Cisco Tees Up 'Biggest Services Announcement in 15 Years'

Cisco will launch a new partner program specific to its highly regarded services business -- a collapsing of nearly 50 different global programs into one, re-designed umbrella program, and a way for Cisco partners to capitalize on what executives call a roughly $200 billion market opportunity with the potential to expand individual deals by as much as 12 times their value.

It's called the Cisco Services Partner Program -- the showpiece announcement at Cisco Partner Summit in San Diego this week -- and Cisco will offer performance-based incentives according to the breadth and competence of the services partners provide customers, said Nick Earle, senior vice president, Cisco worldwide services sales and channel.

According to its annual survey of partners, Cisco solution providers on the whole now make 50 percent of their revenue with services, Earle said, and about 70 percent of their profit with services. It was only five years ago that the revenue number, on average, was roughly 20 percent. Services represent nearly $9 billion of Cisco's overall revenue.

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Cisco spent much of the past year fine-tuning its services programs, including offerings such as its Integrated Architectures Specialization (IAS) for large Cisco partners that can be strategic with Cisco at country-based or multi-national levels, and Collaborative Professional Services (CPS), a series of SKU'ed professional services offerings that partners can deliver to customers.

In another widely-hailed move, Cisco late last year also published a services Rules of Engagement document covering everything from partner services compensation to the formal escalation process for resolving conflicts with Cisco reps in the field.

But the new program is intended as the biggest statement yet of how Cisco wants to help partners profit from services and also differentiate itself from the channel services strategies of tier-one vendor rivals such as HP, IBM and Dell that cordon off major accounts -- a so called "hard deck" strategy -- from partner-delivered services opportunities.

Services are the way Cisco partners best stand to grow in the coming years, Earle told CRN in an interview before the conference.

"Services are massively important and these numbers have grown," Earle said. "So what we're announcing is a new global channel program designed to increase both the top line and the bottom line of their services business. This is the biggest announcement we've made in 15 years."

The program will be globally available within the next 18 months, Earle said. Cisco began piloting the program last year with about 2,500 partners, Earle explained, and is now up to about 4,000 partners participating in the U.S., Canada, Israel and Asia Pacific. About $1 billion in revenue has already gone through the program. he added.

In essence, the program opens Cisco's Smart Services portfolio up to its entire partner base. The basic level, Cisco Branded Services, lets partners essentially resell services in Cisco's portfolio, such Smart Net Total Care and Network Optimization Services, as they would any other Cisco product.

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Thanks to Cisco's intellectual capital and the information it offers through its underlying software, partners can develop services for customers that offer things such as competitive benchmarking -- how a customer's network stacks up, for example, to other customers in its market segment and of its size.

At a more strategic level, qualified Cisco partners can leverage a new offering, Partner Support Service, in which they can not only provide installed base and contract management services to customers but also use Cisco APIs to create their own apps and workflow integration software.

Partners using that program can realize incremental rebates as high as 25 percent depending on how in-depth they go with the programs and how sophisticated their services offerings.

"We're already automating 88 percent of all service activity that we have with our customers," Earle said. "The software recognizes patterns on the network -- common configuration patterns by device. There's just no way a human being can do that."

The backbone of the services program is Cisco's underlying services software -- a powerful platform developed both in-house with several hundred dedicated engineers, and using technology Cisco gained through acquisitions of companies such as Pari Networks and NewScale.

Cisco can only offer in-depth benchmarking on its own products and infrastructure, but the software itself can see all the devices on a network.

"We can discover everything," Earle said. "We can discover Avaya devices, for example. If that partner is supporting multiple vendors in the end customer environment, they can build their own multivendor smart service with the APIs t take to the market."

Cisco partners enter the Services Partner Program based on their current status with Cisco, receiving the same base discounts within the program that they do in Cisco's broader channel program for their Gold, Silver or Premier status. Partners using existing Cisco services programs will be phased into the new program over the next year, with all of their existing statuses and designations preserved automatically.

"We wanted to move away from an upfront discount to more of an investment-based discount and performance-based rebates," said Raja Sundaram, vice president of services for Cisco's Worldwide Partner Organization (WWPO). "We are able to differentiate the partner for the investments they've already made."

As of December, Cisco had about 13,000 services employees, including in maintenance services, and of that about 2,000 in-house CCIEs, 3,800 technical services employees and 5,600 advanced services employees.