The New Network

Cisco's John Chambers tells partners it's time to pounce on the next market transition

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To hear John Chambers tell it, there's a new network in town.

As the chairman and CEO of Cisco Systems Inc. gears up for the Cisco Partner Summit 2008 in Honolulu next week, he's crafting a message that he hopes will inspire partners to follow him down a new path, on a course he says could catapult the vendor and its channel to the forefront of the IT industry.

That path? Intelligent networking that fuels collaboration via online Web 2.0 tools and Software-as-a-Service (SaaS).

Collaboration—a combination of technologies such as VoIP, unified messaging, instant messaging, IP video, presence, mobility, SaaS and Web tools like blogs and wikis that enable customers to more easily communicate with each other—is the linchpin of Cisco's strategy.

It's a vision that shows just how far Cisco is asking its partners to go beyond their roots as providers of routers and switches: Cisco is moving toward software, and its solution providers need to get up to speed on applications or find someone to partner with who is.

"If you think of Cisco three to five years from now, we have the opportunity, along with our partners, to be the most influential company in the world, not just on communications, but also IT," Chambers said in a recent interview with CRN at the company's San Jose, Calif., headquarters. "The role of the network will evolve dramatically, moving from merely transport or plumbing to more of an intelligent infrastructure that makes it completely transparent as to where your applications are, where your storage is, where the processors are, what type of device you're on, [whether you are] at home or at your work or in your car or at a hotel—your services automatically find you and move to you."

Collaboration marks the next phase of the Internet and will drive improvements in productivity for the next decade, particularly as business users latch onto social networking and other Web 2.0 technologies previously thought solely to be the domain of kids, Chambers said.

Next: Grander Things

Grander Things
Solution providers say they are starting to see the groundswell.

"There is a game-changing event going on in networking right now ... We're asking our networks to do increasingly complex things moving forward," said Gary Berzack, CTO and COO of eTribeca LLC, a solution provider in New York, pointing to technologies such as perimeter intrusion detection and prevention, internal wireless controllers, storage and video, all of which are now embedded into networking infrastructure.

Keith Goodwin, senior vice president of worldwide channels at Cisco, said solution providers will have to adapt to take advantage of the collaboration opportunity, even in the way they work with Cisco.

"It's not just a market opportunity. It is significant and, ramping up, is going to drive growth for us together over the next three to five years, but part of it will be to utilize these technologies ourselves," Goodwin said, referencing programs such as Cisco's Industry Solutions Partner Network, which so far has brought more than 200 channel partners in contact with solutions from Cisco ISV partners. In addition, more than 800 users are interacting in ISPN Partner Space, an online partner community Cisco launched in the fall.

Chambers has been laying the groundwork for this push for some time. Anyone who has heard him deliver a keynote address over the last three years has likely heard him preach on the elevated role of the network as a platform for grander things: application delivery, service delivery and all things related to communications and IT. Now it's catching hold, he said.

"It's actually accelerated now, because a lot of the basic concepts in collaboration are now taking off," Chambers said. "The network will probably enable the next major wave of IT spending as well as communication spending. So the role of the network has changed: It's changed from being infrastructure, primarily a box mentality, to an architecture approach that provides business solutions, and as such, we at Cisco have to change and so do our channel partners."

In fact, Cisco channel partners need to do more than change. They need to evolve, he said.

"I think that we and our channel partners will have to evolve based upon, [for] each one of us, our dreams and aspirations and be realistic [about] our capability and our ability to move within markets," Chambers said, adding that while some partners will stick to a product or solution area, others will chase a broader architectural play with solutions expertise.

If Cisco's mantra for its partners to pick a specialization or find a means of differentiation seems familiar, it's because the vendor has been evangelizing it for several years ("If my message to my partners is changing every 12 months, I don't have a strategy or a vision," Chambers noted). The key take-away now
is the ramification of such specialization and differentiation.

"What it means is that partners have to partner with complementary partners because you cannot be an expert in everything," Berzack said, noting that eTribeca works with about seven other Cisco partners on a weekly basis and roughly another 30 on a monthly basis.

In addition, partners need to prepare for the sales model changes that will come as Cisco moves toward SaaS and other related areas, including bandwidth-as-a-service, storage-as-a-service and processing power-as-a-service, Chambers said.

Next: SaaS Push

SaaS Push
A major step in Cisco's SaaS push came with its $3.2 billion acquisition of WebEx Communications Inc. last May. It's a purchase that stands to have long-term impact on Cisco and its channel, Chambers said.

"While we've done over 130 acquisitions, WebEx has a very realistic possibility of being in the top five, maybe even in the top two, in terms of the long-term contribution to Cisco," Chambers said. "WebEx has the capabilities to expand well beyond just enabling collaboration, [to] providing many things as a service to the environment, embedding them deep into our products and [to be] a key differentiator for many of our customers and partners as well."

Solution providers like George Pashardis, vice president of sales at ePlus Technology Inc., a Cisco Gold partner in New York, see huge potential for building WebEx into their businesses.

"Now everyone is using some sort of WebEx-type service, whether it's Citrix GoToMeeting or ReadyTalk or something else, so we do see a huge opportunity," Pashardis said.

Cisco is piloting a number of channel programs built for partners working in these new service models. In addition to a managed services program launched in the fall and a pilot channel program around WebEx, Cisco is now also piloting a program for outsourcing partners. The outsourcing program is part of a strategy Goodwin unveiled in 2006 to create "offer-based" partner programs.

"We're working with a small set of partners today who have a lot of experience historically in the outsourcing marketplace, and we're using their knowledge and expertise to help us build the program," Goodwin said. "The idea here isn't to say that partners need to move into managed services or outsourcing ... but there are significant trends there, so we want partners that are moving in that direction to support that."

New Products, Too
As Cisco pushes out channel building blocks to help partners evolve, it's also launching new products. In March, the company unveiled its Aggregation Services Router (ASR) family, a new line of midrange routers that aims to bring high-performance services to the network edge. The line incorporates IOS XE, a virtualized version of Cisco's Internetwork Operating System, and provides unparalleled levels of resiliency and application delivery, the company said.

In addition, collaboration, unified communications and data center technology are all slated for the spotlight at Partner Summit, including the launch of new application capabilities for Cisco's Integrated Services Router family.

While many Cisco partners share Chambers' vision of what the network can do, some customers are still hesitant to pull the trigger on full-blown collaboration solutions.

"A lot of people are really starting to invest in it now, but most of the customers I deal with are still a little hesitant. But I think it's coming, that's for sure," said Billy Merchant, state contracts manager for ProSys Inc., a solution provider based in Norcross, Ga.

Chambers advised channel partners not to let their business strategies get derailed by clouds on the economic horizon, and he said to get ready for the upturn, get ready to pounce on the next market transition. That, after all, is what he's doing.

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