Cisco Partners: Meraki Beneficial, But Could Be Better

While Cisco's Meraki cloud networking business is flourishing and a buzz is being heard around the channel following a strong second-quarter earnings report, some partners feel the product has yet to reach its full potential.

Cisco's wireless business saw revenue jump 18 percent during its second quarter fueled by Meraki's $400 million annual sales run-rate and 100 percent year-over-year growth.

"Meraki is a very uncomplicated product that account managers get and at a price-point that customers appreciate -- it's an easy thing," said Gary Berzack, CTO and COO of eTribeca, a New York-based solution provider specializing in wireless and a Cisco partner. "Their focus is on the cloud experience and not necessarily on the user environment."

[Related: Cisco Beefs Up Meraki With New Cloud-Based Management, Now Pitching It To Enterprises]

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Berzack said the Meraki products should attempt to satisfy more diverse and different user environments.

"I don’t think anybody would expect to have a Meraki in a hospital or in a critical machine-to-machine [M2M] deployment," said Berzack. "In the end, a customer that might have lots of different wireless needs might end up settling for this common denominator, which is Meraki."

A Cisco partner executive who declined to be named, said Meraki is a beneficial product, but Cisco needs to change its pricing model to help channel partners.

"The way that they want partners to go to market with it is on a monthly reoccurring service, but they're still selling it to us up front," said the executive. "So for us to be successful with Meraki, we have to go buy all the Meraki gear up front, then we have to bill the customer over time. We'd much rather like to see their cost model get an alignment with a consumption model."

The executive said changing the pricing model to align with a consumption model would accelerate Meraki's already rapid growth.

"It's OK for larger companies who can afford it, but smaller Cisco partners can't afford to go buy $50,000 worth of gear because it ties up their capital," he said. "So what Cisco needs to do is have a subscription-based cost model to go with a subscription-based consumption model."

Kent MacDonald, vice president of converged infrastructure and network services at Long View Systems, a Calgary, Alberta-based solution provider and Cisco partner, said he has been hearing the buzz around Meraki's success, but hasn't been as active with Meraki as other Cisco product lines.

"They have a pretty compelling offer with Meraki," said MacDonald. "They have 2 million page views a day on the Meraki.doc website -- that shows the popularity of it in the market."

NEXT: Partner VP Says Meraki Has A 'Fantastic' Use Case

David Powell, vice president of managed and cloud services at TekLinks and a Cisco partner, said Meraki has a fantastic use case in retail establishments, schools and in the health-care field.

"Meraki has a fantastic use case, because it has a centralized management console and fewer devices at the edge," said Powell. "It has one point to manage and control all the wireless access points, so you don't have to log into each access point to make a change."

When Cisco acquired Meraki in 2012 for $1.2 billion, it was known as a Wi-Fi vendor that focused on SMB and midmarket customers. Cisco has since expanded it to include centralized monitoring and management for switching, wireless, location analytics and intelligent WAN/routing.

Last month at its Cisco Live conference, Cisco showed off all the work it has been doing to remake Meraki from an SMB-focused technology into one that's capable of managing enterprise networks.

"Meraki had overall very good margins," said Cisco CEO John Chambers, during the quarterly conference call on Wednesday. "We are very comfortable with [Meraki]. When you begin to look at a company that is now at a $400 million run-rate and to grow 100 percent, I mean, that’s higher than almost any startups in the industry with great gross margins … What we are seeing is a continued leverage of the Meraki type of vision for how we grow our resources and how we grow our relevance to our customers."