Cisco Adds New Program To tap SMB Revenue
Through its new Cisco Continuous Coverage, the vendor is providing an optional program channel partners can use to automate customers' renewals of maintenance contracts on Cisco equipment.
The program, available through several of Cisco's distribution partners, is targeted at accounts less than $25,000 in service value. Distributors Ingram Micro, Tech Data and Comstor, a division of Westcon Group, are participating in the program.
In many cases, Cisco partners are not going after service renewals on such small accounts, said Karl Meulema, vice president of marketing and channels for Cisco Services.
San Jose, Calif.-based Cisco estimates that its U.S. partners are leaving a $60 million opportunity on the table.
"Many customers don't renew, not because they don't want to but because no one tells them to do so," Meulema said. "When they call Cisco with a problem and find out they don't have a contract anymore, you can imagine the disappointment."
Part of the reason solution providers aren't focusing on renewals for smaller, low-value accounts is that there is a high cost of sale, he said.
"The challenge for partners is that the cost of going after smaller renewals is too high to make it worthwhile," Meulema said. "It's the first thing to fall off the plate of a busy reseller."
With that in mind, Cisco launched the new program to give partners a way to renew smaller service contracts and earn recurring revenue with little effort and zero sales costs, Meulema said. "The program will help partners increase profitability and productivity and will drive up renewal rates," he said.
Partners that choose to participate in the program receive notification about which of their accounts are ready for service contract renewal. Solution providers then can select which accounts they want to designate for automated processing.
Once an account is designated, Cisco's service contract partner, Encover, Mountain View, Calif., notifies the customer that it is time to renew, gives them a self-service click-to-buy option, enables them to choose annual or monthly payment plans and gives them several payment methods to select. From then on, the customer contract automatically is renewed until the customer cancels or the product is discontinued.
"The partner at all times stays in the driver seat," Meulema said, noting that all communications from Encover to end customers are done in the solution provider's name. "At no moment in time is this an attempt to take business from partners."
Partners receive a monthly commission check for renewals. They do give up a few points of margin on contracts renewed through the program, which is self-funded, Meulema said.
Cisco has been piloting the program for about six months with 250 solution providers. On average, participating partners saw their renewal rates increase to 53 percent, up from 32 percent.
The Revere Group, a Chicago-based solution provider that participated in the pilot program, so far has seen a 100 percent renewal rate on the roughly two dozen accounts it has pushed through Continuous Coverage, said Elvira Deak, service consultant at the company.
Deak said the solution provider had not been following up on renewals in the past, so the program is bringing in incremental revenue.
"It's business that wasn't touched before," she said. Deak added that the amount of money coming in from the program is small. "But it's better than not getting anything, and since nobody was tracking it before, we didn't know what we were missing," she said. Deak estimates that 80 percent of the Revere Group's customers are small businesses.
Customers thus far have warmed to the automated renewal process, Deak said. "A couple of customers have called when they got notification, but once I explained it, they've been OK," she said.
Deak said she is confident that Cisco has no intention of trying to take the renewals direct or using the program to steal business.
"I don't feel there is any over stepping of boundaries," she said. "There is not any false representation or ulterior motive."