Cisco's Peres: Partners Will Become Even More Relevant In The Future

Cloud computing, vertical-based sales and professional services are all top opportunities for Cisco channel partners, and it is those things, along with other, that Edison Peres believes will drive their growth going forward.

Peres, who became Cisco's worldwide channel chief in early August, sees partners becoming even more relevant to Cisco and to technology sales in the future, even as the move toward services, architectures and solutions-selling and away from product resale and the margin models of old.

Those were some of the key takeaways from Peres, who in an exclusive interview with CRN in northern New Jersey late last week, discussed his goals for growing partner profitability in the Cisco channel, and described what he hopes will come to define his tenure at Cisco's channel helm.

Following a series of changes in Cisco's channel executive ranks, Peres became the company's senior vice president, worldwide channels, and has assumed most of the day-to-day channel-facing oversight from Keith Goodwin. What he's committed to, Peres told CRN, is making sure the 80 percent of Cisco business that goes through the channel stays strong, and that partners become more profitable and more invested -- financially, but also passionately -- in Cisco.

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"My goal is to build a strong passion, because we think it's there," Peres said. "I want partners to see Cisco as their way to success. I want partners to love Cisco, and to see Cisco as the most refreshing company to work with."

NEXT: Building Vertical Practices

Helping partners build vertical practices -- in which partners focus their energies on really knowing and thus enhancing their value proposition to markets such as health care, government and education -- is one key priority for Peres' channel agenda. According to Peres, only about 30 percent of partners said they had vertical-oriented practices a year ago, but based on his recent partner meetings, that number has skyrocketed to 80 percent.

"That's a 'wow.' That's most of the partners are focused on verticals as a way of going to market," Peres said. "What that says to me is that the architectures and solutions have become much more relevant to the specific industry, and therefore, a partner's need to evolve to speak the language of that vertical is much important today than it was in the past."

It doesn't mean that every product needs to be purpose-built for health care or another vertical, he explained, but rather that partners need to sharpen their pitch to make products and services more enticing to customers in the vertical. Cisco may eventually build vertical-specific training into formal partner programs, Peres suggested, and for now is focused on creating a library of information -- as well as validated reference designs -- to help partners become more savvy about particular verticals.

"That's what those verticals are buying. The may need telephony, which isn't necessarily different, but the more a salesperson can bring that horizontal solution in a verticalized way, the more effective they're going to be for customers," Peres said.

Health care, government and education will all be key areas, but Cisco market agencies such as energy and smart grid will also present opportunities down the road, he noted.

NEXT: The Cloudy Cisco Partner

Peres sees cloud computing as having a transformative effect on Cisco partner business, and said Cisco views cloud computing solution providers in three general categories.

First, he said, are cloud resellers -- those VARs who build cloud-ready infrastructure through their converged networking, data center and virtualization practices, and also resell managed service provider services. Second are "cloud builders," or those big systems integrators who build out private enterprise cloud infrastructure using MSPs and full technology portfolios of hardware and software. Third are cloud providers, Peres said, who are the MSPs themselves.

Thanks to the convergence of networking services and networking product resale, the lines between each of three categories will continue to blur, he acknowledged, and it'll be up to partners to be proactive in how they embrace those changes. Cisco will also look to ways to better connect MSPs with Cisco resources and the Cisco reseller community, to encourage going to market together.

"The goal here is that all of these possibilities are going to be there [for Cisco partners], and we want to make sure we motivate the right behavior, and ensure they build profitable business models along the way," he said. "Many partners see cloud as a threat, and many see it as an opportunity. We see it as an opportunity if you're proactive in how you evolve your model, because the mix of revenues is going to change.

"The world is going to be a a hybrid model: it's not all one or the other," Peres continued. "In the hybrid model, there is mystery, and in mystery, there is margin. It's going to power much more professional services business, and our role is to help partners understand how to profit effectively."

NEXT: The Importance Of Professional Services

"Services is key to the partners' differentiation and profitability, and we want to make sure we create an opportunity for collaboration, not competition, with us," Peres said.

According to Cisco's annual partner profitability survey, he said, partners saw a difficult year in 2009, but actually became more profitable in Cisco business, pound-for-pound. That was because of services, Peres explained.

"The profitability has been the highest it's ever been with us, because their services business has gone up," he said. "Five years ago, the services contribution to their business was 20 percent. Now it's between 50 and 60 percent, and it's the professional service piece that's growing the most dramatically."

Business-relevant assessment services will be front and center for Cisco partner professional services opportunities, Peres said, meaning anything from analytics to future-proofing to offering services that help businesses increase their productivity.

"And if you connect that back to the vertical conversation, you're going to need to understand that vertical in a way you didn't before," he said.

What Motivates Peres

Overall, said Peres, Cisco needs to continue to earn partner loyalty and also improve what he describes as "the ease and speed of doing business." As he assumes command of the Cisco channel organization, he's engaging a channel exhausted from both a recession and the lingering effects of Cisco's stopped-up supply chain, but motivated to build stronger Cisco business and tackle key market opportunities around data center, video, collaboration and the various verticals.

"A lot of vendors believe you can coerce loyalty by paying for it. We believe that longevity is seeing value in your relationship," he said. "We also have become more complex and larger, and we're getting to a stage where parnters are saying, hey, I'm having a tough time understanding how to dance with you as effectively as possible."

Look for more Cisco initiatives around ease of doing business, including recent programs like My Cisco, a customizeable online dashboard for organizing a partner's Cisco business interests, and incentive programs such as the new TIP (Teaming Incentive Program), which like VIP, OIP and SIP, offers VARs extra points of margin for the deals they bring to Cisco's attention and the types of deals they are.

TIP, which is currently being piloted following its announcement at Cisco's Partner Summit in April, awards VARs five extra points of margin in deals where they've been qualified early in the sale process -- the motivation being that partners need to be rewarded for the work they've done early in a sales cycle, and will receive those points even if the deal enters the Cisco Dealer Service Agreement (DSA) phase.

It's all part of a plan to make partners more profitable, and have an easier time with Cisco on the operations end of things, Peres said.

"We have been too complex, but not because we started too complex, because we grew into new businesses," he said. "Now, the pendulum needs to swing back the other way, to the point where our messaging and programs are much simpler and more integrated."