Robbins: Cisco Does Not Foresee Margin Pressure From CDW-Berbee Deal

"We create our profitability programs based upon what we see in the marketplace," said Robbins, noting that CDW has not and will not receive any special pricing advantages under the Cisco value based channel model. "I personally believe that CDW and Berbee are both just as interested in profitability as any other partner. I guess we'll have to wait and see how it plays out, but I don't see anything right now that makes me very concerned."

Once the CDW-Berbee deal is completed, the combined company will either be recognized as a systems integrator or a direct marketer under the Cisco channel program, said Robbins. "Obviously we'll have to wait until they bring their companies together," he said. "We'll spend some more time with them and talk through with them what they are trying to accomplish."

When asked if Cisco will take any steps to protect the services investments and margins of other Cisco partners, Robbins replied: "I think the steps we took a few years ago when we addressed the profitability issues of partners are still relevant today. I can't foreshadow how any partner chooses to sell their products or solutions. The [CDW-Berbee] acquisition combination inherently doesn't [drive down margins]. We think it is a positive thing. Berbee has been a great partner and CDW has been a great partner."

Robbins stressed that Cisco has gone to great lengths over the past six years to build a value program that creates a level playing field for all Cisco partners based on customer value and satisfaction rather than sales volume targets. "There isn't a volume based pricing element in the [Cisco] program," said Robbins. "To make a statement that any partner has a pricing advantage over another one would be invalid. The pricing in the market is based upon value as we have always talked about. So ultimately it comes down to the capability to deliver solutions, which Berbee has clearly proven to be one of our best partners in that space."

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"We treat all of our partners consistently," added Robbins. "It doesn't matter whether you are a large service provider, a system integrator or a regional player if you meet the criteria of the program you are on a level playing field. That is the beauty of the value based program."

All that said, some Cisco Gold partners say they are concerned that CDW will use its perennial low-priced product model prevalent in its direct marketer business to drive down margins for what has been a strong and healthy Cisco solutions business in areas such as VoIP. "Without the back-end rebates there is not much profitability on Cisco hardware," said one Cisco Gold partner, who did not want to be identified. "If CDW ends up cutting the heart out of the Cisco margin, it is going to be a Cisco problem because the value of Cisco [solutions] will be depreciated. My question is: How does Cisco intend to protect people like us against this? We are monogomous. We are committed. We won't sell products competitive to Cisco products. So if we can't make money on Cisco, we don't make money."

Robbins countered that Cisco has proven time and time again its commitment to is partner profitability and will not falter on that front. "I think all of our partners have seen in the last five or six years that we are committed to partner success and partner profitability based upon the value that they bring in the marketplace and we will continue to do that," he said. "I think we have been fair and equitable and we listen and we will continue to do that."