Partner Profitability

Topping the list will be the global rollout of a deal-registration program that will provide financial rewards for partners that find new accounts or new business within existing accounts, said Paul Mountford, vice president of worldwide channels at San Jose, Calif.-based Cisco.

While the main intention of the program is to reward new business, a side effect is that it helps protect solution providers that have registered deals from 11th-hour price competition from other partners, he said.

"The deal-registration program we talked about will absolutely prevent people [from] swooping in with high discounts," Mountford said.

Cisco has been piloting the program around its security products in the United States for the past six months, Mountford said.

While partners generally lauded the new program, it might not go far enough to suit some tastes.

"We'd like them to really sharpen that message [and create] a no-tolerance policy for companies using predatory discounts to maintain their Cisco business," said John Freres, president of Meridian IT Solutions, a partner in Schaumburg, Ill.

The program does not apply a penalty to a partner that tries to outbid another solution provider on a registered deal, but it makes it difficult to do so, Mountford said.

The program also does not protect existing business, such as maintenance renewals, from competitive bidding wars.

Cisco also plans to extend its Value Incentive Program (VIP) for another six months, effective Feb. 1. The rolling six-month program, launched about a year ago, rewards eligible partners with extra rebates on IP telephony and security sales.

The extended program will include enhancements around IP telephony, Mountford said. He declined to give further details.

The vendor will also unveil plans to roll out a program to advise partners on building solutions practices around specific vertical markets or technologies. The program likely will debut before the end of this year.

Mountford said recent research shows that partner profitability is on the rise, but is not at the levels he would like,and that's where the new programs come in.

"These programs going forward are robust programs which will make significant difference to the profitability of our partners," Mountford said.

Heading into the annual Cisco Partner Summit, which is expected to draw over 1,500 Cisco partners, solution providers said they are seeking definitive resolutions to problems that have plagued them for several years.

Certified Cisco partners said they have seen mixed results from the vendor's ongoing efforts to improve their profitability by propping up shrinking margins and curbing price gouging on its networking gear by some of its service provider partners.

Some partners said margin erosion has crept beyond Cisco's market-leading router and switch lines into newer areas, such as IP telephony and security. "The day-to-day street price of emerging technology has just eroded," one solution provider said. "We can't survive on razor-thin margins."

While some partners report little to no improvement in their profit margins, others said they have seen increases, due in part to Cisco's VIP.

Overall, Cisco margins for solution provider Sentinel Technologies grew by about 5 percent as a result of VIP, growth in the IP telephony market and efficiencies in the company's own business, said Robert Keblusek, senior vice president of business development at Downers Grove, Ill.-based Sentinel.