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How Cisco Got Its Groove Back

With solid second fiscal quarter results, a renewed appetite for acquisitions, market-share gains in key networking segments and a more-nimble organization for partners, Cisco is certainly singing a different tune ahead of this year's Partner Summit.

When Cisco's global channel community descends on San Diego for next week's annual Partner Summit, they'll be greeting a networking giant more energized about its prospects -- more prepared to play offense in the name of Cisco momentum, it seems -- than at any other time in the past three years.

While Cisco Partner Summit is by nature a rah-rah occasion, recent gatherings have felt less like reasons to celebrate Cisco triumphs and more about analyzing distractions. In Boston in 2009 came a foaming-at-the-mouth call to compete more closely with Hewlett-Packard following the launch of Cisco's Unified Computing System (UCS) a few months earlier.

At the 2010 event in San Francisco, the wounds from Cisco's supply chain and product shortage disaster were still raw. And at 2011's Partner Summit in New Orleans, Cisco was just beginning a yearlong transformation, with Chairman and CEO John Chambers' now-infamous memo about Cisco's loss of market credibility soon to arrive, and a brutal restructuring process about to begin.

But a year later, while no one within Cisco or within its channel is quite ready to declare total victory, there is an overwhelming sense that the networking titan has righted its $43 billion ship.

[Related: Partner Summit Awaits: 10 Big Questions For Cisco ]

Cisco's second fiscal quarter results were solidly upbeat after a string of quarterly earnings disappointments, its appetite for acquisitions has been restored, its goal of trimming $1 billion in operating expenses in its fiscal 2012 was reached one quarter earlier than expected, and its market share in many key networking segments is once again stable -- and gaining -- by most analyst estimates.

And while Cisco still has a host of challenges -- and has lost more than its fair share of major executives in the past year -- the Cisco partner community sees a company that is more nimble than it was even six months ago.

"I don't think they're ready to say 'mission accomplished,' but it is a less-congested network to get through and a more streamlined organization now," said Kent MacDonald, vice president of business development at Long View Systems, a Calgary-based solution provider and Cisco Gold partner. "I think there is more accountability at each level and, at the field engagement level, the responsiveness of the people running the systems -- deal registration, order processing -- is improved."

"The Cisco of today is enhanced from the Cisco of two years ago," said Darren Adams, general manager and vice president, Cisco Solutions Group, at Phoenix-based distributor Avnet. "The path to decision-making has shortened, and there seems to be a renewed vigor on partnering and collaborative selling. Cisco has always listened attentively to constantly improve. Today, there seems to be an increased bias toward action and momentum and, to me, Cisco seems re-energized and less encumbered by structures when making decisions."

NEXT: Cisco's Major Strategic, Structural Changes


Rob Lloyd, Cisco's executive vice president, worldwide operations, said the sweeping changes were both strategic and structural. Strategically, Cisco moved away from talk of "30 to 50 adjacencies" and retrenched to focus on five key priorities: its core networking businesses, collaboration, data center (including virtualization and cloud computing), video and architectures. Structurally, Cisco reorganized its nine global sales theaters into three regions, with a single executive sitting atop each geography. Americas' leader is Chuck Robbins, senior vice president, The Americas.

"We took some pretty bold steps to align most of our resources," Lloyd told CRN in an exclusive interview this month. "We created three regional hubs, which did two things: It allowed people to work much more in the time zones across where they lived, and also allowed these teams to allocate their resources and prioritize much more on what might be called a regional execution plan. That has worked very well."

Cisco also reorganized its engineering units, streamlining the number of technology-based engineering groups and consolidating power with top executives in several units, including video, security and data center.

Its other major structural change was also internal, Lloyd said. Cisco disbanded the past decade's complex system of councils and boards and now convenes three councils, one focusing on enterprise, one on service provider and one on emerging business.

"The difference from the past is that instead of a loose coalition of councils and boards, we have a very tight operating model," Lloyd said. "We know that market share matters. We know that growth and competitive intensity matters. We have a much-simplified model."

The net effect of these moves, Lloyd said, is a Cisco that spends less time deliberating in internal councils, has more executives empowered to say "yes" and approve deals and partner requests without having to request input from headquarters, and has a clearer strategy for its various technology groups, with product sets organized more logically.

Through it all, Cisco also delivered new channel resources, including the launch of its Cloud Partner Program and a new strategy called partner-led that's seen $75 million in new investment from Cisco and is designed to drive more SMB and midmarket sales through Cisco solution providers. Those customers represent at least $7 billion of Cisco's overall revenue.

Partners said many of the steps described by Lloyd have made their Cisco interactions smoother and made the process of making, registering and seeing returns from Cisco deals far less tangled.

"There were so many layers it just all seemed to take longer, from the responsiveness of the people to the systems," Long View's MacDonald said. "Now, you don't have to go as high in the organization to get approval."

"I see a combination of things happening at the same time," said Frank Scanga, executive vice president of business development at Axispoint, a New York-based Cisco Silver partner. "I see the continued enhancement of Cisco tools that we use for businesses, including the portals for how we track VIP [Value Incentive Program] dollars, how we register deals, SmartNet renewals and the simplicity of getting that well-organized. They've done a good job consolidating those -- before, there were multiple systems and places to enter orders, and no one likes to work in a chaotic manner. That's simplicity, and when you have that, you have less frustration and more profitability for the partners."

Axispoint's Cisco business grew 35 percent year-over-year, Scanga said. Its major Cisco-centric priorities include business video and collaboration, business process mapping, and Quad, Cisco's converged UC suite, social networking platform and cloud software product. Axispoint is fairly unique among solution providers in that it also has a thriving custom app development business that becomes particularly relevant in flexible UC architectures.

"Something like Quad really helps bring the two sides of our house together as a business -- we get to a unified practice which, for us, is nirvana," Scanga said.

NEXT: Cisco Partners See More Channel Resources


Dave Elsner, vice president of sales and marketing at Nexus Integration Services, a Valencia, Calif.-based Cisco Gold partner, said he's noticed a big change in the various partner resources being more quickly available to partners.

"We have more technical resources available to us than ever before," he said. "We see more specialists in the field focused on partners than we do Cisco internal employees. It used to be that a Cisco Account Manager [AM] had a specialist they'd bring in if they needed to, but now they're at our fingertips. A year ago, everything had to go through the AM, and now there are more resources directly for the partner."

Nexus receives more marketing support for things such as demand generation, Elsner said, and Cisco has been much faster about deal approvals, without as much contention or what he described as "escalation issues" with various partners and Cisco colliding on an account.

Still flawed, Elsner said, is Cisco's Teaming Incentive Program (TIP), a relatively new channel incentive designed to reward partners for the work they do early in a sales cycle. One conflict frequently mentioned by several partners is how Cisco field reps too often ignore TIP and urge partners to instead register deals with the Opportunity Incentive Program (OIP), an older program that rewards partners who bring new business opportunities to Cisco.

Jim Sherriff, Cisco senior vice president, U.S. and Canada partner organization, told CRN in January that Cisco had spent time training its field sales reps on how TIP was supposed to work to cut down on challenges.

"It wasn't until a month or two months ago that Cisco AMs started to understand what it was about," Nexus' Elsner said. "When we had a TIP opportunity, they were constantly pushing us into OIP because it was just easier for them to do that and they didn't understand it. A lot of them focus on the path of least resistance so they were always saying, 'Just put it in OIP.' "

As for Nexus' strongest Cisco-related opportunities -- Elsner noted its VXI-related virtual infrastructure business, hosted UC and UCS-related data center sales as big priorities -- Cisco overall has shown new commitment to partners focused on architectural plays.

"It used to be that if Cisco had any kind of incumbent partner in an account, we weren't allowed to get any kind of deal reg with it," Elsner said. "They're now a lot better at giving us architectural deal reg. What I mean by that is if maybe there's a partner in there doing voice, but not video, we can go in there for the video opportunities. It's nice that Cisco's come down to it at an architectural level now."

NEXT: A More Nimble Cisco


Throughout its restructuring, Cisco also went wider and deeper with partner expertise. While describing collaboration as a potential $42 billion market opportunity, for example, Cisco made significant updates to its collaboration and business video portfolios, including last month's update to the Jabber platform.

It also continued to bolster its services capabilities, winning raves for the lucrative professional services programs it set aside for partners under Collaborative Professional Services and other offerings. And it offered more resources for specialized partners playing in particularly enticing markets. For example, Cisco launched an Advanced specialization and a CCNA specific to solution providers selling Cisco products to second-, third- and fourth-tier carriers and service providers.

But it's the structural changes that are paying the most dividends for most Cisco partners.

"Cisco has evolved -- we see the engine as finely tuned now," said John Convery, executive vice president, vendor relations and marketing, at Denali Advanced Integration, a Redmond, Wash.-based solution provider. "Our growth for Cisco in 2011 was substantial -- almost triple-digit and definitely high double-digit growth. They've spent a lot of time lately understanding what can drive growth and we've seen them make heavy investments in training and awareness. They're putting a lot of wood behind the arrow."

Denali achieved Cisco Gold partner status for the first time this year, notching Cisco Advanced specializations in UC, routing and switching, security and wireless LAN, and integrating Cisco Lifecycle Services into its offerings.

Cisco is engaging more partners like Denali that can sell beyond its core networking technologies and focus on more than one strategic area, Convery said, adding that Cisco in the past year has spent more time with Denali doing joint road map, account mapping and long-term planning.

"Everything they're doing is with a sense of urgency, from the demand generation to the training and how they bring deals to partners," Convery said. "They are investing heavily in the convergence model, and you saw that focus before, but you didn't always see this type of laser-focus on how to do that with strategic partners, at least not with us."

AVI-SPL, the Tampa, Fla.-based A/V integrator and national videoconferencing powerhouse, became more tightly aligned with Cisco following its 2010 acquisition of Tandberg.

While it took Cisco a long time to align its go-to-market strategy with major Tandberg partners that weren't used to such a crowded channel or sizable vendor organization, it has shown willingness to be a good partner, said Mike Brandofino, executive vice president, video and unified communications, at AVI-SPL.

"With Cisco, you have to learn their culture and how they address customers. Our dilemma early on was that we sell so much to the Fortune 500 and those are Cisco's lead accounts, so you find yourself needing to partner up with their elite sales reps," he said. "We do that because we have to do it and we've been successful.

"They are listening," Brandofino added. "They are taking the time to listen to us and ask questions. We have quarterly executive-level discussions to see how progress is going, and it is getting easier."

"Cisco is our go-to-partner," said Robert Betzel, president of Macon, Ga.-based Infinity Network Solutions, which embraced Cisco wholeheartedly about four years ago when things began to look shaky for former vendor partner 3Com. "Cisco seems to have settled out some of the concerns about changing their headcount, and their SMB focus is also settled. I still think they are trying to bear the SMB market out and how exactly they want to serve it -- they've tried a lot of stuff out -- but they're still an innovative company."

Betzel agreed that Cisco had done a good job building its SMB credibility, even if channel conflict hasn't completely gone away.

"There's still a concern that there will be that conflict in the field," Betzel said. "It doesn't happen to us so much, but I do hear from other partners I know who are afraid to take deals to Cisco because they don't want [the reps] to take the deal from underneath them. There are always things they can do to make partners strategically align to them. But we continue to add more and more with Cisco."

Several of Cisco's most important recent initiatives, including partner-led, squarely target the SMB and midmarket segments. In addition to various partner-led-related channel incentives, Cisco in the past year has broadened its portfolio to include SMB-focused Telepresence -- a hosted video service known as Callway -- and a managed services option called OnPlus. More partner-led programs, including a rumored midmarket-focused initiative, are expected to be unveiled at Partner Summit next week.

NEXT: What's Next For Cisco


Overall, said Cisco's Lloyd, the renewed vigor and sense of focus will help the company be a better business partner for solution providers wrestling with new cloud and mobile models.

"There's this massive shift from client/server to this new mobile, consumer-oriented device -- a massive change in the market, and that creates opportunities," Lloyd said. "Applications are changing monolithic, heavy, every-three-to-five-year upgrades to a much more SaaS-based model. Think of the implications of moving to SaaS delivery. Mobility is exploding. Video is exploding, not only in consumer applications at home and in terms of our entertainment and social networks, but exploding in the enterprise. It really is hitting mainstream government and enterprise networks. And data center and private cloud. A year ago, we talked about private cloud and we saw so much energy in the transformational architecture. A year into this, it's just going faster."

Avnet, which added Cisco as a vendor partner in late 2009 and processed its first Cisco order in March 2010, sees Cisco as gaining traction in the data center because "they are aligned to an architectural proposition rather than a speed/feed dynamic," said Avnet's Adams.

"Cisco seems to be really focused, but they can go after it even faster," he said. "The market is ready, their partners and distributors are ready. We can handle it. So, I'm hoping to hear about new engagement programs that create and incentivize acceleration. They've got the strategy and the products."

"What's next?" said Lloyd. "Probably trying to tie those changes together and help our partners understand that after all, the network touches all of those changes. And if you sell an architecture, you expand wallet share, become more relevant with your customers and expand services. The network touches everything. We said that a year ago and that is absolutely true today. Our job in the next few years is to show how the network sits under all of these changes."


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