Cisco's Best-Kept Secret: Distribution Growth

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Sales of Cisco's video, collaboration, security, wireless and data center products, including the blade and rack servers associated with its Unified Computing System (UCS), are leading the charge in terms of top Cisco distribution growth categories, Brown said.

Even so, said distributors, Cisco hasn't tried to juice that growth by spreading its distribution coverage too broadly, as other large vendors have.

"They've very closely guarded the way they've used distribution," Tech Data's Dutkowsky said. "They don't oversaturate, and I think all of us have found a way to make a good living inside of the Cisco system, whereas other vendors are overdistributed. Some of them sign up as many as they can, hoping to get broader coverage."

"You can count on them not opening up distribution to 2,500 companies out there," added Ingram Micro's Monie. "It's very steady."

Several distributors commended Cisco for successfully making its compensation neutral to encourage its sales reps to focus on distribution and the channel as much as possible. In return, they said, Cisco has demanded a deeper investment from those major distributors, many of which have set up Cisco-specific business units and VAR training programs.

"There have to be sales drivers way beyond pick, pack and ship," Brown said. "The way we evaluate it is that if folks don't measure up to that, they're no longer a part of our landscape. The complaint I've heard from a lot of people is that other [vendors] are signing on additional distribution capacity in countries where they clearly don't need it. If you have too many distribution partners in a geography, then it's not a good book of business."

"Cisco has a sales culture most companies would die for," Dutkowsky said. "But they have also figured out a way to make the sales reps neutral. That takes away a lot of channel conflict, and we can all kind of work together."

There also have been less-publicized structural changes at Cisco that directly affect distribution. During Cisco's broader corporate restructuring, for example, Rob Lloyd, Cisco's executive vice president, worldwide operations, streamlined management of Cisco's global distribution into a single roll-up to Brown.

"All of the regional distribution leaders report into me now," Brown said. "We send a number up to Rob every Monday morning, and there's very strong governance on what they're doing."

That's one of the ways Cisco has put a brighter spotlight on its distribution sales and tightened how it does forecasting with the major partners, who during the nadir of Cisco's supply chain stop-up were frustrated with the vendor for not providing better guidance on the depth of the problem.

"They misinterpreted the data they were getting," Comstor's Pritchard recalled. "I mean, we didn't just start rolling down a hill, we fell off a cliff -- the product stock just went away. But they were making some decisions in isolation."

To hear the distributors tell it, recent Cisco programs such as the 2010-launched Fast Track 2 and last year's Power Up have been just as crucial to tightening the relationships.

Fast Track 2 accelerated how lower-end, transactional-type Cisco products such as several of its routing and switching lines move through distribution, whereas Power Up sparked UCS C-series rack servers to a 430 percent sales increase through distribution, according to Brown.

Cisco sought distributor input for many of those programs. Comstor, for example, was an active contributor to the Power Up program, said Pritchard, who listed it as a good example of Cisco soliciting distributor feedback instead of spooning out decisions to the field.

"Historically, what would have happened is that someone in a business unit would make a decision without any understanding of how it would transact in distribution," Pritchard said. "That has changed. Scott has the understanding that distribution really is key to what they're trying to do now."

NEXT: Cisco Distribution Programs And Hiccups

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