Cisco's Best-Kept Secret: Distribution Growth

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Fact: Over the past two years, Cisco's distribution business has grown to about $13 billion from $9.6 billion, a roughly 35 percent increase and these days more than 28 percent of Cisco's overall $46 billion revenue pie.

It's a growth statistic not much discussed outside the four walls of Cisco but one that for Cisco's major distributors -- particularly its global distributors -- holds special significance in an era where razor-thin two-tier distribution margins are tenuous and the traditional role of those distributors is being dismissed as outmoded for cloud computing.

"Distribution is one of the best-kept secrets at Cisco," said Scott Brown, Cisco's vice president, worldwide distribution, in a recent interview with CRN. "We've done this well not because we've added a whole bunch of new distributors but because we've focused on driving this as a sales growth opportunity for the company."

[Related: 10 Things We Learned At Cisco Partner Summit]

Cisco's growth in distribution during Brown's tenure has been somewhat overshadowed, first by the supply chain crisis that left the Cisco channel reeling for much of 2009 and 2010, and then by a global restructuring that began in earnest in spring 2011 and has continued at Cisco through today.

Brown, who took over the distribution post at Cisco in September 2010, said that at the time he was appointed, Cisco's distribution sales were about $9.6 billion and had been flat for several years. The San Jose, Calif., company topped the $11 billion goal Brown set up for his first year at the helm and is hitting $13 billion for his second.

"We were doing a good job on the operational side of distribution, but I didn't feel like we were doing as good a job on the sales side," Brown said. "So when I began talking with our distributors about it, we were trying to basically swing the gun turret from an operational focus to much more of a sales- and growth-oriented focus."

"Cisco is one of the best vendors to work with, if not the best, as far as the relationship with distribution, the level of engagement you receive, and level of trust," said Alain Monie, CEO of Ingram Micro, Santa Ana, Calif. "They really are honest when they say they rely on distribution, and we are growing much more with them than we are with others."

Brown and his team have built upon many of the programs and relationships established during Dave O'Callaghan's run as distribution chief at Cisco, distributors said. O'Callaghan was promoted to vice president of worldwide commercial sales at the time of Brown's appointment in September 2010 and retired one year later in September 2011.

"Dave did a great job of establishing distribution as a viable route to market for Cisco," said Bob Dutkowsky, CEO of Tech Data, Clearwater, Fla. "I don't think six years ago that Cisco was nearly as in tune with distribution as it is now. Scott has now taken that to another level in terms of leveraging the capacity and coverage model that distribution represents. The numbers speak for themselves: Distribution is growing faster than Cisco is growing."

"They're not doing anything all that radical, but I will say that Scott has been a breath of fresh air," said Jon Pritchard, worldwide president of Comstor, the Cisco-centric unit of Westcon Group, Tarrytown, N.Y. "He recognized that we have to think about growth together, and he's made sure the programs that Cisco comes up with are very aligned to us. We've had a lot of input into helping them design some of those."

Credit for Cisco's distribution success appears to be due to a few structural tweaks, coupled with well-timed programs, promotions and an ongoing mutual investment between Cisco and its major distributor partners. With a few additions and subtractions, Cisco's distribution mix has remained about the same since Brown took over: approximately 170 distributors worldwide, with no plans to swing that number in either direction, Brown said.

"We've been really disciplined and really controlled and not brought on tons of additional distributors," Brown said. "Our goal is to double down and deepen the relationships we have."

NEXT: Cisco's Distribution Channel Evolves

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