Cisco's Race For the SMB Market

The new program is designed to recruit new partners and refocus existing ones on the lucrative opportunities offered by the midmarket and small businesses. To prepare for the push, Cisco has newly developed or re-engineered some 30 different products to optimize them for the needs of smaller organizations.

The most obvious question for Cisco is how it will cater to the space, but CEO John Chambers says the company is well-prepared. "The market we understand best is enterprise, second best is high-end commercial, then service provider, then what I would call SMB in commercial--the ones with less than 100 people," Chambers says. "Having said that, our architectural play is evolving as we thought it would, and we already drive 92 percent of our enterprise and commercial accounts through partners. As we move further down the market, it becomes 100 percent."

Surinder Brar, Cisco's senior director of worldwide channel programs and strategy, says the company is adjusting to the unique needs of the space. "We've already had some success in the SMB market, but we've tried to identify the requirements you need to succeed in the space, and we realize you need different technology offerings for SMBs than you do in the enterprise," he says.

To underline its commitment, the company will earmark 30 percent of its marketing budget to the SMB space, an increase of more than 50 percent from two years ago. "This will be the fastest-growing segment of absolute dollars spent on technology over this next decade, and it's one of the few areas where we have huge potential market-share gain," Chambers says. "Time will tell if we can execute on that, but in the enterprise we're already 70 percent plus in terms of market share and 35 percent to 40 percent in commercial. If you've got the fastest-growing segment in terms of new jobs and consumption of the new technology, combined with the potential of market share gains, it's pretty exciting for us."

While Cisco often drives business at the enterprise level, the company sees the midmarket as partner-led and the low end as a partner-only endeavor. Cisco has outlined an SMB Select program that recognizes partners who meet the necessary criteria to target the sector, and the company will integrate all its partner data into one portal that SMB Select partners can use as their gateway to the program. "We've been doing a lot of regional planning to identify the market opportunities for each technology, mapping out where the SMB market is slow and strong, and we'll recruit more partners wherever necessary," Brar says.

One of the changes already under way is the repositioning of brands like Linksys. "You should think of [Cisco] as a Mercedes, Cadillac or Lexus and Linksys as a Toyota or Volkswagen--the car for the average person," Chambers says. "It doesn't have as much functionality or speed, and it's a different support model, but it's still a very good car. But a call to a Linksys support center costs us $3. Our channel partners have to understand that they are competing with the distribution of a Fry's or Circuit City or Wal-Mart, so they have to provide a very low cost for the basic service and charge a premium on top of that to add value."

Cisco plans to use partners to primarily target two tiers of customers at first, the ones that behave like enterprises and the ones that like to innovate by adopting new technologies early.