Top 10 Things To Know About Cisco's Push To The Cloud2:00 PM EST Mon. Jun. 10, 2013
This week, Cisco executives had a message that rang loud and clear at their 2013 Partner Summit event in Boston. That message: "Embrace cloud services, we will help." In the last two-and-a-half-years, Cisco has had three areas of cloud focus: builder, services provider and services reseller. Now Cisco is specifically geared toward ramping up resources for resellers to make the transition to cloud. Cisco is more than encouraging its partners to embrace the change; it is heavily invested in an incentives program around reselling Cisco-powered cloud services. In true Cisco form, executives are blazing trails where they see profit potential, and solution providers say they are already reaping the financial benefits.
Edison Peres (pictured), senior vice president, Worldwide Channels, urged partners during his keynote presentation on Tuesday, "Don't sit on the sidelines, get in the game." Right now, Cisco is convinced that "Cloud" is the name of the game, and with good reason. According to Gartner, half of all CIOs expect to operate the majority of their applications and infrastructures in the cloud by 2015. In addition, global spending on public cloud services is projected to reach $200 billion by 2016. It may not be an easy switch, but Cisco insists it is a necessary transition -- one that could mean life or death to solution providers' businesses.
One benefit to jumping on board with Cisco's push toward cloud is in the power of the brand. With the new partner program, Cloud Services Resellers will be able to use Cisco Powered Branding on their own white-label offers. "It's more than just a branding. It's more about reference architectures; it's about Cisco outbound awareness; it's about joint marketing programs; and it's about the operational support behind that," said Scott Boyd, director, Cloud Strategy and Planning at Cisco. Boyd emphasized the logo as a symbol of Cisco’s overall commitment in making sure exceptional services are delivered in the marketplace.
Cisco's Value Incentive Program (VIP)to assist channel partners in increasing their return on Cisco investment and boost partner profitability, according to Cisco, is also getting a facelift. VIP has now been made available to partners in the cloud reseller category and includes rebates on sales of Cisco-powered Services. "All the details around calculations and rebates are going to be announced a week or two before the end of the quarter," Boyd said, "However, our target is approximately 3 percent for HCS-based offers and 5 percent for IaaS-based offers." In addition, Cisco has created a reward point system in which points are awarded based on volume of cloud services sold. Resellers can then apply their points toward selected Cisco products or training opportunities.
Cisco recognizes that information is imperative for solution providers to be able to take cloud and run with it. Absorbing the panic around learning how to redesign a business model around cloud, Cisco has provided multiple learning tools for partners to use. One tool available to Cloud Services Resellers is an online Cloud Go-To-Market Resource Center. Another is a Cloud Connections service, loaded with information on Cisco Cloud Providers for resellers to research and contact. Business transformation resources also will be available for partners in the form of workshops or webinars. Finally, a six-section manual Cisco refers to as "The Playbook" seems to be the Holy Grail for partners to understand how to make this transition to cloud. “We want no excuses not to satisfy the customer," Peres said.
Reselling cloud means incremental sales as opposed to one-time, large-scale deals. This can be attractive to customers, but causes questions in relation to sales compensation and commission. In this case, both Cisco internal sales teams as well as cloud providers will need to see a payout. "The partner pays based on margin; we tend to pay based on bookings against a quota," Peres said. Now that services are sold on recurring revenue, it is also recurring revenue for the sales representative with the reseller as long as the customer stays with that account.
So much talk has revolved around the benefits Cisco has molded around resellers, but what about the distributors? Boyd specified two types of distributors: those that have made their own capital investment and those that have not. "Both are very complementary to our partner community," Boyd said. "For the distributors that have not made a capital investment, they look more like resellers to us today."
Though it is still under evaluation whether or not distributors who have not made a capital investment will need to be treated differently, all of the announcements made at the Partner Summit will apply to distributors who look like resellers, according to Boyd.
Transitioning to a cloud-based model is not a one-size-fits-all endeavor. As partners take advantage of the resources provided to them, Peres encourages them to think in terms of speed-to-revenue rather than speed-to-expense. Depending on the size of the company, previous experience with cloud, current business model, etc., partners will be making the switch at different times. "Selling cloud and managed services is a new business model. If you move too quickly to a recurring revenue stream model, you will be greeted with cash-flow challenges. If you move too slow, you're out of the game. It's all about timing," Peres said.
Of course, not just anyone can freely enjoy the new and improved benefits package Cisco is offering up. For starters, a reseller must already be a Cisco registered partner. "Our program is relatively open," Peres said. "But if you're going to play with Cisco you need to be capable. You need to be able to understand the technology, play with the technology and, therefore, be assured that you can deliver high customer satisfaction." Resellers must also have a valid contract with a Cisco Cloud Provider and apply for the partner designation online.
"I believe what really separates Cisco from the rest of our competitors is how we afford our partners the opportunity to differentiate themselves with the lines of business," Boyd said. Traditionally, vendors, including Cisco, would communicate with a company's CIO; that communication is gradually shifting to communicating with those in the lines of business. "We are trying to make sure every one of our partners has the opportunity to layer on their own value-add to be relevant to those lines of business," Boyd said. The new model also allows the potential for three to four partners coexisting in the same account, all addressing different lines of business needs according to each partner’s strength.
According to Boyd, 86 providers already have made the transition Cisco is looking for. There are more than 350 Cisco-powered Services in market. Over 1,700 partners have cloud or data-center centric specializations that could be building clouds or providing clouds. "Overall, this is a small percentage of partners, but the ramp is just beginning," Boyd said. Currently, Cisco has over 600 applications of resellers and the number is growing on a monthly basis. Ultimately, Cisco recognizes that not all partners will embrace the change, but they also look forward to new partners as the "Internet of Things" continues to grow.