Art of the Deal: Cisco, D&H Distributing Team Up

A year ago, neither side was completely sure the deal would work.

Cisco hadn't added a new distributor in more than a decade. And besides, selling Cisco gear to smaller businesses was fraught with problems both perceptual and practical. Would the networking giant's solutions be too big, too complicated or too pricey for the SMB market?

Now, a year into the deal that saw SMB specialist D&H Distributing start educating and enticing VARs with the benefits of Cisco products, both sides say the project has exceeded expectations. D&H executives say some 3,000 VARs have received training on Cisco networking solutions fine-tuned for SMBs. About 1,000 of those have been added to Cisco's reseller program rolls.

And while Cisco execs won't disclose specific numbers, they say revenue beat first-year projections as well.

"We all consider [the alliance] very successful," says Dan Schwab, vice president of marketing at D&H. "When we set out, we knew that we needed a new product set for our customers looking to move up the chain."

Billed at the outset by D&H execs as one of the most important vendor alliances in the distributor's history, the deal was entered after years of mulling its potential. D&H agreed to carry and promote Cisco's SMB-focused products to its reseller community, giving Cisco a significant entry point into the SMB market while offering D&H a market-leading vendor to boost its own business.

The move was among several that Cisco made last summer to push its way into the SMB space. The company launched a complete line of SMB-targeted gear, along with an SMB support-services organization, an SMB leasing program and a deal-registration initiative, called the Opportunity Incentive Program.

While it may have moved Cisco down the food chain a bit, the partnership has had the opposite effect on D&H, which has become a legitimate challenger to larger broadline distributors, such as Ingram Micro, Tech Data and Synnex. But D&H execs say they aren't satisfied to stop there.

"Now we're looking at how to take this relationship to the next level," Schwab says. "This year, there will be more segmentation, more solutions aimed at security, wireless, etc. The whole Cisco evolution really mirrors our customer base as they look to [integrate] higher-spectrum, more enterprise-level technologies into SMBs."

At the D&H West Coast Expo, to be held Oct. 19 in City of Industry, Calif., Cisco and D&H will be showing off some hands-on examples of the new specialized product sets and introducing the training and marketing programs designed to help VARs sell them. Getting the most attention are network-security and IT-mobility solutions. Schwab stresses the importance of the specialized SMB packages, saying Cisco "didn't just slap a lower price on products and introduce them to the channel."

"The first year was really a foundational one," says Julie Hens, senior director of U.S. channels distribution at Cisco. "Distribution is the backbone of our SMB strategy. And we've learned with D&H that these customers buy differently. We've had to get creative with marketing programs and product bundles that would make sense, as well as with ease of use and price."

According to D&H's Schwab, the ideal VAR for the programs Cisco and D&H have created is one who is currently doing $1 million to $5 million in annual sales and has eight to 10 employees engaged in delivering total solutions to the SMB marketplace.

As for the typical end users, Schwab says he thinks a real-estate company with 50 employees or a law firm with 100 end users would fill the bill. "These are engagements where the partner isn't simply managing the system," says Schwab. "They're needed by their customers to be a true consultant."

Tim Maier, director of professional services and a partner at CSB Technology Partners, a VAR in Lancaster, Pa., is right in the wheelhouse for the Cisco-D&H alliance. Selling mostly to SMB users, Maier says he's been with D&H for only a couple of months but already sees the value in the SMB-targeted Cisco programs that the distributor is touting.

"The [Cisco-D&H relationship] is certainly developing," Maier says. "A lot of our business comes from the midsize market, and Cisco has traditionally been seen as a [provider of] premium product aimed at the large enterprise. There's a need for products that sell well in the SMB space. The more they tune their stuff for SMBs, the more I'm going to grow. I'm small myself, and we don't go after a lot of big firms. We'll certainly be looking to partner with D&H."