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If Cisco learns anything from the crisis, solution providers said it should be that effective communication is critical in a shortage so solution providers and customers can do project planning.
“They could have been clearer, sooner to the channel on the delays so that we could clearly plan,” said Robert Betzel, president of Infinity Network Solutions, a Macon, Ga., solution provider. “If they could learn anything to make it better next time, it’s that they can have the confidence to say we’re going to make partners know as soon as possible and let the partners carry it forward. People forgive when they know details. Most of our clients understood.”
Raoul Tecala, who until May was group vice president of the Cisco Alliance and Dimension Data, Cisco’s largest global reseller, said Cisco did as good as could be expected in a difficult situation.
“The quoting and ordering tools from Cisco give you the lead times, and that’s how we found out, so the question becomes, should they have come right out and said, ‘We’re experiencing these issues. You should expect these lead times to lengthen?’ Yes, I suppose that’s true. Could they have forewarned a bit more on lead times? I suppose that’s fair. But do I blame them for it? I don’t think so,” said Tecala.
Tom Adams, managing director of IT Services at Axispoint, a New York-based Cisco Silver partner, agreed with many solution providers that the frustration felt by VARs wasn’t so much the whys of the shortage as to when products would be widely available.
“The one thing that would have been nice to understand is how long it was going on, but I don’t think even they knew what the demand curve was going to be, and didn’t until April and May when things got back into control. Their communication to us was everything they knew,” said Adams.
Whether Cisco has made supply chain improvements that could allow the company to weather another economic downturn without severe shortages remains to be seen.
According to several solution providers and distributors, Cisco has put several executives on the ground in China to have better day-to-day visibility over suppliers.
Responding to a set of detailed questions sent via e-mail, the Cisco’s spokesman said that Cisco is “working with suppliers, including negotiating incentives, to bring on additional capacity in both materials and personnel for high-demand components, making strategic inventory purchases and deploying Cisco personnel to key supplier factories and contract manufacturers to work closely with our partners at monitoring quality and output levels.”
“In addition, we’ve contracted dedicated logistics and transportation arrangements in order to ensure the fastest possible delivery for both inbound components and outbound finished products,” the spokesman added.
Other improvements have been happening over the past year, the spokesman said. According to Cisco, it provided regular updates to its partner lead time tool, and addressed the issues with its advisory boards and councils, including the Cisco Partner Executive Exchange and Partner Operations Advisory Board (POAB).
“In fact, directly following our Q1 FY10 POAB, Randy Pond led the formation of a POAB Partner Communications Sub-Committee to help get direct feedback from these partners on what they needed from Cisco in the form of communications,” the spokesman said.
Quarterly earnings calls, the spokesman said, provided a “broad-scale update.” Cisco is also continuing to direct partners to its online lead times tool on the Cisco Web site, where registered partners can log in and see expected product availability for individual Cisco products.
Cisco further said that according to its field staff, it learned that payouts in its Value Incentive Program (VIP) could be impacted by lead times. As such, Cisco introduced in March a third VIP payment scheduled for payout in August.
On the communication issue, Cisco offers the following:
“Our channel partners are critical to our success. As such, we strive to be as transparent as we can, especially on topics that impact their business. That said, as a publicly traded company there are guidelines as to when and how we can provide financial guidance. Providing updates on our lead times, positive or negative, would have been considered new financial guidance, and as such we were limited as to the types of external communications we could provide.”
Gartner’s Fabbi isn’t so sure that lets Cisco off the hook. “Cisco is still in control of what they disclose. Publicly traded companies make disclosures, good and bad, all the time that are materially affecting,” he said. “They clearly didn’t want to admit this publicly and they’re big enough that they can hide the impacts in their financials. Cisco likes to hide behind these types of regulations as an excuse not to talk or disclose information about their business.”
Ken Dulaney, vice president and distinguished analyst with Gartner and the researcher’s principal Cisco analyst, agreed that Cisco needed to be more forthcoming.
“What did we learn from Toyota and what are we seeing with BP? You have to tell your folks and you have to be honest,” Dulaney said. “If you had supply chain issues and you didn’t communicate them, shame on you.”
Even as they are still grappling with the Cisco shortage, VARs and distributors have done what they always do: adapt.
Holly Garcia, senior director of vendor management at Ingram Micro, said Ingram had invested to carry more Cisco inventory than usual in accordance with the information coming from Cisco. It is also working with Cisco on more frequent forecasting.
“The kudos I would give to them is they were very sensitive to our quarter-end and year-end needs,” Garcia said. “They’ve been open and have engaged with us quite a bit in that regard.”
Westcon’s Minett said regular meetings between his team and Cisco specifically on the supply chain began a few months ago.
“This was an exceptional situation: the length, the depth of the issue, and you’d probably find most situations self-correcting,” Minett said. “They had to take action which they never had to take before, and realize that the standard response to the situation was no longer achieving the normal remedy. In evolutionary terms, you have to have a setback to push advancement, and this is an advancement that’s pushed collaborative planning with Cisco into a new league. Cisco is a more open book now, and a lot more inclusive.”
And a lot more partner-centric, Minett believes.
“They’re looking at distribution as a partner in the supply chain rather than just a customer,” he said. “We’re going to have a far better integrated supply chain discussion going forward than we ever had before. This has made them stronger.”
For some partners, however, mending fences may take a little longer.
“What you’re seeing from them signifies the core internal problem. They haven’t put solving this as a very high priority,” said a Cisco Gold partner. “Who got fired over this? That’s the question I want to ask. Somebody should have gotten fired. If no one is accountable, nothing changes. I don’t think they’re going to do better. Too often the storm blows over and everyone goes back to what they did before. Who’s accountable? No one’s got any skin in the game?”
“You want to clear away all the B.S. and talk brass tacks? Here’s the bottom line: They took a situation that was largely not their fault and made it a hell of a lot worse by not being forthcoming,” said another national Cisco Gold partner, who spoke with CRN in mid-July. “People needed answers. People needed something. For one of the most important technology companies in the world, with one of the broadest and most important channel programs, that’s simply unacceptable. Do better.”