Cisco Signs Pact With D&H

After years of discussing a potential partnership, Cisco and D&H Distributing finally took the leap this summer and announced a major distribution agreement that makes D&H a primary ally in the networking giant's recent push toward the small and midsize business (SMB) market. Under the agreement, D&H will carry and promote Cisco's SMB-focused products to its reseller community. The partnership looks to provide benefits to both companies; Cisco now has another entry point to the SMB market, and D&H acquires a market-leading vendor to bolster its own business.

"What probably made no sense 18 months ago now makes perfect sense," says John DiLullo, vice president of worldwide distribution at Cisco. "There's very [little] overlap between the customer segment of D&H and the reseller communities of our other distributors."

Michael Schwab, vice president of purchasing at D&H, says Cisco's SMB strategy matches up well with the distributor's focus. Schwab adds that the Cisco partnership could be one of the most important vendor alliances D&H has ever made. "Cisco's up there with Microsoft and Intel," he says. "This is a very meaningful relationship, and we want to continue doing business with Cisco as long as we're in the market."

The D&H agreement is yet another sign that Cisco is serious about upping its sales in the lower end of the market. In the past 18 months, the networking company has made a number of efforts to boost SMB sales. Last summer, it launched 30 SMB-related products while doubling its marketing budget for the market segment. In addition, the company created an SMB support-services organization, an SMB leasing program and a deal-registration program, dubbed Opportunity Incentive Program, which, according to Cisco, currently has 8,000 registered deals worth more than $1 billion.

Cisco also introduced its SMB-Select partner designation last year, which has some 1,200 VARs enrolled. "It has been received very well so far by the resellers," DiLullo says. "I'd really like to see the D&H crowd adopt SMB-Select." But, DiLullo adds, Cisco will tread carefully to not "cannibalize" the efforts of its other distributors.

The two companies say they have put together teams to draw up marketing plans and recruitment strategies to develop Cisco sales through D&H. While many D&H customers are currently doing business with other networking vendors, DiLullo and Schwab are both confident that the new alliance will attract a substantial following in the channel. "We hope to come through the back half of the year with thousands of resellers [doing Cisco business through D&H]," Schwab says.

The new partnership marks a major change for both companies. The Cisco deal vaults D&H further up the food chain in the North American distribution market, making the company a viable challenger to other larger broadline distributors, such as Tech Data, Synnex and Ingram Micro. While Schwab says the partnership won't directly change D&H's business model or move the longtime private company toward an IPO, it will help raise D&H's profile in the channel.

As for Cisco, the alliance with D&H comes at a time when many major vendors have consolidated, rather than expanded, their distribution relationships across the globe. While Cisco has kept a small number of distribution partners in the past--Ingram Micro, Tech Data and Westcon Group's Comstor division are Cisco's only U.S. distributors--the company now believes that expanding its presence with a distributor whose core competency is in the SMB market is the right move. "We've said we would stay the course and stick with our three existing distributors," DiLullo says, "but change is good sometimes."