SAN DIEGO – Cisco Systems’ push toward intelligent information networks has sparked major enhancements to its partner program.
The changes, announced at the annual Partners Summit, will be the company’s most significant since it introduced a value-based plan in 2001.
The enhancements include a new Masters specification, which is an attempt to make the channel program fair to all partners.
In the past, Cisco gold partners attained more benefits and margins than the company’s silver and premier partners because they held all certifications.
Cisco realized some partners are either boutique outfits or want to specialize — in security, for example. Through the new Masters specialization these deep partners will be able to attain the same level of rewards as gold partners.
“It’s a level playing field for a Master security partner and a gold partner,” said Andrew Sage, Cisco’s senior director of worldwide channels marketing.
T.C. Doyle, a channel analyst at Amazon Consulting, agreed Cisco has helped partners a great deal with this new plan.
While Doyle believes the overall plan will be encouraging to the channel, he added that Cisco will still need to work out a way to respect the value of the upper tier. “The gold tier does not want to be undermined. They have made boat-loads of investments and there could be some partners who push back,” he said.
Sage said Cisco wants its partners to consider depth and breadth, or both. “It’s a simple case of asking partners what they want to do. Will I be an integrated infrastructure provider and give the minimum set of routing, switching, wireless, security and voice to (customers)?
“And, we will ask some partners to go deep and be specialized in one area or multiple areas such as voice and security. These are the boutique partners who have skills in one area and are not interested in doing a lot of things,” Sage said.
Cisco used to want partners to sell routing and switching, and then security.
“Now,” said Sage, “as a networking partner you are selling routing, switching, voice, contact centres, and storage networking. This is the addressable market and it will grow because of intelligent information networks. Partners must be able to get into more of this market.”
According to IDC, routing and switching is going to be a US$25 billion market globally this year. Tack on storage, security, wireless and voice and that market balloons to a US$42 billion opportunity for the channel in 2006.
Problem for partners
This lucrative market also poses a problem for most partners, Sage said, because upcoming systems involve complex technology.
“Partners will need breadth of skills to provide fully integrated networks,” he said. “These are skills that are broad. They will need lifecycle services skills, also, to provide the services and support on the life of the equipment.”
So Cisco’s channel team created a set of changes that would incent partners to invest in building intelligent information networks.
Cisco’s tiered partner structure will remain the same, with gold, silver and premier partners. However, VARs will have two years to achieve a minimum set of capabilities for routing, switching, voice, wireless and security.
The new Masters specification will be added to Express and Advanced specifications. Express is the basic level, while Advanced is the integrated infrastructure level.
Lifecycle services will also be a mandatory part of each specialization.
“Premiers have to get the Express specification,” said Sage. “The same goes for silvers, except they have to have any two Advanced specifications. Gold partners have to have all Advanced specifications, which are routing, switching, security, wireless, and voice. Any partner can make the investment and be a Master.”
Masters will get the highest level of VIP rebate and reward,” he added.
Unis Lumin Inc., a Cisco gold partner based in Toronto, won’t need the full two years to achieve all of the certifications. According to CEO John Breakey, the company is only two certifications away.
“The program has become broader,” he said. “Yet we have people in areas that are strong in a discipline and they will be rewarded.”
Doyle thinks the two year deadline will not be a major issue. He said VARs will get the message and sell more of Cisco’s portfolio.
Breakey believes that now more than ever all Cisco partners will benefit from the branding of the expertise in the market place.
“Cisco has been good at identifying to the marketplace the expertise of the gold partners,” he said. “Now the market will know about the quality in the Masters (specification).”
The company’s multi-pronged partner profitability channel strategy has been a boon for partners, said Cisco.
It said partners have enjoyed 60 per cent year-to-year booking increases through the Value Incentive Program (VIP).
Partners also saw a whopping 340 per cent increase in the number of deals closed that went through the Opportunity Incentive Program (OIP).
As for the Solutions Incentive Program (SIP), Goodwin said 70 deals are in that pipeline and about 23 new applications have been approved. He added that SIP is still in its infancy.
Move from volume program
Back in 2001, Cisco dropped its volume-based channel program for its current value-based system.
Today, Keith Goodwin, vice-president of worldwide channels for Cisco, would like its channel to move from value to building specializations — services that focus on applications and solutions.
Breakey called the value plan “incredibly intelligent.”
He added that the objective was to make the industry healthy again and enable the channel to earn a reasonable rate of return.
Analyst Doyle agrees. “Cisco brings a higher level of channel game than others in its space. They understand channel business models and the economics of it. When they recognized that none of their guys were making any money they were shrewd in going over to the value over volume model,” Doyle said.
Another concept Cisco wants its partners to take hold of is life-cycle services.
New and old concepts such as network monitoring and design, application integration, and security posture assessments will all be tied into Cisco advanced technologies. Also, these concepts will help increase partner margins and other money making areas such as consulting and services.
Unis Lumin is one of the early adopters of Lifecycle Services. “It is a business process we are selling today, not technology,” said Breakey. “If you were doing VoIP with RFID you are changing workflow patterns not just technology. You need Lifecycle Services to do it properly.”