Cisco, D&H Ink Deal

The expansion of the networking vendor's distribution strategy is Cisco's latest step to push beyond its roots as a dominant enterprise player into the SMB, or commercial, market, which it roughly defines as businesses with 20 to 1,500 employees.

In addition to chasing more partners, the company is also working to expand its low-end portfolio with new products in areas such as switching, routing, wireless, security and VoIP, which should create more head-to-head battles with small-business networking stalwarts 3Com, D-Link and Netgear.

In particular, the D&H partnership aims to bring on new VARs that focus on small businesses, by and large defined by Cisco as companies with fewer than 150 employees, said John DiLullo, vice president of worldwide distribution at Cisco, San Jose, Calif.

The percentage of partners that focus on the lower end of the commercial market is much higher at D&H than at Cisco's other distribution partners, DiLullo said.

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Also, some 85 percent of D&H's solution provider base is new to Cisco distribution, leaving only a 15 percent overlap with Cisco's other distributors, he said. Through D&H, Cisco has the potential to add "on the order of thousands" of solution providers to its distribution channel, DiLullo said.

D&H, however, is not a complete stranger to the networking universe, as it already distributes products from Cisco's Linksys division as well as D-Link and Netgear. Still, the partnership took some solution providers by surprise.

"I know that Cisco has been pretty much locked down, so it was a surprise to see anyone else authorized, but it makes sense in my book because Cisco is looking for smaller businesses and alternate dealers, and that's where D&H focuses," said Jude Daigle, president of PA Computer Connections, a Cisco solution provider in Greensburg, Pa., that also works with D&H.

On the product front, D&H will distribute Cisco's lower-end lines in areas such as desktop switching, wireless and security that do not require specializations and carry "the least hurdles as far as certifications go," DiLullo said.

Still, the products elevate D&H's networking portfolio, said Michael Schwab, vice president of purchasing at the Harrisburg, Pa.-based distributor.

"We believe these [Cisco] products sit above those products from a scalability standpoint and compete much more against [Hewlett-Packard] and 3Com than our current lineup of networking vendors," Schwab said. And in the future, D&H could continue up the ladder to more complex Cisco products, he said.

Cisco also plans to expand its commercial portfolio, continuing momentum begun last year when the company delivered on promises to roll out more than 30 new products for that market.

As a result, solution providers said Cisco is starting to make more headway into the commercial market and is convincing them that it is committed to the space.

"Word is getting out. I've seen probably a 30 percent increase in the amount of Cisco being proposed," said Jeff Romick, vice president of HBR Technologies, a VAR in Carrollton, Texas. However, with many proposals still outstanding, the increased visibility has yet to translate to business growth for HBR, he said.

Cisco estimates that it owns a 44 percent to 45 percent share of commercial market revenue, up from the low 40s last year.

Schwab said D&H expects to carry new Cisco small-business products scheduled to debut later this year.

"The road map is even more compelling, relative to products designed for this customer set," Schwab said. "We're excited about back half of the year and the new product rollout."

Peter Alexander, Cisco's vice president of worldwide commercial marketing, confirmed that Cisco will continue to launch new SMB products over the next year or two, putting particular focus on the low end of its switching/routing, wireless, security and VoIP portfolios.

"There will be new product in the fall, no question, but there will also be new product in the winter, spring and so on," Alexander said.

While declining to provide specific details, he said the new wares will aim to meet solution providers' needs for small-business products that integrate multiple technologies and are easy to use.

"At the same time, a lot of the resellers at the low end of the market are also providing their own form of managed services and outsourcing to their customers, so the resellers are also saying, 'But make it very manageable so that I can manage it for the customer,' " Alexander said. Such management features help differentiate Cisco's small-business product from those coming out of its SOHO-focused Linksys division, he said.

Cisco also is working to satisfy partner requests for smaller VoIP platforms that provide varied price points and phone options for customers with fewer than 100 employees, Alexander said. "You will see us increasingly bring voice to smaller and smaller customers," he said.

Cisco's invitation ushers D&H into an exclusive club and marks the first change to the vendor's distribution landscape in a decade. Until now, Cisco has only authorized Ingram Micro, Tech Data and Westcon Group's Comstor division to distribute its wares in the United States.

SCOTT CAMPBELL contributed to this story.