Q&A: Cisco's Lloyd Promises A Simpler Cisco3:31 PM EST Thu. Jul. 07, 2011
Rob Lloyd, Cisco's executive vice president for worldwide operations, said Cisco is aware of its shortcomings and is making the series of targeted moves Chairman and CEO John Chambers promised would re-focus Cisco after a year of disappointing earnings and partner frustration.
Lloyd joined Cisco in 1994, the year before Chambers took over the top job, and assumed his current position in February 2009 after several successful years running Cisco's U.S., Canada and Japan operations and before that, Cisco's EMEA theater. As an EVP, he now oversees Cisco's worldwide channels, worldwide sales, and Internet Business Solutions Group, and serves on Cisco's Executive Committee. He is often mentioned by Cisco insiders on the short list of potential successors to Chambers.
Lloyd recently joined CRN Senior Editor Chad Berndtson for a discussion of how Cisco's restructuring will ultimately benefit Cisco partners, and why Cisco's architectural approach to networking and data center sales makes more money for the channel than competitive offerings. Excerpts of the conversation follow:
From the Cisco partner perspective I'm hearing some confusion but more importantly a lot of interest in how Cisco is going to emerge from the restructuring, heading into its fiscal 2012, as a better partner. So my broad question to you is: How is Cisco going to make solution providers more profitable this year?
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When I think of that decade-long march in this shift to a value-based portfolio of product and services that drives profitability and differentiation, we're just going to continue to pour more fuel onto that engine, put more fuel into that engine. It's been a great relationship. It's one that built trust. It's one that's mutually beneficial. It's one that's enabled partners to grow and improve their profitability. So what we're going to do is keep doing more of the same. One of the things that we have seen and had some great feedback on is the drive toward an architectural approach to customers where we [leverage] our portfolio in interesting ways and drive that portfolio with our partners' services to enable them to differentiate. It's working. We're going to do more of that.
However, we're going to simplify the way in which we interact with our customers and our partners. We're going to simplify the way in which we make available our resources and programs. We're going to simplify the way Cisco operates internally so we can speed up the pace in which we bring these types of innovations and capabilities. We're going to continue to drive a reputation which our partners have relied on and the customers we jointly serve for innovation and leadership. We're one of the very few companies that makes new markets happen, and when I think of the essence of our relationship with partners, our partnerships are a model for the industry, certainly the networking industry, because we make things happen together.
Nobody thought that our approach in the data center would become the benchmark approach. Nobody believed we would help drive the convergence of network fabrics with a unified fabric. Nobody believed there was a tight integration with the network fabric and computing in the virtualization layer and that the network played a role. We made a market with our partners. We made unified communications happen with our partners when everyone less said that it was sort of too far off and that incumbent suppliers like Nortel and others had their view that it was time to stall the market. That's the essence of our relationship. As we streamline our business and simplify our operating model, I think we should just add speed and agility and more innovation to the mix and that's where I think we'll begin as we enter the new year and where we'll try to be better and better every day.
NEXT: How Cisco Will Get Simpler For Partners
So talk brass tacks: specifics in terms of what you mean by simplifying. Rob, you have a channel background, you came from the channel side, you get what makes a VAR, what makes a solution provider tick and they crave the difference between talking about simplification and the programs that are going to filter down to them. What's Cisco going to do specifically, can you give me an example?
Well, sometimes when I visit with partners, when I visit with customers with our partners, there seem to be too many people required to make decisions. This is a business moving quickly. The networking industry has never moved more quickly than it is today. What we're doing is aligning our resources in a way in which there's much clearer accountability for decision making. [When it's] a matter to make a decision on a deal with our partner, we're going to do that faster, require less internal approvals to make these things happen. I know the processes we engage in every day sometimes take too long, so I think cycle time, simplification on the kinds of decision we need to make on a deal or program going to help us.
We've moved a lot over the last 60-90 days to create two key places in our organizations where final accountability resides for decisions. They reside in my Worldwide Field Organization -- you could call that sales and channels -- and they reside in the Engineering Organization. So we expect we're going to move faster, if need to make a decision or a change on something, we're going to move more quickly. I expect we'll react in competitive situations in a more aggressive fashion, and continue to deliver the consistency our partners expect of us. Our partners expect consistency. They want to see our processes implemented and our decision making quicker. We've done a lot of things, Chad, so that as we enter the next year, the next fiscal year, we're going to be faster in decision making with more accountability, less people who need to be in a room to make a decision, and more people who will be empowered to say "yes."
So what will partners see as a result of these internal moves? There are faster decisions on who to call, who to speak to when decisions need to be made,…you're telling em you're getting more nimble?
Exactly. That's exactly the issue. I would say we don't need as many people involved in decisions. More accountability and faster to the "yes."
So where up the hierarchy of decision makers are you removing layers? I know you have folks moving around, but we have heard form partners that it takes too long to escalate things with so many layers of decision making. What layers are being removed?
You know what? The basic realignment for us is to realign all of the resources in a geographic area -- under these three new geographic regions and just to make it real simple. All of the resources in the Americas, we generally operate within four hours of the same time zone, are now aligned with one leader, Chuck Robbins. That means our entire channel partner team, with Jim Sherriff, that means the entire architectural resources, the support expert capabilities with our partners, the sales teams in each of the market segments we serve across the Americas, service provider, commercial, enterprise and public sector.
The resource pool is there. Because the resource pool is there, I expect those teams can optimize the opportunities without having to crossover barriers or organizational steps every time. That's what we're doing right now. It's not a matter of going up or going down, it's a matter of how we optimize those investments, and that process is underway right now. It's happening in the three regions around the world: Europe, the Middle East and Africa, Asia, Japan, Pacific and China, and obviously, in the Americas.
NEXT: More Resources For Partners, Says Lloyd
At the end of the restructuring effort -- and I realize a lot of these decisions are still being made -- will the Worldwide Partner Organization (WWPO) see more or fewer resources than it does now? How will the resource pool change? How will the restructuring benefit the WWPO as an organization inside Cisco -- inside the areas you oversee -- and benefit partners?
Our overall priority is resource allocation. One of our top priorities is to invest and accelerate the capabilities we bring to our selling model we call partner-led. Partner-led is when we embrace, through systems, through marketing programs, through differentiated offers based on value and investment that our partners make with us. As we embrace that around the world, my expectation is that we'll invest more of our resources in the partner-led model that puts our partner sales force, engineering team and services as the primary vehicle with which we engage with customers. That's a foundational program around the world.
My expectation is that more of those resources will be in the field teams that face our partners every day and engage in our partners, but I'll be very candid that we will put more into marketing programs over the next year. More into systemic investment to support the relationships with partners, their sales teams and their engineering teams and more into helping them build their practices.
We are, as a company and an organization, focusing on more resources facing our customers and partners and less resources talking internally to each other.
So just to put a bow on that, partners who fear that as a result of this restructuring, fewer resources will be available to the WWPO and thus fewer resources available to them…those fears are unfounded? You can tell them that now?
All of our teams are going to be looking at ways to be more efficient and that's across the company. Everyone can look at ways in which we can be more efficient and as a result, simpler. Everyone will be focused on simplification, however the outcome of this is very clearly have our resources much more clearly aligned at the front of our business, facing customers and partners every day. That's the end goal. I've look the plans Keith and the teams around the world have rolled out, and I expect you'll see more resourcing, more program dollars, more engagement capabilities and more investments in systems that face our partners, and they'll feel a greater degree of alignment going forward.
The basic answer is that across the company, we're all looking at making our business run more efficiently. We think the net result of what we'll achieve is a simpler interface and faster engagement with our partners. Time will tell if that's the way they feel, and I can assure you I'll be asking them in the sessions we hold and the meetings I have almost every week either here or in the field. We'll ask them if they feel a simpler Cisco, and a Cisco embracing more the construct of their profitability and their value propositions.
The feedback CRN has gotten and the feedback that's out there is that Cisco partners look at this charge toward 30 to 50 adjacencies coming out of the downturn, and they wanted to find ways to realign their businesses to focus on the things that were going to be more important. Given that you have oversight over the WWPO and the sales function for Cisco, if you're advising partners on how to focus for profitability and focus on the technology that's going to define them for tomorrow, what are you telling them?
Obviously our partners fall into different segments and categories and serve customers whose needs vary significantly. Our partners cover the vast range of infrastructure solutions. [They] drive the capabilities to help our customers capture network technologies and achieve their business outcomes faster. Typically, we equate those capabilities with service offerings. Increasingly, we're seeing some of those capabilities as integrated technology that helps customers get faster the outcomes they're looking at. Whether it's a small VAR serving small customers or serving public sector customers, the faster they can help the customer get to the outcome for which they're investing in that technology, the more value they bring.
All of us believe that our partners' investment in practices, and our partners embracing architectures will allow them to get the stuff in place faster. I think big projects with multi-year turnarounds and multi-year ROI are not cutting the grade anymore, not passing the investment test. Projects that don't see a return for three years aren't happening anymore because the needs of clients may change before those are ever completed. The partners' value proposition through services expertise, through integrating technology that gets the customer in place with lower risk and faster time to market in a much quicker world is going to be the winning formula.
We need to be faster in getting there, we need to be simpler in how we present our offers and conduct our marketing and programs, and a lot of those things are long-term evolutions, but that's the long-term direction we're heading. Simpler, faster, integrated architectures that add value to the customer and our partners getting that in place to hit the customers' return on investment.
That's why we're convinced that once we spend some time on this switching debate, we see it's not about the cheapest switch in the closet, it's more about the skill sets required to deploy that, the [need] to upgrade and protect that investment over time. That's just an example of where a lot of the conversation will turn to: return on investment in customers. It's not a box play anymore.
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So when we talk the fundamental difference between what Cisco can offer in switching and what competitors are pushing against your top Catalyst and Nexus products, what to you is the 30-second/1-minute difference as to what Cisco can offer here versus HP and the others that move against you here?
So I know the difference, and I think it falls into three categories. The first difference is we develop our own ASICs, our own processors that support switching and routing fabrics. In doing so, if you look back, the upgrades and investment protection that a Catalyst customer has experienced over time is amazing. The upgradeability to a new switching fabric has been phenomenal because we [put] the concept of investment protection into what we do in switching in routing. That is not the way merchant silicon works, which is the foundation of our competitors' products.
Number two is skill sets. And look, I admit that in some places, all someone wants to do is connectivity, and if that's the case, connectivity is connectivity. Let's not spend a lot of time on that. If a network fabric is intended to deliver services on which the end user, application and device can rely, then let's get real clear: video is a network service that matters, security is a network service that matters, protocols that support VLANs and other abilities to shape traffic on a network matter, both in the campus and in the wide-area. In that regard, the layer of network services and the richness of our software is a differentiation that the other guys don't care about. I'm fine with the way that some parts of the market want to connect a box, connect a switch, a device. What I care about is that network services on top of switching fabrics will continue to evolve and accelerate, especially with the importance of video. I've had three customer meetings this morning, and every single one of those meetings what came up was how video would be deployed to leverage rich collaboration, mobile services and internal collaboration tools. If that's part of the network fabric, there's a network service layer that's different. Cisco does very well in that area.
The third thing that's different is actually the skill sets required internally and externally. There are hundreds of thousands of certified experts on Cisco technology foundational in our partners who create a fabric of skills and expertise in complex deployments and the use of the networks that is second to none. When you bring in somebody's system into your network -- it might be a very small company -- the problem you have is that you are now tied to a person that has the expertise to support that system.
The infrastructure -- the ecosystem of systems and expertise is around Cisco. Think of a switch: three years from now, who's going to be supporting that switch? Is it the same company, the same person? If you look at that underlying capability in this industry, it's a Cisco capability. That's a huge differentiation. The breadth and capabilities and skills associated with the technology. And if you go to the upper levels of complex networks, you do need expert capabilities to deploy services, deploy networks and troubleshoot them when applications and other devices cause an issue.
When we have a conversation about my switch, your switch, it takes people to make these technologies work. Our channel has the people.
For the partners themselves, there's a lot of saber rattling out there on who's going to making partners more profitable. You've got HP touting that they've recruited a large section of the Cisco Gold partner base, we all see the hype out there. By doing more with Cisco, by aligning more closely with Cisco, how is a partner more profitable than if they align in a similar capacity with HP?
You know, I ran my own partner business for 10 years. I wrote the checks. I had to finance the receivables. I did everything that our networking and partners do today. I was responsible for our customers, our outcomes and our capabilities. It's a simple formula: I'd rather sell something for $100 for a certain percentage of margin than something at $60 for the same percentage of margin, because the unit of work I had to deliver with my sales force, with my infrastructure, with my services capabilities, I'd like to maximize that, the gross profit dollar that came from that unit of work. I'm confused as to how you make more money if the value proposition is to sell less dollars at the same margin, or "we'll give you a rebate to make it try to look more." I'm confused, because the last time I checked, more dollars and more margin helps me build a profitable business and helps me get a return on resources that are always scarce and limited. I have limited availability to invest in a sales team, limited availability to run a service practice. We've built the collaborative approach to each of those things. I don't know how selling something at 70 percent of what I was selling at a dollar helps make me more profitable. I'm sorry. Someone's going to have to explain it to me.
Our view is sell value, sell up the value chain, sell the features and capabilities not only for today's requirements but also for the future. Understand how an architecture creates a broader conversation than a point product does. That's in the interest of the overall profitability of the practices our partners run today. Economically, I don't know that there's any other outcome than a unit of work that achieves the highest profit contribution than one in which the margin is based on the highest dollar value.
I don't think there's anyone out there in the partner base that can argue the value of the Cisco architectural approach and [that] the size of the conversations they're having has expanded in the last three years. [Partners] are able to have a two-times bigger conversation on what they're selling than the point product servers, or the point product end-of-rack of point-product top-of-rack switch they sold two years ago. So this is a good thing for profitability. And if you want to go out there and say to people that there's another way to look at it, then I guess, I don't understand it.
NEXT: Cisco's Architectural Selling Motion
Rob, the architectural selling motion is something that resonates with partners who move behind Cisco because it elevates the conversation to one of business process: you're not just speaking to IT managers, you're getting into the C-suite, you're talking business transformation. How do you push that more through partners? How do you want them to take that to market?
The sustainable differentiation our partners bring is to have that conversation: here's how it all works together. "I have a practice that technically helps you do that, I believe the conversation is in the future, and I also have a service offering that will help you accelerate the results of that architecture." That's what we're working on with partners: deploying the systems and architecture that personify the Cisco differentiation and we will continue the road we set, which, by the way, which other company that we're having discussion on has a service model that's based on building practices that are scaled through our partners rather than competing with our partners?
That's the foundation for profitability for the future. We build practices to accelerate the adoption of converged data center, private cloud, collaboration, virtualization, expert solutions that our customers can see and demand. [Partners] need to help build those practices they take into their services and into their businesses. That's the Cisco model. We're not out there at the end of the day competing with them and creating a hard deck of customers: "You can go out and work with these players and we're going to take these ones direct." That's not the Cisco model.
Rob, with your solution provider background and the fact that you were the guy signing the checks, and fielding the angry phone calls…
…They were always happy phone calls [laughs]…
CRN: [laughs]…Right, right. You have a better understanding than most of what separates the good VARs from the great VARs and what they need to do to stand out among their peers. They must come to you with that question all the time, so what do you tell them? What's their edge?
That's a complex question because it has multiple facets. And a great VAR, a great partner of Cisco, always has great leadership. I meet some of the smartest businessmen and businesswomen I've met in my life who run Cisco partner businesses. They're innovative, customer-centric, great people-leaders, they build great teams, they create immense loyalty. Like any business, it's great leadership. Underneath that, they apply that formula of solid business management and leadership to execute in a focused way. There's so much out there today, but having an execution model is common to the partners thriving out there. They've gone deep in an area, or decided they'd go horizontal or be vertical experts, but they're focused.
I look at a combination of great management, solid business skills, forward thinking, and then a focus. We give our partners options to go deep, with master certifications, or go broad, with Gold and Silver and Premier certifications, across the board. Our partners have options to execute the business model they choose and in the future, that's going to be the model that wins. Those we hear complaining typically lack some of those success factors.
Rob, how often are you meeting with partners these days?
I meet with a partner a day, and if I'm on the road, I'm always doing a partner round table, listening to the unique issues in Brazil, or Europe maybe, always having a partner dinner, or a partner lunch. I'm in the EBC [Cisco's Executive Briefing Center] if I'm here in San Jose, and that keeps me energized because we all know that customer engagements is the fun part of what we do every day. I like to have [partner meetings] every day. Big partners, small partners, partners coming in here to plan their next business cycle.
Will the roles of Keith and Edison change at all in the new year?
No. They're building incremental focus on supporting our partner-led initiative around the world, and they'll be working very closely with our marketing organization. My belief is, having heard this from partners, we need to be more systemic in joint marketing activities. Keith and his team and Edison will be pulling more resources to support our field efforts around a partner-led go to market model. There's an entire go-to-market engine called partner-led and Keith's team, Edison's team and the people that support them inside the organization will be emphasizing how we create scale in that area.
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Two years ago when Cisco introduced UCS, you had much the same reception as you got when Cisco entered voice, and fast forward two years, it's surprising at least to some of those competitors how it turned out. What's been key to Cisco's execution behind UCS and this data center play?
The key was actually that we brought innovation into the marketplace in which the data center delivers value that others didn't see. That's the hallmark of Cisco. We looked at this five years ago. We said what is the role of the networking in this increasing trend to virtualization. We knew how VLANs and VPNs worked -- we'd been virtualizing networkings in the WAN and the LAN for years -- and some very smart people said, what happens when you virtualize the computer? Five years ago, we put the investments in place to create a series of platforms that would do that, and understand the market transition and getting it right, taking smart engineering talent and applying a networker's view and a networking mind to a problem and a market transition.
It was great execution with some incredible innovation. The richness of that innovation and the smartness of managing what a top-of-rack switch and fabric extension and the construct of controlling all the way down to those network interface cards. It still stands alone as the system -- as the only system in the market -- that does that work.
We've expanded the conversation to a value discussion around virtual machines and cloud, and I'm not going to say we anticipated the move as quickly as we've seen to private cloud and cloud-lie infrastructure, but I would tell you the move to virtualization was something we anticipated. The attach rate of virtual software [is] the strongest in the industry because we have the strongest value proposition. The fact that [according to IDC] we're No. 2 in market share in blades as of the first quarter in the U.S., the fact that we're No. 3 in the world, that's a great accomplishment. We're going to have to keep driving innovation and change and it's moving very quickly, and that's the reason we've been successful. We have to do a lot more, but I'm happy what the team has done.
Our partners recognize the value of that innovation. We change the conversation in a commodity space of servers to one of higher value. We embraced the fact that they can build services on top of that higher conversation. It's worked well for our partners, and changed the conversation about integrating these formerly siloed stacks. The market is now starting to copy the architecture which we think is a good compliment to what we've driven. We're used to that. If you make a market and do something different than eventually the market will follow. We like to lead at Cisco and we're best when we're leading. I feel very good about the value proposition and the roadmaps ahead. [Partners have helped] make a market transition that no one else saw.
The other feedback we do hear about selling UCS and the associated architectures are a couple of logistical headaches related specifically to the Vblock and the VCE piece. Is that something CIsco is working on? Are you leaving that in the hands of the VCE organization to make sure that's top notch?
I'm personally involved in the process of simplifying how our partners can access the power that's expressed with this converged infrastructure and the Vblock. We've had executive discussions already this week talking about just that. We know we have a great value proposition and know we need to simplify how our partners and deliver it to customers interested in the value proposition. I'm personally involved in that simplification, and the short answer is we need to simplify the way our partners are able to access and employ Vblocks. Plain and simple.