Cisco Forges Ahead With New Engagement Plan

That's the latest word from Chuck Robbins, vice president of U.S. channels at the networking hardware vendor.

Since the company's partner summit in late April, "We've been working pretty hard," Robbins said in an interview with CRN.

Cisco's solution provider partners have faced serious business challenges in the past two years as product margins dwindled, pressured by the practice of some large, high-volume service providers that were selling Cisco gear at or below cost. That policy is referred to by Cisco executives as nonvalue selling.

"As the economy contracted, we saw partners in search of revenue and margin stray outside their traditional value role," Robbins said. "It created margin pressure, and it also created customer-satisfaction issues. Partners that had not played a particular role,if they didn't have the expertise, the customers' experience could be worse than it had been traditionally."

Cisco's problems in the channel were the main topic of discussion at the company's partner conference last April, where Cisco President and CEO John Chambers promised to personally address the problems with service providers. But the company also said that its partners were going to have to adjust their business models to survive in today's marketplace (CRN, May 6).

Since the partner conference, Chambers and other Cisco executives have had "significant conversations" with the service providers that were offering the deep discounts, Robbins said. Cisco is asking these service providers to refrain from offering Cisco hardware as a loss leader to win managed services business and is encouraging them instead to work with Cisco's traditional solution provider partners to deliver those services, Robbins said.

"I think our partners are seeing some improvement in that area," he said.

Indeed, Cisco partners tell CRN that the company's efforts seem to be working. Solution providers say that during the past few months they haven't encountered carriers offering Cisco gear at or below cost, but aftereffects of the problem are still being felt. The carrier's deep discounts over the past few years have left a "margin hangover" in the marketplace, they say, with customers expecting those discounts to continue.

The key to solving the customers' thirst for the highest discount possible lies in Cisco's "value engagement model," which the company is rolling out across the country now, Robbins told CRN.

Under the new model, originally unveiled at the April partner conference, the company said its sales team will bring its partners into a prospective deal from the beginning, allowing them to wrap higher margin services around a solution to make the deal more profitable. Previously, Cisco's enterprise sales organization would typically walk prospective customers through the specifics of deals and then refer them to a list of partners for procurement, solution providers said.

Brett Shockley, CEO of Spanlink Communications, a Minneapolis-based Cisco partner that focuses on IP telephony and call-center technology, said the plan marks a crucial turning point for the vendor.

"It's a pretty significant change for Cisco, but it's critical," Shockley said. "As Cisco moves heavily into the solutions space, it's absolutely critical for the partner to be involved in the sale from the very beginning."

Success under the new plan will require a higher degree of collaboration between the vendor and its partners, Robbins said. The plan calls for Cisco to work closely with partners on a regional basis to understand their business models and objectives, as well as areas of expertise and technology focuses, he said.

Michael Fong, CEO of Tempe, Ariz.-based Cisco partner Calence, said he was "refreshingly surprised" to see the new engagement strategy in action. "Getting Cisco's enterprise sales organization to move in lockstep with its channels is important," he said. "We have started to see that strategy take hold."

Under the new model, Cisco is engaging in a much higher level of regional planning than it did in the past, Robbins said. In each region, the process will map out each partner's particular technology focuses, such as specializations in emerging technologies including IP telephony, security, VPN, wireless LANs and storage, as well as any vertical industry expertise, Robbins said. In some cases, geographical presence will play a role, he added.

With this regional matrix of partners and their business plans in hand, Cisco's channel account managers and enterprise sales team will chart goals and opportunities in the region and work with partners to create marketing plans together, Robbins said.

The teams also will conduct a "gap analysis" in each region, identifying key opportunities for partners in a given vertical or technology market that may be underrepresented in a region, he said.

While some partners worry that the system will create a short list of "go-to" partners in each region for Cisco's sales team, Robbins said that's not the goal.

"This is not an attempt for us to tell our partners how to run their businesses," he said. "And it's not an attempt to eliminate partners."

Plus, the new engagement program only applies to business that Cisco and its partners bring to the table together, Robbins said, adding that nearly 22 percent of Cisco's annual revenue comes from business generated by partners that prospect customers on their own.

Robert Ditta, CEO of New York-based ShoreGroup, said he believes "Cisco is committed to helping its partners with this regional planning process.

"We've invested hundreds of thousands of dollars in our specializations," Ditta said. "In my specialties, I feel pretty sure that I will be one of the partners that is recognized on a regional basis. I can take that and leverage it to win more business."

The aim is for Cisco's sales team and partners to work more closely together, Robbins said.

"We see a lot of our partners focusing, either on industry verticals or on technologies, he said. "We want to focus our regional marketing plans on the areas of focus that our partners have."

The plan is also chiefly targeted at greenfield opportunities, Robbins added. Cisco will not take new partners into accounts that already have established a relationship with another Cisco partner, he said.

In the background, Cisco has been working to evolve its sales and channel teams to be more aware of partner business models and what factors drive profitability for its partners. It also has developed an internal "channel MBA" course that educates its channel and enterprise sales teams on the business issues that partners face in the marketplace, Robbins said.

But the process doesn't stop there, he said. Cisco also is unleashing more tools for its partners to develop their services businesses.

"We knew we needed to help our partners build services practices instead of just saying, 'You need a services practice,' " he said. "So we are providing them with the tools to do that."

To that end, the company is creating a series of "playbooks" that define service offerings and the staffing required to offer them effectively, Robbins said. The first playbook, which focuses on IP telephony, is available now. Playbooks on security and VPN are on tap, Robbins said.

If Cisco's plan is well executed, it should do a lot to alleviate the problems in the vendor's channel, said Ken McKinnon, president and CEO of Planetary Networks, Sunnyvale, Calif.

"I understand the intent," he said. "At the end of the day, we should all be hypersensitive to customer satisfaction. But it all depends on how well they drive this program down to the feet on the street."