Cisco Channel Boss: We're Here To Earn, Not Demand, Partner Loyalty

And Goodwin, senior vice president of worldwide channels at Cisco, certainly knows his way around that voluble, demanding channel, having received numerous plaudits -- including the 2009 Channel Executive of the Year Award from Everything Channel -- for his hand in shaping it.

But Cisco is a restless beast, and 2010, like most other years in the Cisco channel, hasn't exactly seen the networking titan dial back the intensity.

As the Cisco Partner Summit kicks off in San Francisco the last week of April, Cisco is seeing an evolution in many of its core businesses. At the same time, it's diving headlong into many of the 30 "adjacencies" that CEO John Chambers so often describes, among them a bold attempt to remake the videoconferencing and collaboration channel with its planned acquisition of Tandberg, and gain a foothold as a true data center vendor thanks to its Unified Computing System (UCS), barely a year old, and much touted partnerships with EMC and VMware.

In the background of all these technology plays is a rivalry -- Cisco's publicly declared war on HP -- that with each passing week seems to drag more and more of the overall IT channel into its orbit. The latest shot was fired by Goodwin himself, appearing on Cisco's Channels blog in February with a video message that indicated Cisco would not be renewing HP's longstanding System Integrator contact when it expires at the end of April.

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With so much going on with the Cisco channel -- and the Partner Summit not four weeks away -- it was time to check in. Goodwin recently joined Everything Channel Vice President and Editorial Director Kelley Damore and Assistant Managing Editor Chad Berndtson for an update on what partners can expect from Cisco at this year's Summit, and whether channel partners -- and the media -- are making too much of "HP vs. Cisco."

So, Keith, we're hoping to tee up this interview as a look ahead to Partner Summit. I wanted to get into some technology particulars, but let's start with a high-level view. If there's one message you want to get across to partners at this year's Partner Summit -- if they're going to leave thinking one thing -- what is it?

Acceleration and return to growth!

All right!

That's what it's all about. You know, I think back to Partner Summit a year ago and we were really in the trough -- things were looking pretty rough from a global perspective. Partner Summit one year ago was all about what are we going to do to help partners survive, so we launched our Navigate to Accelerate initiative and talked about our stimulus package for partners. It was very much survival. But we purposely built the theme as navigate to accelerate because every downturn has an upturn. Our secondary message to partners was: Let's prep together for the upturn. Not only can we navigate to growth but accelerate when the environment does improve. Well, we've seen that acceleration, and what we're excited about is that partners are in a totally different mindset. They're looking at taking advantage of these trends in the industry, and we're looking at how do we translate that into growth in the short term and growth together in the long term.

So we've reached the accelerate phase, undoubtedly.

We have absolutely reached the accelerate phase and that's pretty much true around the world. It's certainly true here in the U.S. and Canada and is true about virtually every other major geography, and that's exciting. Before we get into some of the specific technology topics, I wanted to talk about HP. You appeared in a video blog post a few weeks ago explaining Cisco's decision to not renew HP as a Cisco reseller. Not surprising of course, given the climate and the competitive atmosphere, but why do it in that format, on the blog like that? Why so publicly?

Well, we wanted to ensure that we're very transparent to our partners and customers in terms of what we're doing and why we're doing it. As you said, it was not unexpected. We wanted to be very clear that this is about competing with HP in the future, but it's really about ensuring there's a transparency around the fact, for our partners and customers, that we have very different visions around where the market is going. Ours is very much a network-centric vision, and HP has a different vision. I wanted to be very clear that that was the basis of what we were doing. We have different views of the role of the network. We're acknowledging that we will compete with HP going forward.

And last, and very importantly, I wanted to get out there directly to our customer and let them know that through this change, our first priority is to ensure customer business continuity and ensure them directly and personally that we'll do whatever we can to make sure that continuity is there. We will be working closely, and working closely with HP to negotiate a new agreement that protects those existing customers.

So obviously there is this battle brewing in terms of the data center, and clearly, VARs are in the middle of it here because they're offering solutions that have both Cisco and HP equipment. I'm wondering what the message is to partners with regard to exclusivity, loyalty and selling the Cisco portfolio versus pieces of the portfolio. Some of them may view this battle as great news; others may feel they're caught in the middle. What would you say to them?

I was at our U.S. and Canada Partner Exchange and we spent a lot of time talking about that. My philosophy is very simple: Our goal is to earn -- earn our partner loyalty and investment every day. The keyword there is earn. We're not there demanding it, we're not there focused on 'you have to be loyal,' it's about earning it. The way we're going to earn it is by sharing a compelling vision around these different markets -- these markets in transition that we think represent huge opportunities for us. Data center virtualization is clearly one of those. Our view of how data centers virtualize going forward has the network in the center. HP has a different view of that. We want to share in a compelling way with our partners and inspire them to invest in our vision.

Our partners are, in many cases, multivendor -- OK, most cases, multivendor -- and they'll have to determine how they'll work in a multivendor environment going forward. I think many of them see a value proposition in the fact that they are multivendor. We are very supportive of that. We want to inspire them to align and invest in our vision, but at the end of the day, they make the investments that are right for them and their customers, and think the value proposition is in an integrated offering in some cases.

So getting Cisco solution providers to sell all or mostly Cisco, how big of a priority is that based on what you just told us?

It's a good question, but we don't think of it in those terms. We really don't. We think there are significant opportunities for partners to invest in what will drive growth going forward, so for us, it's all about focusing on those opportunities and motivating the partners to want to invest because they will believe we'll grow together. It goes back to something we were talking about a minute ago: return to growth. One thing I heard very clearly from partners six months ago, when we started to think the economy was turning, was "Keith, we're excited about returning to growth top line but don't lose sight of the fact that we want to grow bottom line as well. So if you think about programs and initiatives that drive and accelerate top-line growth, you have to make sure you also stay focused on our profitability, our margin. As we're creating this acceleration phase, we're focused on top- and bottom-line. That's critically important to why would partners want to invest in Cisco vs. someone else. They see a compelling top-line and bottom-line opportunity for growth.

Can you talk a little in terms of what changes you would like to see your partners make to ensure they're successful in terms of partnering with Cisco? What do you view as a really successful Cisco partner?

There are multiple facets to that question, and again, it's a good question. We had a lot of dialog with our partners last week on the subject because of the significant market transitions that are happening. We see five market transitions happening today that we believe represent the next Internet, provide the foundation for the next Internet. They are significant transitions. The five -- and you've touched on a few, as many of them have been in motion for a few years -- include collaboration, which is a significant transition, and video, which is a significant transition. I'm really excited about the video opportunity; just a fun fact, 60 percent of Cisco's own traffic today is video, and you guys have probably seen the projections that over the next few years, 90 percent of consumer traffic will be video-based. That's a huge market transition we can lead together.

Virtualization is another, you touched on that as well, and that's going to be the enabler to a lot of cloud-based services, which I'll come back to in a minute. Borderless Networks is another: That concept of any content to anyone, anywhere, anytime, is a vision that we established some time ago and we have been building with our partners. Another is clearly cloud, and, which gets to your point, the idea of everything as a service. Clearly, our partners have a vision to bring more services to market, and many of them offer support services, most offer higher-level consulting services, and many have started to offer managed services and outsourcing services.

The growth is significant also in applications-as-a-service, X-as-a-service, whatever that's going to be. I heard a great quote from a partner last week: 'The whole services thing I'm excited about, but it scares the [silent pause] out of me.' So it's a new business model associated with it. The ideal partner wants to evolve with us to embrace that trend. As we get into some of those areas in which partners are looking to expand their practices, I wanted to get back on the HP note just for another minute. You've got a number of solution providers who sell both Cisco and HP, and some of them tell us that they felt pressured by Cisco's channel organizations to choose a side or make some kind of definitive commitment beyond what they have already. Are they being paranoid?

I don't think they're being paranoid; I'm not sure I'd choose that word. Again, I'll go back to what I said, my direction to our worldwide channel team is that's not the dialog we want to have with our partners. Field behavior, we know how that all works, but our direction is very clear: It's not about asking partners and telling them to be loyal or invest more, it's earning it. Being that trusted business adviser to sit around the table with a partner and demonstrate the compelling growth opportunity top line and bottom line around Cisco -- it's that earning mentality. For the partners, if they're not hearing that from us, we've got an execution issue. The message from me and my leadership team is: We want to earn it. We fully expect partners to be multivendor, and there's value they can bring. But we have different views of how the world's going to evolve. So it's a difficult one because they're going to have to naturally make some choices because of these different visions of how market transitions are going to be playing out. At the end of the day, our approach is to inspire them by our compelling vision.

Do you think the partners who have been a little bit more vocal about how they've felt this pressure and maybe us in the media have made too big a deal of "Cisco vs. HP"?

Honestly? Yeah, I do think so. It's a bit of clash of the giants, and that's something that gets people's interest. Do you guys make too big a deal of it? I don't know, because you have to think about that in the context of your business. For us, competition is a great thing. We love competition. HP has clearly declared its intent to be a broad-based competitor to Cisco in the space. Competition makes us better. It's about having a very clear message that we will compete with HP, but we'll focus on the needs of our customers and align with the needs of where we see significant market inflection points. We think that's the right approach. That's what we want to stay focused on, but we recognize is certainly is a topic of interest these days.

How would you articulate the fundamental differences in strategy either around the channel in general, or, specifically, the data center, between Cisco's approach and HP's approach?

I don't want to try to speak for HP, but I'll go back to a couple of higher-level things I said earlier. We have different visions of the world and different views of the network in the significant market trends going on. We're value-focused, and we're enabling and incenting partners to deliver value with customers. It's not fulfillment-based and it's not volume-based, it's about value, about moving up the stack.

The old days were about products and systems, and today is about solutions and architecture and the vertical knowledge to apply that. By working with our partners to focus on delivering value in those areas, we allow them to grow, and that's what's going to allow them to be differentiated. That's where we're putting our focus with the channel. I'm not sure what HP's doing, but our focus and priority is clear. For Cisco UCS, why did you choose volume distribution [Ingram Micro, Tech Data, Westcon Group] for that particular product line? It seems to be a sophisticated, integrated product.

Let me take it up a level and add some kind of context. Data center virtualization is a great example of what we've been talking about. I'll go back to the days when we entered the voice world. The quotes all over were, 'What does Cisco know about voice? What does Cisco know about telephony?' And our approach -- and this example really exemplifies it -- is that it's never about competing under the existing rules of a market like that, it's about embracing the market transition and creating a new set of rules. That's what we did in voice and that's what we're doing in the data center. It's not about competing on servers, it's about our architecture to support and create the next-generation data center. At the heart of our architecture is the network.

Having said that, we recognize that as part of that architectural play, with our goal and focus based around the value part of that with UCS, in order to have the kind of breadth of product line we need to support the data center, we also have to have servers you might typically classify as volume. So it's both a value and a volume play, but all supported by our architectural view of how they integrate. Recognizing that that's what we need to do to be effective in bringing that architecture to the customer, we have to embrace the routes to market that get us there, distribution being part of that. But distributors who you might think of as volume distributors are focused on the value components as opposed to just pure-volume focused.

In the fall we saw the big rollout of UCS, of the C-series especially, through distribution and out through partners. Can you give us an update on how that's going, and what you see as catalyzing UCS sales through the channel going forward?

We have well over 400 new customers for UCS, and the partners have hugely invested in our vision. One thing I feel so good about and will be acknowledging at Partner Summit is that in an unbelievably difficult economic environment last year, partners invested in Cisco and invested in our vision of the data center, big time. I can share some of the specifics with you later, but they invested significantly and as a result, we're getting traction. We're winning deals with the C-series especially now flowing into distribution. The distributors tell us that there's lots of demand out there, and that's exciting for us.

With regard to V-block architecture, I spoke with [Cisco North America channel chief] Wendy Bahr in November and she mentioned that there were still some details to be worked out about how V-block packages would move through the channel, given that Cisco, EMC and VMware all have different policies for deal registration and other things. Any update you can provide?

Probably not a quick one, but that's one we've done a lot of work on. Operationalizing that -- who does what in the cycle -- is something we have to think through. The exciting thing from the partners is that they're excited because there are things they can do to put glue to the V-block and the VCE [Virtual Computing Environment] coalition by creating demand and delivering the offering for the customers. We'll be following up.