Claflin: 3Com Poised To Snare Market Share

3Com appears to be back on track, according to solution providers at the 3Com Live partner conference in Las Vegas last week. After a surprise overhaul of sales volume requirements for partners last fall, 3Com is moving its partner program toward a model that rewards partners for building expertise and adding value.

President and CEO Bruce Claflin pledged to "do whatever it takes" to build 3Com's brand in the marketplace, bring solution providers more leads and help them challenge market leader Cisco Systems. Claflin spoke with CRN Infrastructure Editor Jennifer Hagendorf Follett at the conference about how the Marlborough, Mass.-based company is better poised to win business and gain market share.

CRN: One 3Com executive spoke about getting partners excited about 'the new 3Com.' What is 'the new 3Com?'

CLAFLIN: We want to be a leader in the enterprise networking space, and we want to leverage the trend of secure converged networking. We believe that we can give superior value to customers. If we do that, then we'll have growth and prosperity and all the things the investors look for, too. So I think it's fairly straightforward. If you think about business, at the end of the day, it's infinitely simple. What you have to do, it's just hard to get it done. If you offer customers something of value--and it's better than what your competitors can give--they'll come to you. And I think we're doing that.

CRN: How is that different from the 3Com of the past?

CLAFLIN: Well, I think in the past--if you go back in time, a long time--3Com was a conglomerate that had a variety of technologies serving a variety of markets, everywhere from consumers to carriers, from $40 modems to million-dollar machines. And I think what's different is we're completely focused on the enterprise networking market. . . . I think that would be the principal difference from what you would have thought of in the past.

CRN: When you say 'enterprise,' does that include small and midsize businesses?

CLAFLIN: Yes, I mean all sizes--small, medium and large.

CRN: Partners still see a lot of resistance to 3Com in the customer base--'What are they doing? Are they in this market to stay? They've been in and out of markets.' How long does it take to overcome that?

CLAFLIN: I don't think it gets measured in time; it gets measured by success in the marketplace. Nothing sells better than success, and as we demonstrate growth, as we win accounts, those concerns evaporate. I think that's part of what's happening. An interesting thing that's just happened in the last week or two is we began to formally ship the Switch 8800, a very high-end switch. And it's interesting, the effect that's had on a lot of channels and partners, because this is the absolute, top-end of enterprise-class switching and seems to be a proof point that customers rally behind in terms of believing we're really committed. We're also winning some pretty nice accounts with the product line, too. So I think as we continue to demonstrate that we're fulfilling our product lines, adding capabilities and winning accounts, I think the questions from the last century begin to go away.

CRN: Can you give a rundown of some of the changes that have taken place over the last six to 12 months?

CLAFLIN: Probably the horizon ought to be more like two years. Let me come at it first from the product point of view. If you were to think of the 3Com of about two years ago, we had Layer 2 edge switches, we had a low-end LAN telephony product that would scale well to 100 to 200 handsets, we had a wireless access point, we had a service capability that was essentially 8 to 5 Monday through Friday, and that was the company. Today, we have a whole line of Layer 2, Layer 3, Layer 4 [switches] at both the edge and the core; we have a full line of wireline and wireless products, including wireless switches; we have a voice product line that scales from tens of handsets to tens of thousands; we have service capabilities that are seven days a week, 365 days a year, in all the major countries of the world; and we have a security capability in intrusion prevention that's second to none and a management system for it, EMS [Enterprise Management Suite], which allows us to manage it as a single solution. So just there's just been a [big] change in the capabilities we offer in terms of products.

From a marketplace standpoint, I'd say there are two changes. The first is we've been wanting to revitalize and refresh what I'll call our traditional channel approach to the market--typically two-tier, typically focused on small and midsize businesses, which is still a huge business for us and will be forever. We have a long history there with channels, but we want to revitalize it. . . . But the new challenge is to move up into a new class of channel partners who can sell to a larger enterprise, who can sell a more complex solution, who typically have a higher value-add in terms of services. And that's where a lot of the new action has been going on in terms of recruiting new channels we've not been in before. I guess the other thing I'd say is that when you sell to a large enterprise, even though you're working with partners, typically the end customer wants to have a relationship with the manufacturer. So we've been adding sales reps who are dedicated account execs focused exclusively on nurturing large accounts and deals--again, working with partners. We've added substantially to that team of people, both in account execs and in the technical team over the last year and a half.

From a channel standpoint--I'm sure you've heard this--one of the things they say is, 'Stay the course. Don't go left, right, left, right. Have some consistency to what you are doing.' And that's our commitment: to be consistent in the assignment of resources, to be consistent in the development of the channels that we've been in.

CRN: Where are you with your integration of TippingPoint?

CLAFLIN: Because we're using what I call a 'light' integration, I think we're well under way. Essentially, [TippingPoint] will operate as a division of the company. They have a sales force of their own, which we will continue to keep as a security-specialized sales force. We have made some mission transfers, where we took internal security development that was happening within 3Com and moved that under TippingPoint's management so that they will become the security division of the company, not just intrusion-prevention systems [IPS] but all security for the company. We've already put in cross-selling incentives so their sales force can get paid for bringing us into sales with switching and infrastructure, and vice versa. So I think we're well under way.

CRN: Is that the long-term strategy, to keep them separate?

CLAFLIN: Well, 'separate' isn't the right word. 'Integrated' would be a better word, and 'linked.' No, there will be other things that will happen. Their product today is largely an appliancelike device that can sit in a network and filter traffic, and it's typically a high-end device today. There are several things we can do with the technology. First, we're convinced we can scale it down into lower-cost products so that a large enterprise can distribute IPS pervasively throughout its environment as opposed to just at the core. Second, we believe we can take their technology and actually embed it into our switching and routing infrastructure. Third, we'll manage it under that EMS management system in a holistic way, and I believe there are a set of services that we can bring to the market to support them as well: vulnerability assessments as a front end to deploying security technology. And lastly, they are principally in the U.S., and we can help them expand internationally, I think, much more rapidly than would have been the case.

CRN: What about the security lineup right now? Partners talk about there being a hole in the sub-$5,000 space. Is that what you'll fill with the TippingPoint technology?

CLAFLIN: Yes, that's part of what I was saying. That's technology that can not only scale up but also scale down. TippingPoint knew that and knew there was a huge market, but they believed as a stand-alone company they couldn't go that way because in order to do it they'd have to develop a channel, which takes a long time. We have that channel, so it's much more feasible from a business standpoint to scale that product down because of our channel capabilities.

CRN: You're doing a lot with the channel program in terms of MDFs and the 3Earnings rebate initiative. How much is the channel budget growing?

CLAFLIN: I honestly don't know in absolute dollars. It is growing; I just don't know the amount offhand. Perhaps more importantly than its growth is that I'd like to think we're spending it smarter. Like all companies, we had a striated channel structure that has different and better terms for certain partners over others, and it is typically volume- or revenue-based. But we concluded that was not a good way to go because it didn't really reward the channel [partners] who were going to go develop the market and invest heavily in building up their competencies. It only rewarded volume. So we completely restructured how we spend the money so that there are substantial differences in terms from our high-end partners to the low end. But it's based not so much on volume as much as on their business commitment to develop the market.

CRN: Some might say you're slow to come to that realization. Cisco made that shift several years ago.

CLAFLIN: Yes, I think that's true.

CRN: Why did it take so long for 3Com to get to that point?

CLAFLIN: I have no idea.

CRN: Some partners say that when they get in with a customer and put 3Com technology up against its competitors, they do really well, but they don't always get invited to that party. How do you, Bruce Claflin, help them get invited to the party?

CLAFLIN: Me, personally? Actually, I enjoy that. I tell every channel that they have a team that supports them. And I am part of it, and I actively work with partners on closing deals, particularly where the customer wants to make a vendor decision as well as a product decision. We have folks in our company who are infinitely better than I am at describing why Product A is better than Competitive [Product] A. But I think if it's a vendor question, I'm as good as anyone. I mean, if the CEO can't talk about a company, who can? So I'm actively involved with partners and actively involved in an incredible number of deals. But frankly, what the CEO does on a personal level is interesting but insufficient. We need to use our marketing capability more effectively to get us invited to the dance, because when we're invited to compete we win an awful lot of the time.

CRN: Why has it taken so long to address the marketing problem? That's something that's been on partners' minds for a while.

CLAFLIN: At the risk of being defensive, the 3Com brand is one of the most widely known brands in the networking industry. When we do brand surveys and talk about 'favorable' and 'unfavorable,' it tends to have very high and favorable ratings. So I'm not going to apologize for what we've done. It's one of the most powerful brands in the IT industry. Having said that, I think there's more that can be done to make it relevant--and relevant particularly to [C]-level executives who are making major technology decisions. I think it goes back to our history. We are committed to being a full-line provider of products and solutions to the enterprise, and that is not a capability that the company really has not had as a core mission ever. So we need to make sure that is known and understood by these policy-level executives, and that's where the marketing will go. ... Remember, the company is changing. Go back to what we said two years ago to where we are today. It's one thing to develop a class of products. It's another thing to convince a billion people that we're there. The marketing always lags behind the products.

CRN: Are you expecting 3Com to make market-share gains this year?

CLAFLIN: Yes, absolutely.

CRN: At whose expense will that be? Which competitors?

CLAFLIN: Well, it's interesting. Obviously, with Cisco and their size and share, you would say some has to come out Cisco. But frankly, I think in the near term, some of the bigger share gains may come out of some of Cisco's smaller competitors. I have this image in my mind of the old cartoon characters, two big giants trying to slug each other, and their punches miss but they hit the poor, innocent bystander. So we view Cisco as the strategic competitor, but when we look at our win/loss report, we are now beginning to see lots of wins [against] Enterasys, Foundry and even Extreme, now that we've announced our higher-end switch products.

CRN: What about on the voice side?

CLAFLIN: With voice, you have a different set of competitors. Obviously, Cisco is one, but then you're going to run into Avaya and Nortel in the larger accounts. And at the lower end, we typically see Mitel or companies like that. But it's the same idea. You focus on Cisco and, say, Avaya, which are the bigger ones, but your blows may land on Mitel.

CRN: So how does the concept that market-share gains will come from smaller competitors jibe with your keynote discussion that 3Com can become the leader and basically unseat Cisco?

CLAFLIN: [If] you target the leader of the industry, and you're better than the leader in the industry, odds are you're going to beat the laggards pretty well, too. That's the idea.

CRN: What's the time frame for when 3Com could become a market-share leader over Cisco?

CLAFLIN: Who knows? And by the way, it's not necessarily you're the market-share leader over Cisco, but you become a clear, major supplier in the industry. I've used the example of Amdahl. Amdahl never did half the market share of IBM, but they clearly were perceived as an absolute competitor. Almost no deals ever went competitive in which Amdahl wasn't invited to compete. That's the environment we're talking about, where when the CIO instantly thinks when going out to bid, "I'm inviting Cisco and 3Com." Get to that environment and, trust me, we will win a lot of deals.

CRN: So you don't think you'll be able to overcome Cisco's market share?

CLAFLIN: I didn't say that, but I'm obviously not going to forecast numbers. Let me tell you what I will say: It's less about the market share. We are superior to Cisco today. It's not going to be in the future. If you want to know what day did we pass Cisco in superiority, write it down: today. We are superior to Cisco today. If you want to buy a converged network today, we are superior to them. If you want it to be secure, we are superior to them. Today. So you can write it first and put it in a headline, '3Com Passed Cisco Today.' The market share will follow.

CRN: Can you give a rundown of some of the changes that have taken place over the last six to 12 months?

CLAFLIN: Probably the horizon ought to be more like two years. Let me come at it first from the product point of view. If you were to think of the 3Com of about two years ago, we had Layer 2 edge switches, we had a low-end LAN telephony product that would scale well to 100 to 200 handsets, we had a wireless access point, we had a service capability that was essentially 8 to 5 Monday through Friday, and that was the company. Today, we have a whole line of Layer 2, Layer 3, Layer 4 [switches] at both the edge and the core; we have a full line of wireline and wireless products, including wireless switches; we have a voice product line that scales from tens of handsets to tens of thousands; we have service capabilities that are seven days a week, 365 days a year, in all the major countries of the world; and we have a security capability in intrusion prevention that's second to none and a management system for it, EMS [Enterprise Management Suite], which allows us to manage it as a single solution. So just there's just been a [big] change in the capabilities we offer in terms of products.

From a marketplace standpoint, I'd say there are two changes. The first is we've been wanting to revitalize and refresh what I'll call our traditional channel approach to the market--typically two-tier, typically focused on small- and midsize businesses, which is still a huge business for us and will be forever. We have a long history there with channels, but we want to revitalize it. . . . But the new challenge is to move up into a new class of channel partners who can sell to a larger enterprise, who can sell a more complex solution, who typically have a higher value-add in terms of services. And that's where a lot of the new action has been going on in terms of recruiting new channels we've not been in before. I guess the other thing I'd say is that when you sell to a large enterprise, even though you're working with partners, typically the end customer wants to have a relationship with the manufacturer. So we've been adding sales reps who are dedicated account execs focused exclusively on nurturing large accounts and deals--again, working with partners. We've added substantially to that team of people, both in account execs and in the technical team over the last year and a half.

From a channel standpoint--I'm sure you've heard this--one of the things they say is, 'Stay the course. Don't go left, right, left, right. Have some consistency to what you are doing.' And that's our commitment: to be consistent in the assignment of resources, to be consistent in the development of the channels that we've been in.

CRN: Where are you with your integration of TippingPoint?

CLAFLIN: Because we're using what I call a 'light' integration, I think we're well under way. Essentially, [TippingPoint] will operate as a division of the company. They have a sales force of their own, which we will continue to keep as a security-specialized sales force. We have made some mission transfers, where we took internal security development that was happening within 3Com and moved that under TippingPoint's management so that they will become the security division of the company, not just intrustion prevention systems [IPS] but all security for the company. We've already put in cross-selling incentives so their sales force can get paid for bringing us into sales with switching and infrastructure, and vice versa. So I think we're well under way.

CRN: Is that the long-term strategy, to keep them separate?

CLAFLIN: Well, 'separate' isn't the right word. 'Integrated' would be a better word, and 'linked.' No, there will be other things that will happen. Their product today is largely an appliance-like device that can sit in a network and filter traffic, and it's typically a high-end device today. There are several things we can do with the technology. First, we're convinced we can scale it down into lower-cost products so that a large enterprise can distribute IPS pervasively throughout its environment as opposed to just at the core. Second, we believe we can take their technology and actually embed it into our switching and routing infrastructure. Third, we'll manage it under that EMS management system in a holistic way, and I believe there are a set of services that we can bring to the market to support them as well: vulnerability assessments as a front-end to deploying security technology. And lastly, they are principally in the U.S., and we can help them expand internationally, I think, much more rapidly than would have been the case. CRN: What about the security lineup right now? Partners talk about there being a hole in the sub-$5,000 space. Is that what you'll fill with the TippingPoint technology?

CLAFLIN: Yes, that's part of what I was saying. That's technology that can not only scale up but also scale down. TippingPoint knew that and knew there was a huge market, but they believed as a stand-alone company they couldn't go that way because in order to do it they'd have to develop a channel, which takes a long time. We have that channel, so it's much more feasible from a business standpoint to scale that product down because of our channel capabilities.

CRN: You're doing a lot with the channel program in terms of MDFs and the 3Earnings rebate initiative. How much is the channel budget growing?

CLAFLIN: I honestly don't know in absolute dollars. It is growing; I just don't know the amount off hand. Perhaps more importantly than its growth is that I'd like to think we're spending it smarter. Like all companies, we had a striated channel structure that has different and better terms for certain partners over others, and it is typically volume- or revenue-based. But we concluded that was not a good way to go because it didn't really reward the channel [partners] who were going to go develop the market and invest heavily in building up their competencies It only rewarded volume. So we completely restructured how we spend the money so that there are substantial differences in terms from our high-end partners to the low-end. But it's based not so much on volume as much as on their business commitment to develop the market.

CRN: Some might say you're slow to come to that realization. Cisco made that shift several years ago.

CLAFLIN: Yes, I think that's true.

CRN: Why did it take so long for 3Com to get to that point?

CLAFLIN: I have no idea.

CRN: Some partners say that when they get in with a customer and put 3Com technology up against its competitors, they do really well, but they don't always get invited to that party. How do you, Bruce Claflin, help them get invited to the party?

CLAFLIN: Me, personally? Actually, I enjoy that. I tell every channel that they have a team that supports them. And I am part of it, and I actively work with partners on closing deals, particularly where the customer wants to make a vendor decision as well as a product decision. We have folks in our company who are infinitely better than I am at describing why Product A is better than Competitive [Product] A. But I think if it's a vendor question, I'm as good as anyone. I mean, if the CEO can't talk about a company, who can? So I'm actively involved with partners and actively involved in an incredible number of deals. But frankly, what the CEO does on a personal level is interesting but insufficient. We need to use our marketing capability more effectively to get us invited to the dance, because when we're invited to compete we win an awful lot of the time.

CRN: Why has it taken so long to address the marketing problem? That's something that's been on partners' minds for a while.

CLAFLIN: At the risk of being defensive, the 3Com brand is one of the most widely known brands in the networking industry. When we do brand surveys and talk about 'favorable' and 'unfavorable,' it tends to have very high and favorable ratings. So I'm not going to apologize for what we've done. It's one of the most powerful brands in the IT industry. Having said that, I think there's more that can be done to make it relevant--and relevant particularly to [C]-level executives who are making major technology decisions. I think it goes back to our history. We are committed to being a full-line provider of products and solutions to the enterprise, and that is not a capability that the company really has not had as a core mission ever. So we need to make sure that is known and understood by these policy-level executives, and that's where the marketing will go. ... Remember, the company is changing. Go back to what we said two years ago to where we are today. It's one thing to develop a class of products. It's another thing to convince a billion people that we're there. The marketing always lags behind the products. CRN: Are you expecting 3Com to make market share gains this year?

CLAFLIN: Yes, absolutely.

CRN: At whose expense will that be? Which competitors?

CLAFLIN: Well, it's interesting. Obviously, with Cisco and their size and share, you would say some has to come out Cisco. But frankly, I think in the near term, some of the bigger share gains may come out of some of Cisco's smaller competitors. I have this image in my mind of the old cartoon characters, two big giants trying to slug each other, and their punches miss but they hit the poor, innocent bystander. So we view Cisco as the strategic competitor, but when we look at our win/loss report, we are now beginning to see lots of wins [against] Enterasys, Foundry and even Extreme, now that we've announced our higher-end switch products.

CRN: What about on the voice side?

CLAFLIN: With voice, you have a different set of competitors. Obviously, Cisco is one, but then you're going to run into Avaya and Nortel in the larger accounts. And at the lower end, we typically see Mitel or companies like that. But it's the same idea. You focus on Cisco and, say, Avaya, which are the bigger ones, but your blows may land on Mitel.

CRN: So how does the concept that market share gains will come from smaller competitors jibe with your keynote discussion that 3Com can become the leader and basically unseat Cisco?

CLAFLIN: [If] you target the leader of the industry, and you're better than the leader in the industry, odds are you're going to beat the laggards pretty well, too. That's the idea.

CRN: What's the time frame for when 3Com could become a market share leader over Cisco?

CLAFLIN: Who knows? And by the way, it's not necessarily you're the market share leader over Cisco, but you become a clear, major supplier in the industry. I've used the example of Amdahl. Amdahl never did half the market share of IBM, but they clearly were perceived as an absolute competitor. Almost no deals ever went competitive in which Amdahl wasn't invited to compete. That's the environment we're talking about, where when the CIO instantly thinks when going out to bid, "I'm inviting Cisco and 3Com." Get to that environment and, trust me, we will win a lot of deals.

CRN: So you don't think you'll be able to overcome Cisco's market share?

CLAFLIN: I didn't say that, but I'm obviously not going to forecast numbers. Let me tell you what I will say: It's less about the market share. We are superior to Cisco today. It's not going to be in the future. If you want to know what day did we pass Cisco in superiority, write it down: today. We are superior to Cisco today. If you want to buy a converged network today, we are superior to them. If you want it to be secure, we are superior to them. Today. So you can write it first and put it in a headline, '3Com Passed Cisco Today.' The market share will follow.