Solution providers are taking a wait-and-see attitude when it comes to a new marketing agreement between Cisco Systems and AT&T.
Cisco and AT&T said Tuesday that they have aligned their marketing and sales forces to focus on selling AT&T's 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 upfront incentives and monthly commissions on the managed services contracts they sell as part of the program.
The program has potential, but it all depends on how it is executed, said Scott Strochak, president of Burlingame, Calif.-based Xtelesis.
Strochak said he's leery of the agreement. "I am 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 in Schaumburg, Ill., said he hopes the deal works out, but that he is skeptical. Cisco in December inked a similar deal with regional Bell SBC Communications, but nothing has happened since that agreement was announced, Freres said.
"I was ready to work with SBC, but it seems like that deal was more of a press release. There is nothing happening there," he said. "I hope this deal with AT&T works. If AT&T really has a program in place to work with us, they will have a major competitive advantage."
Indeed, Cisco's agreement with AT&T covers managed services already in existence that already are being sold through AT&T's 1,200 indirect partners, said Keith Olsen, vice president of indirect channels for AT&T.
The program initially covers 17 AT&T end-to-end managed services in the areas of Internet-protocol virtual private network (IP VPN) services, IP network security services, metro optical and Ethernet services, managed router services, managed hosting services and voice/data integrated-access services. More services will be added to the program in the future, Olsen said.
Cisco's agreement with AT&T, and the agreement with SBC, are a part of the vendor's efforts to increase profits for its solution provider partners as well as reduce tensions between its partners and telecom carriers.
Cisco partners have long complained that service providers sell Cisco 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 in these troubled economic times. The situation has led to increasing discord between Cisco and its once-diehard faithful solution provider partners.
Cisco's message to partners has been that cooperation rather than competition with service providers is the answer. Cisco 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.