Cisco Channel Chief: 'Partners Need To Get Started' On New Software Subscription Model

'Partners Need To Get Started'

Cisco channel chief Wendy Bahr sees the biggest opportunity for channel partners in 20 years as right around the corner, as the networking giant's new network software subscription model will fundamentally change what it means to be a Cisco partner.

"If I am a partner that has a huge installed base of Cisco, I am going to look at this as being one of the biggest opportunities that we have had in the past maybe two decades," said Bahr in an interview with CRN. "We've already begun to shift some of the value exchange and compensation for our partners in moving down this path. … Partners need to get started."

In the interview, Bahr dives into the the channel dynamics surrounding the new software model and Cisco investments coming down the line to make partners as profitable as possible. "This is not a revolution, it's an evolution," she said. Read on for what she had to say.

Once this software subscription pricing starts hitting the basic routers and switches, are Cisco partners going to be less or more profitable than they are today selling a hardware solution ?

We believe they'll be more profitable. Not just because of the opportunity to sell software, but for the opportunity to build services around those use cases, which much of our software is designed around.

What we're finding is when partners can talk to a retailer about sales per square foot or insurance companies about average cost per claim, partners get a lot of credibility when they start talking about the functionality of the software to help drive the insight into the [network] analytics. This is what digitization is really all about. We think this is a tremendous opportunity for our partners to add more value and for our customers to gain more value out of their networks.

How many partners will be participating in the pilot program for this being launched within the next three or four quarters?

It will be less than 100.

We've have partners indicate that they would like to participate in the pilot. In typical fashion, we'll try to look at that geographically and make sure we pick a broad spectrum of partners of different varied sizes as well.

What does this new subscription model do to all these partners who have a huge installed base?

If I am a partner that has a huge installed base of Cisco, I am going to look at this as being one of the biggest opportunities that we have had in the past maybe two decades to go out and really have a strong value proposition for our customers.

It's a tremendous opportunity to go back out into our install base … and say, "We're ready to take the journey to a digital network architecture, to a programmable, application-centric network that's going to give you top-rate security. It's going to be able to sense your application and change the performance to ensure that you have the best advantage [and] the best analytics."

How will this model impact the profitability of the channel?

Today Cisco One in a perpetual license format has some of the highest rebates in VIP [Value Incentive Program] that we offer along with collaboration and security licenses. So we've already begun to shift some of the value exchange and compensation for our partners in moving down this path.

What are some new benefits partners can talk to customers about with this new model?

One benefit they can talk to customers about is that they will receive -- as long as they're buying a service support contract -- ongoing innovation so that software will continue to be innovative. They'll continue to get more features and enhancements and they'll get license portability, which means that in the model where we have hardware refresh, they can be confident that their investment in the software will go with them on that journey.

What we're also doing is we're developing role-based capabilities for our partners -- [for instance,] the software Lifecycle Advisor and Software Integrator role. We're going to be helping partners understand what are the capabilities and requirements to perform those roles, then we will align our incentives accordingly.

Will this be a big differentiator for the channel in regards to competition?

Everyone knows we're in an applications-based economy right now, and applications are what the line-of-business buyers are particularly interested in evolving and adapting to drive their business forward.

When you have a network that is intelligent enough to sense the needs of that application and adjust accordingly, that's a huge differentiator. We think that it will open up much, much more budget and more much conversation about value, because we have this very application-centric, programmable, flexible, intelligent network, which at the end of the day is going to be a competitive differentiator for our customers.

What’s the biggest challenge that the channel faces and what can partners do to be ready?

Partners need to get started. This isn't going to be a something that is a class you take and you're done in 90 days. This is a business model -- I think many of the CEOs of the partners I've spoken to believe this is an area [where] they need to invest. They're going to need to take a look at the life-cycle management adviser role. They're going to need to build out practices.

Have Cisco partners ever had to transform like this before?

It reminds be of back in the day, where many of our partners did not have professional services practices, and Cisco really spent time and energy looking at return on invested capital -- helping them understand what it takes to build out a professional services practice. Today, many of our partners' profitability comes from the professional services they build around Cisco and our architectures. We expect another similar, positive outcome when our partners invest in these capabilities around adopt, expand and renew when we talk about licensing.

How will Cisco help partners make this transition?

We're really going to be helping our partners with workshops, with enablement, bringing on that Lifecycle Advisor role, helping them understand what it takes and the resources they need to invest in to get that adoption and life-cycle management practice stood up.

What type of investments has Cisco made internally and in the channel for this software transition?

We've increased the level of VIP investment when it comes to software. Our partners have been very successful in that regard and we'll continue to change the value exchange inside all of our partner programs as the market transition is timed accordingly.

We certainly have invested significantly in software both at a company level and what we've done inside the portfolio with the partners.

Has Cisco hired any new software experts?

We've been hiring people with software experience both into Cisco and into the channel, and we're sharing the knowledge of both hardware and software across those work teams.

How many people have you brought on that you would consider software specialists who will be working as part of your team?

We have probably more than a dozen software specialists, and we have in-house some software specialties already. I work with Kevin Bandy, our new chief digitization officer, and Rebecca Jacoby, who leads our global operations, because so much of this is going to be important to understand from a digitization perspective.

Do you see the role of the CCIE [Cisco Certified Internetwork Expert] changing over time as the software subscription model takes hold?

Absolutely. We've been looking at the evolution of the CCIEs. We think they're absolutely critical to future success, and the value that they're going to provide will continue to morph and grow as we see this evolution into the programmability of that intelligent network, and to more application-centric capabilities. We see this as a continued evolution of a very valuable brand.

How important has [CEO] Chuck [Robbins] been in this transformation?

Chuck has set the vision. We all understood the vision and are aligning across that vision. I asked the same of my partner leaders, the CEOs of my partners, that they decide the business model, they set the strategy, then they push that down.

Chuck has been amazing in his leadership here.

What's the timing for this model going forward?

We'll be watching the market very carefully, but we do see this as a three- to five-year journey. Because it's establishing a new practice, I would encourage our partners to start now so we can have plenty of time to get ready, develop all the skills and capabilities for the adoption, expansion and renewal practices. This is going to be a tremendous advantage in helping our partners create that value and that stickiness that they will benefit from in the future. We'll time it with the market, but this is a journey. This is not a revolution, it's an evolution.

How do you feel as you look out to the future with this new model?

It's super, super exciting. Many of the partners who I talk to, while they can sometimes be a little nervous because we are changing fundamentally what we've been wildly successful doing together for a number of years, they also have great confidence in Cisco and the relationship that we've built together over the years.

There's a little bit of excited nervousness about the journey, but there's a whole lot of expanded opportunity that the partners are really excited about.