Cisco SVP: Every Cisco Partner Needs To Understand Video

Cisco is fond of touting video as the "killer app," and has for much of the past year been urging partners to invest in video strategies. In a move to drastically expand its own video presence in the channel, Cisco this month finished acquiring Tandberg, by most estimations the worldwide market share leader for videoconferencing.

Solution providers welcomed the deal for the muscle Cisco brings to the space, though with the Tandberg portfolio now exposed to the galaxy of Cisco partners, they also worry about squeezed margins for Tandberg-driven video deployments.

Marthin De Beer, senior vice president of Cisco's Emerging Technologies Group, and one of Cisco's top executives in charge of new and growing markets, sat down with Networking Editor Chad Berndtson at this week's Cisco Partner Summit in San Francisco to hear more about why Tandberg is so significant an acquisition for Cisco and why video is crucial for every Cisco partner.

Video has been around for a while as a channel play but there are still a lot of folks out there who see traditional video endpoint re-sale and are only starting to understand the broader opportunity. How do you articulate that opportunity to them?

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When it comes to video, we've been on this bandwagon for about three years and investing in this space for about five. But I think people are seeing this happening -- we have reached an inflection point. I don't seen every Cisco partner jumping on, but there are more customers asking for this, and I think we'll continue to see more and more interest from partners as well. If we over-distribute, that's not good, and we want to be smart about it. But I will say that Tandberg was a big, bold move that gives us an additional 1500 partners we didn't have before, partners that are big believers in video. They will have access now to bigger opportunities and also the ability to tie video to the network.

But even if you're just selling routing and switching, every partner needs to understand video and know that there is a play and know to make a choice whether they want to invest aggressively or just scale what they do today. That's their choice. The trend is inevitable, you can't argue with that. And one thing I didn't say [in De Beer's keynote] this morning is that we have consistently under-guessed the growth of video. We have been wrong every year, it's always exceeded our expectations.

It's been growing all a long, and we've been saying video is going to be the next big thing for so many years, but what's changed that makes this year 'the year'? Availability?

We entered this market on the very end and we invested a lot in creating TelePresence, which is the market name we used for high-end video conferencing, because we wanted to show customers that there is a better way than the remote control. It can be both a great experience and easy to use. We did that but our system has been very expensive. The big bold move with Tandberg is to round out the entire portfolio, starting with an HD webcam at $199 and all the way up to a full, three-screen TelePresence system. It's a transformational deal not just for Cisco but for the industry as a whole. Many partners have told me that and it's exciting for everyone involved. Everyone will benefit in a big way.

NEXT: Why Tandberg

Why do you see Tandberg as such a good fit? They're the market share leader for sure, but there are other companies in the space with rich channel plays.

We looked at a lot of companies, and would say that beyond the table stakes of the technology, the leadership and the culture of Tandberg is so similar to Cisco.

We never acquire any company for the technology they have today but for the people that can help us create the next generation of where we want to go. Tandberg fit that to a T. What was risky about this is that they're Norwegian and London-based, and we've been shy about acquiring big companies outside of where we are, more than a few time zones away. In fact, this is the first public company we ever bought outside the United States. We took that risk -- and the reason John [Chambers] and the board was willing to sign off -- was that both of these teams are passionate about culture. We have the best two teams in the world that believe in using this technology. I'm putting my two top leaders in TelePresence over in Europe for a year and some of their leaders are coming to San Jose for the first year so there will be some cross-pollination as well.

Some of your competitors are circling the wagons and looking at ways to entice channel business away from Cisco-Tandberg. Polycom is perhaps more of an apples-to-apples comparison with Tandberg, and LifeSize is a different animal, and one that would paint Cisco-Tandberg has having HD presence systems that are too expensive and thus unrealistic for many customers. How do you respond to that?

It depends on what they mean by expensive. If you're a business buyer, I wouldn't call $199 expensive. Tandberg combined with Cisco has a very complete product line from the very high end to the very low end, and we will continue to innovate and drive down price points.

One product we've talked about publicly but haven't announced is our home telepresence solutions. That play in the channel will not be to sell to consumers -- that will be through retail -- but it's a business-to-consumer play that's so attractive to our business customers. You're talking about millions of endpoints, not just a few thousand. If you can now deliver video and connect to your accountant, or your doctor, right into the home, it's a lot like what we saw with e-commerce in its early days. This is an e-services model delivered to your home.

In the channel, video became a services play a few years ago; you're not going to enter the market selling only endpoints anymore. Can you give some key examples of the play for VARs beyond basic video endpoint re-sale? Is it hosted services? A managed model?

I think they can go deeper than they have been going because in many cases, if you rewind 5 years, they were resellers of video conferencing. Now, they can work with customers to create new value by innovating to deliver new experiences. HD, the availability of the network, the fact that it's based on UC, these make it easy to transform experiences. A number of [partners] will go much deeper, and a number will go wider as well, picking up digital signage, or maybe video surveillance. The good ones will go not just deep but wide and connect, on a horizontal plane, these businesses as well. I think all of that will come into play, whether you add more specializations, both top and bottom line for partners.

As video also becomes more affordable for SMBs and the partners that service them, what are the plays there? I know we've talked before about managed video services through the cloud.

To expand a little on your previous question as well, services have to be part of the equation. You can't just resell the box, you really, truly have to deploy it the right way, and make sure the network is ready for it, then create the right experience that will truly solve the problem that customer has. It'll be a lot about how they can do business in a virtual model that helps them be more effective and helps them scale. That's where both the on-prem[ise] and/or the hosted solutions deliver. If you think of B-to-B services delivered by carriers it's very expensive, but with new options, it'll be a lot less expensive and there'll be opportunities for partners to take video outside the firewall for all companies.

NEXT: Consumer TelePresence On The Way

We've heard a little bit about how the two channel models [Cisco and Tandberg] will eventually converge, in about nine months time. Many Tandberg partners that don't also work with Cisco are concerned that with more exposure for the Tandberg portfolio, there's going to be unavoidable margin pressure. What do you tell them?

It'd be silly for us to destroy a Tandberg business model that's brought partner profitability. We have put in place very disciplined processes to ensure we don't disrupt that. We do have two different channel business models. We discount deeper versus Tandberg and our list pricing is higher, so what we're going to do is, if someone brings us a deal and pushes us for a Cisco-like discount on a Tandberg [product], the answer is going to be no. The net price for Tandberg is not going to change.

We're not going to over-distribute, either. We have now about 90 Cisco TelePresence partners, and Tandberg had 1,600 partners. About 50 Cisco TelePresence partners were Tandberg already, so we're only adding a net of about 40 additional partners. I'm not saying we won't add any additional partners but if we do it will be on a carefully selected basis.

OK, so for partners who are selected, is there a process in place for picking them? Is it folks specialized in UC? Service providers?

It could be all of the above, though I think UC partners would be the natural. But video is a very different animal than voice. It's very important that we attract the right partners with the right mindset. Our focus is not going to be growing the overall number of partners, but rather to invest in the partners we have to make them really successful. If we have a region in the world where we don't have enough coverage, we will recruit. But Tandberg operated globally and so does Cisco, so there aren't a whole lot of gaps to fill. We feel over the next year we have more than sufficient capacity to absorb the demand we've seen.

We heard at Partner Summit that Cisco will be introducing a specialization for video. Can you talk about what that will entail?

It's going to center around the broader video play and include the combined portfolio of TelePresence and Tandberg. We want people to start thinking more holistically about video and break down the silos. That's where we think the biggest value for customers will lie.

Will Cisco look to make additional acquisitions in video? I mean, you're always on the lookout, right, but is that a priority right now?

We're always on the lookout. Obviously I can't comment on anything that hasn't been announced, but as you know, that's all part of our model, so if we have a gap, we will look to either build or acquire and make the best decision for the business at the time. There's nothing that's a burning priority for us at this time. We've got a pretty big bite to swallow right now.

Anything else you can tell me about home telepresence at the moment?

We are in trials, and you will hear more during John [Chambers'] keynote [Thursday]. All we can say is we're very excited about it. It's going to be a home run product for us, I think, and will tie directly into our strategy. I can't wait for Christmas to come.