Cisco Uncaged

To help solution providers in this endeavor, the company is rolling out an incentive program that calls on partners to combine applications, services and Cisco technology into focused solutions. Cisco is also adding wireless technology to its deal-registration program and expanding it to include larger deals. In addition, a new service option aims to help partners continue to push Cisco products into the SMB market.

Under its new Solution Incentive Program (SIP), Cisco is asking solution providers to either partner with third-party ISVs or perform their own in-house development, positioning the resulting applications as the primary drivers of solutions delivered over a Cisco technology foundation. The program gives partners the freedom to build their own unique solutions, said Mountford, senior vice president of worldwide channels at Cisco, San Jose, Calif., during an exclusive interview with CRN.

"This is the first time you'll be able to register based on your own differentiation, certify it and then get more for having built it," Mountford said.

To maintain the diversity of SIP, Cisco is leaving it up to solution providers to find appropriate ISV partners rather than dictating a select group of approved vendors, Mountford said. To participate, authorized partners must present their solution to Cisco for evaluation. Once Cisco certifies it, partners can then register sales opportunities for that solution with Cisco to earn extra product discounts.

On average, horizontally focused solutions that lead with network applications for areas such as call centers will earn additional 4 percent to 5 percent discounts. Vertical market business solutions, such as electronic records and imaging applications for health-care customers, will earn approximately 8 percent, he said.

Some Cisco partners said they see the need to move beyond integration into high-level solution selling because customers are now looking to buy that way.

"You're no longer talking about networking to the network manager. You're talking about true ROI," said Tom Foley, CEO of Networked Information Systems, a solution provider in Woburn, Mass. "You need to have serious business discussions with CIOs, COOs and CEOs," he said.

Over the past two years, Networked Information Systems has worked to build up a convergence practice and then morphed it to support applications from ISVs in areas such as scheduling and time sheets for health-care and engineering/manufacturing customers. It has been an arduous process that has required a makeover of the company's sales force through extensive in-house training, he said. "The discussion is no longer just about a customer needing to buy some software and a couple of phones. It's about how to bring these applications to my phone, how can I make my people more efficient," Foley said.

Other partners are building out their own XML applications to ride on top of a converged Cisco infrastructure. Madison, Wis.-based Berbee Information Networks, for example, targets schools and hospitals with InformaCast IP Speaker, a solution that combines its own InformaCast broadcast paging software with a networked Power over Ethernet-enabled speaker. By tying the paging system into a converged IP network, customers can benefit from new functionality not available through traditional overhead paging options, said Pat Scheckel, Cisco practice director at Berbee.

"Customers can broadcast to every device at every location concurrently, whether they're all in one campus or around the world," he said.

The solution-based sales strategy SIP encourages should also create differentiation among Cisco's channel and help cut down on partner-on-partner cannibalization, said John Freres, president of Meridian IT Solutions, Schaumburg, Ill.

"In the past, Cisco would say, 'Here's what you need to do,' then go to 10 other partners in your area to do it, too. You all look the same. Now, when Cisco asks us to invest in SIP, they're supporting us and not offering [the same solution] to everyone else," he said.

Yet some Cisco partners are more hesitant to migrate toward application-driven solution sales. "I agree with the idea of customers looking for total solutions, but [with] the criteria to get the additional discount, I didn't think that's what would work for us," said Pat Grillo, president of Atrion Communications Resources, a security-focused solution provider in Branchburg, N.J.

Others worry about getting pigeonholed during Cisco's lead-generation efforts if they are pushed to focus on a small number of vertical markets. "We don't have revenue in any one vertical that exceeds 20 percent of our revenue," said Robert Keblusek, senior vice president of business development at Sentinel Technologies, Downers Grove, Ill. "If you get painted with one brush, then it's hard to show them your diversification," he said. Mountford said he's prepared for a fair amount of push-back from partners on the new program. "The reaction I'll probably get is, 'But we don't do that. We don't do solutions yet and we don't do applications work.' That's precisely what we're expecting, and that's precisely why we're doing it," Mountford said.

Edison Peres, vice president of advanced and core technologies for worldwide channels at Cisco, estimated that 25 percent of Cisco's authorized partners currently have the profile to participate in SIP. "We hope that will grow over time because we hope that the more proliferation of applications [there is] in the marketplace, the more it's going to encourage partners to get in the game," Peres said.

Recent research commissioned by Cisco indicates that its channel may be more prepared than ever to take on the challenge. For fiscal 2005, Cisco customers gave the same satisfaction rating to both Cisco's channel partners and its Enterprise Sales Organization. Just four years prior, customer satisfaction ratings for the Cisco channel lagged the direct-sales force by 10 percent.

It's an improvement Cisco has been driving through its popular Value Incentive Program, an initiative that provides back-end rebates on security, VoIP and some routing products to partners that maintain high customer satisfaction ratings. Partners said VIP and Cisco's Opportunity Incentive Program (OIP), its deal-registration initiative, have helped protect margins and boost profitability, enabling them to turn their energies toward growth.

Cisco partners' return on invested capital for fiscal 2004 was more than 50 percent, up from 15 percent in fiscal 2003, according to the vendor.

"They're doing it right," said Doug Bowlds, vice president of AAC Associates, a solution provider in Vienna, Va., of Cisco's VIP. "They really are taking care of their partners," he said.

For the 12 months ended in January, Cisco's VIP payout to partners grew 160 percent year over year while bookings through the program grew 75 percent, Mountford said. As for OIP, after less than one year, partners have registered more than 8,000 new business opportunities worth more than $1 billion, garnering a close rate thus far of approximately 20 percent, he said.

At the Vancouver, British Columbia, conference, Cisco plans to roll out a new OIP option dubbed Access Anywhere, a deal-registration program for wireless technology, including WLAN switching products from recently acquired Airespace. Cisco currently offers deal registration for security, VoIP and government/education solutions under the OIP umbrella. Cisco is also removing a $1 million cap on deal sizes so that OIP will cover both large enterprise and SMB deals for the first time.

Cisco plans to continue VIP and OIP into the foreseeable future to reward partners for pushing advanced technologies and hunting for new business, Mountford said, noting, however, that the makeup of the programs is subject to change over time. "The question is in five years from now do you want VIP for [IP] telephony when telephony may well be mature by then and we want to put some other technology in there, like RFID or something else?" he said.

At the same time, Cisco continues its efforts to move down into the SMB market and grow its share among smaller customers. Approximately 1,200 solution providers have joined SMB Select, a partner program that targets customers with fewer than 500 employees. The company has also released 19 of the 30 SMB products it has pledged to deliver by the summer.

Solution providers said they expect new product releases this year to help fill some of the holes that still exist in Cisco's SMB product portfolio, particularly in VoIP and security. "Many feel that Cisco is still missing the mark in smaller IP telephony deals, with 50 users or less," said Gia McNutt, CEO of Special Order Systems, Rocklin, Calif. "I've heard through the grapevine that there is another small-business [VoIP] offering on the way. They're telling us, 'Don't give up yet,'" she said.

Having taken steps to retool its product lineup, Cisco this week is now turning its focus to its SMB services options. At the Partner Summit, the company is rolling out SMB Support Assistant, a maintenance offering partners can sell to customers with fewer than 250 employees. Designed specifically for SMB customers, the new maintenance services provide an SMB support portal, next-business-day advance replacement parts and access to an 8x5 SMB-specialized Technical Assistance Center.

Carrying a price tag that's 45 percent below pricing on Cisco's Smartnet services, the new option should enable partners to sell maintenance to customers that previously could not afford it, said Karl Meulema, vice president of services marketing and channels within the Customer Advocacy group at Cisco. "It's not just scaling back Smartnet. It's right-sizing it, making it more appropriate for smaller customers," Meulema said.

One project that will not come to fruition this week at the conference is the planned redefinition of Cisco's Gold, Silver and Premier partner categories. Mountford said the ongoing effort is "half-baked" at this point. "We're forming our ideas around it, but we're not there yet," Mountford said. "Whatever we do will be evolutionary rather than revolutionary."

For Mountford, it's really is all about evolution anyway, symbolized by his choice of U2's "I Still Haven't Found What I'm Looking For" as his personal theme song for the event. "We now need to transition into solutions ... we have to start working more in vertical focus rather than pure horizontal focus, we need to take on all the new technology we're bringing in this year and make it successful," Mountford said. "There's a constant 'we're not there yet' sort of feeling, which is what I think successful companies always have."