Cisco's Changes
Cisco's solution provider partners, faced with declining margins and aggressive competition from carriers selling Cisco hardware at below their cost, are looking to Mountford to provide a few solutions himself.
CISCO PARTNER SUMMIT HIGHLIGHTS
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To be announced at the Summit
>> New engagement model between Cisco's enterprise sales force and channels.
>> Enhancements to emerging technologies strategy to improve partner profitability.
>> New regional business planning process identifies vertical markets by country with appropriate technologies and partner core competencies.
>> New platforms and enhancements to modular access routers and midrange routers, extending network intelligence to the branch office and remote worker.
Mountford, who took the reins of Cisco's worldwide channels organization in December, told CRN he has spent the past four months listening to partners to identify key issues. "We can't help channel partners increase their profitability without addressing the key issues that limit both product margins and their ability to grow higher-margin, services-based businesses," Mountford said. "At the Cisco Partner Summit, I will talk about the actions we need to take to help channel partners become more profitable [and productive and identify a solid return on investment."
Changes ahead include a new "value engagement model" and enhancements to Cisco's emerging technologies strategy, he said.
While Mountford would not disclose details prior to the Summit, some of his plans are already in the works, solution providers said. In the past few months, under pressure from Cisco, carriers have agreed to stop selling Cisco gear for less than cost. And if a solution provider competes on a deal against a carrier that is underpricing, Cisco will sell the product direct and give the solution provider a commission, solution providers said.
But the damage may already be done, said Bob Norton, vice president of Select, a Westwood, Mass.-based solution provider. "The carriers have eroded the street price of Cisco product significantly," he said. "They'll do almost anything to get the transport business."
Norton said the carriers' dealings have changed the tone in the market for Cisco gear. "Cisco's certification program has been prostituted for the discount," he said. "The only value customers see in the certification now is the level of the discount."
Cisco also has been counting on its specialization program and emerging technologies, such as IP telephony and wireless, to boost profits for solution providers. But those technologies, too, are facing margin pressure, said Chris Vincent, vice president of sales and marketing at Global Data Systems, Lafayette, La.
"Obviously, the emerging technologies are where the growth will come from," Vincent said. "But there is margin pressure in all of Cisco's product lines. It's nothing for the carriers to achieve these specializations and start selling the emerging technologies in the same way they sell routers and switches."