Execution Key To Cisco-AT&T Pact

Partners see potential but remain wary of new managed services deal

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Solution providers are taking a wait-and-see attitude when it comes to a new marketing agreement between Cisco Systems and AT&T.

The two companies said they have aligned their marketing and sales forces to focus on selling AT&T managed services that use Cisco gear. Under the agreement, Cisco and its channel partners will work with AT&T to sell the carrier's managed services offerings.

Cisco partners would earn up-front incentives and monthly commissions on the managed services contracts they sell.

While the program has potential, whether it's successful will depend on how it's executed, said Scott Strochak, president of Xtelesis, a solution provider based in Burlingame, Calif.

Cisco's message to both partners and service providers has been that cooperation rather than competition is the answer.

"I'm comfortable partnering with both of these companies, but I'd like to see what happens in reality," Strochak said. "Will the direct-sales forces of each company go out together and leave us out of the deals?"

Strochak said companies such as his are a perfect fit for selling managed services. "Sending AT&T direct sales out to sell Cisco hardware doesn't make sense, and sending Cisco direct sales out to sell AT&T services doesn't make sense," he said. "It's guys like me who know both ends of the business. We're the right ones to be selling these services."

John Freres, president of Meridian IT Solutions, a Cisco partner based in Schaumburg, Ill., said he hopes the deal works out but is skeptical.

In December 2002, Cisco inked a similar deal with RBOC SBC Communications, but the carrier has yet to create a program geared toward solution providers, Freres said.

"I was ready to work with SBC, but it seems like that deal was more of a press release. There's nothing happening there," he said. "I hope this deal works. If AT&T really has a program in place to work with us, they'll have a major competitive advantage."

Indeed, the latest Cisco agreement covers existing managed services that are already being sold through AT&T's 1,200 indirect partners, said Keith Olsen, vice president of indirect channels at AT&T, Basking Ridge, N.J.

The program initially covers 17 AT&T end-to-end managed services in the areas of IP VPNs, IP network security, metro optical and Ethernet, managed router, managed hosting and voice-data integrated access. More services will be added to the program in the future, Olsen said.

Cisco's agreements with AT&T and SBC represent part of the vendor's efforts to increase profits for its solution provider partners and reduce tension between those partners and telecom carriers.

Cisco partners have long complained that service providers sell the vendor's hardware at or below cost to lock in the managed services business. Those deep discounts have led to depressed hardware margins for Cisco partners, forcing many out of business, and the situation has increased discord between Cisco and solution providers that were once diehard-faithful to the company.

Cisco's message to partners has been that cooperation rather than competition with service providers is the answer. The vendor has been working closely with service providers to convince them that they, too, would be better off relying on Cisco partners to bring managed services to market, said Nigel Williams, Cisco's vice president of service provider channels.

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