Cisco Services Rewards Open To Two-Tier Partners

Through the new Pay for Performance program, initially available to Cisco&'s top 250 U.S. partners that source through distribution, the vendor aims to boost lagging services sales among two-tier partners, said Liz Lawson, Cisco&'s senior director of channels for Customer Advocacy, the services group at the San Jose, Calif.-based networking hardware vendor.

At issue is the relatively low rate at which Cisco&'s two-tier channel—primarily comprising Registered or Premier partners targeting SMB customers—attach sales and renewals of the vendor&'s maintenance services to product sales when compared to higher-level one-tier Silver and Gold partners, Lawson said.

The top 250 two-tier partners average a 44 percent sales and 62 percent renewal rate for offerings such as Cisco&'s SmartNet maintenance services. By comparison, Gold and Silver partners reach average attach and renewal rates of about 70 percent, she said.

The result is that some two-tier partners are “leaving money on the table,” Lawson said. Cisco estimates that the unrealized annual services opportunity for that partner group sits at some $200 million.

Greg Engle, business unit manager for Information Engineering in Huntsville, Ala., said he expects a profit boost from the program. “We have made selling services a part of our culture, so our attach rate is already very high,” Engle said. “But with this added incentive, our attach rate will improve and it will absolutely increase profits.”

To qualify, partners must achieve at least $500,000 in Cisco hardware sales during the six-month incentive period. In addition, solution providers must be Registered or Certified partners holding the Cisco Service Expert Program certification.

Qualified partners can then earn back-end rebates on services revenue for meeting attach and renewal rate thresholds during the six-month period. Partners that attach maintenance services to at least 60 percent of hardware sales will earn 2 percent rebates, while those who hit 75 percent or more will garner 4 percent rebates.

Cisco is also offering incentives for partners that hit targets for service renewals, granting 1 percent rebates to solution providers that reach renewal targets of at least 80 percent, 2 percent to those that reach at least 85 percent and 3 percent rebates to those that hit 90 percent.

The vendor is also rolling out Performance Metrics Central to program members. The online tool helps partners track their services sales stats and grab sales leads. Until now, the tool has been available only to one-tier partners, Lawson said.

Cisco intends to extend the Pay for Performance program and roll it out to a broader range of two-tier partners if it is successful, she said.

LARRY HOOPER contributed to this story.