Partners say new program could ease telecom provider conflict
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Cisco Systems is launching a rebate program to increase the profitability of its partners that specialize in emerging technologies, CRN has learned.
Solution providers say that if the program delivers as promised, it should go far in alleviating the conflict between Cisco's solution provider partners and telecom service providers that offer deep discounts on Cisco products.
Under the Value Incentive Program, Cisco partners carrying IP telephony or VPN/security specializations will be eligible for 10 percent back-end rebates on IP telephony and security product sales and related SmartNet maintenance contracts, the company confirmed.
Edison Peres: Cisco's new Value Incentive Program is not a typical rebate program.
But the program is not a typical rebate system, said Edison Peres, vice president of emerging technologies for Cisco Worldwide Channels. Cisco partners must register for the program and meet stringent customer satisfaction requirements, Peres said. Also, the program runs for six months, with rebates paid at the end of the six-month period, he said.
The beefed-up customer satisfaction requirements and lengthy payout period are designed to ensure that the rebates enhance specialized partners' profits rather than "flow to the street," Peres said.
In the past few years, stiff price competition between Cisco's traditional solution provider partners and telecom service providers has led to serious margin compression on Cisco hardware, Peres said.
Under a less-stringent rebate program with more frequent payouts, the rebates could likely flow through to customers in the form of even lower street prices on Cisco gear, he said.
The extra requirements are key, said Jeff Reed, chief marketing and technology officer at Logical, a large Cisco partner in Bloomington Hills, Mich.
"We've invested a lot in getting our technicians up to speed on these technologies," Reed said. "We need some margin protection on the product side of the business to be able to afford the certifications required."
John Freres, president of Meridian IT Solutions, a Cisco partner with both IP telephony and security practices, said the program could significantly enhance the Schaumburg, Ill.-based company's profits.
The first six-month period will be retroactive to Jan.
27 and will run through July 26. To participate in the IP telephony rebate program, partners must be IP telephony-specialized, purchase $300,000 in IP communications products during the six-month period, and achieve a customer satisfaction rating of 4.16 out of 5 on each qualifying project.
For the VPN/security program, partners must be VPN/security technology-specialized, purchase $150,000 in security products during the period, achieve a 4.16 customer satisfaction rating on each project, and have a focused security practice.
Even as the new rebate program kicks in, Cisco's solution provider partners are taking a wait-and-see approach when it comes to a new marketing agreement unveiled last week between Cisco and AT&T under which 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.
The program has potential, but it all depends on how it is executed, said Scott Strochak, president of Xtelesis, Burlingame, Calif. "I am comfortable partnering with both of these companies, but I'd like to see what happens in reality," he said. "Will the direct sales forces of each company go out together and leave us out of the deals?"