Inside Cisco's Stand-Out Approach To Partner-Friendly Services Programs

While Cisco's ongoing corporate restructuring has put many of its investment priorities on the back burner, one area to which the networking titan is devoting serious time and resources is in the growth of its services organization, particularly the professional services programs it offers through channel partners.

To hear its services team team tell it, the reason for doing so is clear-cut. Cisco wants to put some distance between Cisco's services programs -- already some of the most highly regarded among tier-one channel vendors -- and those of competing vendors like Hewlett Packard and IBM whom Cisco says don't offer nearly the rewards or potential for partner profitability that Cisco does.

Services now account for more than 50 percent of Cisco partner revenues -- a substantial jump from roughly 10 percent as recently as four years ago. That kind of growth means Cisco services has to be a global channel priority, Nick Earle, senior vice president of worldwide services sales and channels, said. He added that Cisco's strategy around "smart services" is the most partner-friendly in the industry.

Earle was promoted to the role as part of a number of Cisco executive changes this summer, and he serves as the field chief for all of Cisco's global services organizations, with the various Cisco services sales leaders in each of Cisco's sales geographies now reporting to him. Cisco Chief Operating Officer Gary Moore, Earle's manager, retains P&L responsibility for the services business, which is about a $10 billion contributor to Cisco's more than $43 billion revenue pie.

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Earle's charter is to make clearer how Cisco expects services field engagements to take place, to offer partners more access to Cisco intellectual capital as they build their professional services organizations, and to leverage development and also acquisitions Cisco's made to automate the delivery of services using software.

The last point is huge, said Earle, who said that Cisco has reached a point now where 93 percent of all the services support calls it receives can be handled using software. And that isn't merely automated call center responses, he said, it's the potential to diagnose network problems -- such as a needed upgrade to a later version of Cisco's IOS software -- remotely.

"The moment you have this capability with software, the first benefit is your margins go up, but the second benefit is you can take those software capabilities to your partners," Earle said. "Everything that we have in smart services we make available through partners. They're accessing our capital and they wrap their own unique value around that, whether that's multivendor support, or Microsoft capabilities."

More services also enable more product sales. Cisco claims that partners who sell Cisco's Smart Care service -- a network maintenance and monitoring package for SMBs -- end up selling more hardware than partners who don't.

"If a customer's network is more stable and everything's working, they'll buy advanced capabilities and put them on top, such as video," he said. "Partners that are smart services-enabled are selling more hardware. That's a fact."

Next: How Cisco Separates From HP And The Services Pack

It's Cisco's goal to have a fundamentally different approach to services than companies such as HP that use a "hard deck" strategy -- in other words, restricting partner access to certain sizes and classes of global customers that those vendors intend to service directly.

It also wants to separate Cisco from the trend of major IT companies buying consultancies, integrators and outsourcers to bulk up in services, as HP, IBM, Dell and Xerox have all done in the past decade, executives said.

"That's never been our strategy," said Raja Sundaram, senior director of services channels. "Strategy-wise, which is better? Do I build a 200,000-person services arm or go acquire the largest outsourcer on the planet? Or do I enable a value-based partner model with an amazing set of partners?"

"We absolutely do not have a hard deck strategy, we have an ecosystem strategy and that's how we can do so much business," said Earle, who spent 18 years at HP. "[A hard deck] makes for a simple strategy, but it's not a partner friendly strategy."

On a global basis, Cisco has about 13,000 services employees, including in maintenance services. Among those employees are 2,000 in-house CCIEs -- compared with what Earle said is more than 84,000 partner employees that hold CCIE certifications -- and 3,800 technical services employees and 5,600 advanced services employees.

Clarity on how Cisco expects partners to work with the vendor on services has been a frequent request from VARs, Earle said. Therefore, one of the big initiatives from Earle's team this winter is the release of what Cisco is describing as a Rules of Engagement document: an exhaustive, thoroughly annotated file that outlines Cisco's global services strategy, how it plans to engage customers and where, on which opportunities it will work with partners and where, and what partners qualify for which services programs based on their certifications.

According to Earle, the document will be made available to every Cisco channel partner worldwide and also every Cisco field employee. One benefit is that it will give Cisco partners a tool to reference -- including a step-by-step guide on how to escalate problems int he services organization -- when they feel Cisco has overstepped its bounds on a partner-led services sale.

"We've formalized it. If you find any [bad] behavior, here is the formal escalation process," Earle said. "We talk about how we pay our people. We've written it all down so we're absolutely clear. It's something we should have done in the past, and we didn't."

Next: The Rise Of Cisco's IAS, CPS

Sundaram, who is Cisco's channel chief for services, said a priority for Cisco is to grow its Integrated Architectures Specialization (IAS), a newer Cisco specialization focused on larger Cisco partners that have the resources to be strategic with Cisco around services delivered to large customers at country-based or multinational levels.

IAS launched earlier this year and Cisco has nine partners that have signed up, including large global partners like IBM and Dimension Data. In order to qualify for IAS, partners need to be Gold-certified in all of the countries they wish to participate, and have a combination of Master or Advanced specializations -- as resellers or as managed services providers -- in the UC, security, data center or cloud categories. The requirements vary depending on whether partners are seeking local, multinational or global IAS certifications.

More partners, however, are cottoning to Collaborative Professional Services (CPS), a Cisco program that officially debuted at this year's Cisco Partner Summit in New Orleans, following about two years in development and the input from more than 200 Cisco solution providers.

Functionally, CPS is a series of SKU'ed professional services offerings that partners can leverage for customers using Cisco's engineers, design tools and software as back-end support. It's the partner's engineers and technical support staff that lead how those services are provided to customers, however, which is a big difference from, say, Cisco's Advanced Services offering, in which Cisco engineers are essentially sub-contracted and brought in to deliver the services for customers.

The idea of CPS is that partners use Cisco's expertise as a resource for customizing a professional services package for customers that keeps the partner front-and-center in the engagement but has Cisco's engineering and intellectual capital as a backstop. Partners want to add professional services as a way to expand their margins, but with so many Cisco products and architectures to learn, they're often hard-pressed to do everything themselves, said Bob Dimicco, senior director of Cisco Services.

"That puts a tremendous amount of pressure on the professional services organizations of the partners, because they have to come up to speed on new technologies, and also how to create new technology and business outcomes for customers," Dimicco said.

CPS applies to all of Cisco's architectures, including cloud computing. CPS use by partners is restricted, however, to those solution providers that have specializations in particular Cisco technology. For example, if a partner wanted to use a CPS-covered professional service for a unified communications engagement, that partner would need an advanced Cisco specialization in UC.

According to Dimicco, partners requested that requirement.

"They told us very specifically that they make an investment to become specialized and that we needed to create a set of offers that go beyond the baseline," Dimicco said. "They don't want these made available to partners that haven't invested."

CPS covers everything from analytics to planning and design guidance, and the services are grouped into the categories of assessment services, guidance and development services and practice accelerators.

The individual services -- more than 30 in all -- are offered as SKUs, ranging in price from about $1,000 to $40,000. Cisco developed the pricing structure based on input from partners, Dimicco said.

"We've worked with a wide variety of partners to understand the economical price points that allow us to cover costs and also ensure this is a high-value program," Dimicco explained.

About of the partner demand for professional services in CPS so far has been in designing UC and collaboration solutions, Dimicco said, with the rest a fairly even split between Borderless Networks architecture and data center integration. Among the individual services, by far the most popular -- at least by volume -- as been the basic assessment service for routing and switching, which Dimicco noted is valuable to UC and data center customers, too, because those customers often need network upgrades.

Partners are also able to keep the infrastructure and network designs they've created using CPS, and make reference architectures for use with other customers if they so choose. That's a way for partners to "amortize" their investment in Cisco's engineering resources, Dimicco said.

Next: Partners Applaud CPS Growth

Several Cisco partners said they've seen good returns from CPS thus far.

"What I like about CPS is that it keeps my engineers in front of the customer and the technology, while the [Cisco] Advanced Services engineers work behind the scenes," said Dale Hardy, vice president, professional services at Nexus Integration Services, a Valencia, Calif.-based Cisco Gold partner. "I have the flexibility to provide full disclosure to the customer on the engagement or simply collaborate with the AS-CPS team and keep it fully transparent to the customer. It is all based on the customer's delivery expectations."

Cisco has responded well to partners about feedback over the pricing of the services in CPS, Hardy said.

"The CPS offers were initially released with bundled pricing," he said. "However, we didn't necessarily want all of the items within the bundles, plus it inflated the associated pricing models. Now there are more flexible options that provide more flexibility and improved cost models."

Harry Zarek, president of Compugen, a Richmond Hill, Ont.-based Cisco Gold partner, said the CPS offer was well packaged and well documented.

"It allows us to get up to speed a lot quicker and in effect have a protection in terms of knowing that we have Cisco-trained, experienced resources that are part of the work we're doing," Zarek said. "The way they've constructed it now is that they're never in front of the customer. It's always a remote support service, and it's we that maintain the interaction. We're the ones that continue to lead the engagement, but by having them as part of it, that helps build our folks' confidence."

That's a big difference from leveraging Cisco Advanced Services to essentially do service fulfillment for customers, he said.

"In fact, what you're doing there is contracting Cisco to deliver the service for you," he said. "So we're not involved, and we don't really have an opportunity to learn from them. That would make more sense maybe for a DMR or someone who doesn't do professional services but not for us."

VARs agreed the growth of their professional services practices is what sets them apart, especially in a channel as crowded as Cisco's. Several major recent solution provider acquisitions that weigh heavily in the Cisco channel, including Softchoice's $17 million pickup of Unis Lumin last month, were in part motivated by professional services.

It's a particular form of value-add, and also a moneymaker, VARs said.

"The issue with professional services is that you're limited by people with certain skill sets," Zarek said. "It's not something you can easily scale systems-wide."

"Our year-over-year growth in professional services has never slowed down, even when the economy did," said Nexus IS' Hardy. "Unlike hardware, professional services is where we can capture increased margins. It's extremely important."