D&H Looks To Expand Its Reach With Cisco Pact

The Harrisburg, Pa.-based distributor will carry low-end Cisco products geared toward small-business customers, including some to be rolled out in the second half of the year. D&H executives call it their most significant vendor addition since Intel in 1998 and Microsoft in 1995.

For D&H, the deal could bring a huge windfall, particularly if other vendors follow Cisco's lead and move beyond pacts with broadline giants such as Ingram Micro and Tech Data as they seek small-business market share. Both Symantec and Computer Associates International, for example, have signed with D&H within the past nine months.

"We're naturally very excited," said D&H President Gary Brothers. "We believe the Cisco relationship highlights our focus on the SMB channel and will be a great opportunity for our SMB resellers to sell more sophisticated solutions."

Cisco is the first vendor with a historic enterprise focus to tap D&H, but a slew of others recently have leveraged its unique presence among small solution providers, said Michael Schwab, vice president of purchasing at the distributor. Since last December, Broadcom (RAID controllers), Novell (Linux servers), Xirrus (access points), Spectra Logic (backup) and Seagate (storage) have turned to D&H to reach the small-business crowd.

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D&H also is pursuing relationships with other major vendors, including server vendors, but Schwab declined to identify them. "As server technology becomes more sophisticated and price points come down, we will look more at scalability technology to offer a more complete solution," he said.

The agreement being announced this week marks Cisco's first new distribution pact in nearly a decade and represents a major shift by the networking giant, which dominates enterprise accounts with its premium products, to expand into businesses with less than 150 seats.

Cisco's move to add D&H to its distribution roster is all about reaching a different set of VARs than is available through its current distributors, Tech Data, Ingram Micro and Westcon's Comstor division. About 85 percent of D&H solution providers are not buying Cisco products from another distributor, said John DiLullo, vice president of worldwide distribution at Cisco.

"The D&H reseller partners are partners that generally sell to the lower end of the commercial market," DiLullo said. "I don't want to stereotype, because certainly Ingram [Micro] sells down into the bottom but I think you'd find that the percentage of 'S' business is higher with D&H than you would find with an Ingram," he said.

When it comes to SMB, Tech Data's Cisco business is more "M" than "S" acknowledged Bob O'Malley, senior vice president of marketing at the Clearwater, Fla.-based distributor. "But clearly, we're aimed at the M and S," he said. "We need to figure out how to get at that marketplace more aggressively and efficiently. A lot of manufacturers are relying on distribution to reach the small-business market."

Paul Bay, senior vice president of vendor management at Ingram, said initially he was concerned that the D&H deal would "cannibalize" the investments Ingram has made to attract small-business-focused VARs to the Cisco fold, but Cisco allayed his fears: "They've built pretty good parameters around the product offering and the customer set that D&H will go after."

Among solution providers, D&H is gathering a reputation as the go-to distributor for vendors trying to reach the small-business market.

"D&H is an easy company to deal with—whether it's invoicing, processing RMAs, credit," said Roger Bender, vice president of operations at Futureware, a solution provider in Omaha, Neb. "With D&H picking up [Cisco], it cannot do anything but help us. It will give us another good source when we need it."

Another D&H solution provider said he is interested in Cisco but is waiting to hear from D&H to determine the vendor's strategy.

"A lot of people speak about trying to go work with SMB, but it tends to be a lot of lip service," said Jordan Malkin, operations manager at MicroStandard, Redmond, Wash. "We're a little cynical when someone says they will support a market we've supported the whole time. If it's a program D&H is rallying behind, there's a certain credibility that does go along with that."

Solution providers such as MicroStandard are exactly the type Cisco turned to D&H to uncover, Schwab said. "Our goal is to find resellers that are not doing a lot with Cisco. [Malkin] is a perfect candidate," he said. "He's never been provided the opportunity to acquire part of this solution set. It's been available from other distributors for a decade. He's not selling it. Maybe it was too difficult to acquire, maybe he has not been solicited or provided the knowledge base. That's our role: to evangelize their technology to these resellers."

D&H also told Cisco it wants to sell more complex products in the future, but that is not expected to happen until D&H's Cisco solution providers are ready to move up the food chain, Schwab said.

"The goal is not to ramp them up to be selling Catalyst switches. The goal is to look at a need, provide the right solutions for resellers to take to their end users," he said. "Over time, the goal would be to continue down the path to the right solutions and not put up roadblocks for VARs to work with Cisco."

JENNIFER HAGENDORF FOLLETT contributed to this story.