At Ciscos recent Partner Summit in Las Vegas, Paul Mountford, vice president of worldwide channels at the network hardware vendor, spoke with CRN Infrastructure Editor Larry Hooper about what Cisco is doing to gain traction among its noncertified partners, which account for 13 percent of the company's business.
CRN: You're introducing a lot of programs to improve profitability for Cisco's certified partner base,the Gold, Silver and Premier partners that deal directly with Cisco and account for 87 percent of Cisco's channel business.
What are you doing for the partners that deliver the other 13 percent of your business,for the authorized partners that largely deal with Cisco through distributors?
MOUNTFORD: If you take a commercial customer with 500 to 1,000 employees, that's a pretty big company. That still fits for Premiers and Silvers and Golds. [Companies with fewer than 500 employees] and, arguably, with less than 250,there are the small VARs that have a local relationship with small companies. And that's where I think there's a lot of opportunity.
CRN: So what are you doing to increase business in that space?
MOUNTFORD: Until we have enough of a product set, we don't really appeal to that marketplace. We have a pretty good market share in the 500-employee to 1,000-employee market, but below that, we have a low market share. So the question is, 'Are the price points right on the technology to get into that space?' Well, no, they're not.
We have a couple of things going on where we're looking at bringing products to that space to make it compelling.
CRN: Didn't Cisco buy Linksys to get into that market?
MOUNTFORD: Well, we bought Linksys, but Linksys is not really a partner sale because the minute you say, 'Hello, this is a Linksys box,' you've lost your profit.
CRN: What about selling services around that profitless box?
MOUNTFORD: There are not many services that you can sell, because that space has already been delineated by the people who play in it. Linksys and D-Link and the others that play in that space give their services away for nothing. It's just a box. It's not sold. It's bought. People know what they want and go into a retail store and buy it. That's the buyer who wants to set up his own personal network at home. It's not something you can sell services with.
CRN: So when you talk about a small business with 50 or 100 people, you're past the point of a Linksys solution.
MOUNTFORD: That's right.
CRN: But there is a market there, and it's not necessarily one that your Premier partners play in. It's more the realm of your two-tier authorized partners,the small, local VARs.
MOUNTFORD: I agree with you. There is a service and a product play there. I don't think we have the product suite right now to do that. Linksys is a SOHO and consumer box. The rest of our portfolio appeals typically [to companies with 500-plus employees]. So we have to get technology that has the price point in that space.
CRN: Are you working on getting that technology?
MOUNTFORD: Yes, I think we're going to do that because I know what's going on in the company in terms of what we're thinking of doing in acquisitions and development.
There's big growth for us there. The company recognizes this. I'm being asked to look at the business model for that space through the channel because that's the only way you can do it. But because it's a lower-margin business, I have to get the cost base sorted out. I'm being asked how to optimize the demand chain to make that effective not just for Cisco but for partners as well.
We're taking a good look at that at the moment. We're actually looking at it as a plan.
CRN: When will you go forward with the plan?
MOUNTFORD: We'll at least know whether the board says let's go for that space or not [by November].
CRN: It sounds as if you're saying that going for that space will mean another acquisition.
MOUNTFORD: It will mean either acquisitions or development, because we don't have the technology today that fits as a broad portfolio.
We have switches that you could argue go into that space. But when you're going for a market, you want the full offerings for that market. You don't want to have just one point product.