasing another brand."

Partners that are feeling sales or margin pressure are those that "don't know how to adapt or innovate their business models" to a services-led structure, says John Breakey, CEO of Unis Lumin in Oakville, ON. And customers and partners that stray from the end-to-end architectural approach to purchasing and deploying are not playing with a full deck, Breakey says.

"Buying a little from multiple suppliers becomes a little stupid," he says.

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