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Cisco 'Buys' Into Managed Services

Cisco Systems stepped up its commitment to helping partners deliver services with last week's acquisition of publicly traded managed service provider NetSolve in a deal valued at nearly $200 million.

NetSolve's core services include monitoring and managing IP communications networks, security software and devices, and WANs and LANs. The MSP already worked with Cisco to allow Cisco partners to resell its managed services to their customers.

Edison Peres, vice president of advanced and core technologies for worldwide channels at Cisco, San Jose, Calif., said NetSolve will enable solution providers to operate and optimize customer networks from just about anywhere.

"We're interested in trying to help our partners develop capabilities [in managed services]," he said. "This type of offering delivers strong annuity streams and improves a partner's ability to monitor and manage Cisco products" on customer networks.

Considering that many Cisco partners already offer managed services in these areas, however, some solution providers wondered whether the acquisition would put Cisco in direct competition with its own solution providers.

Jim Teter, president of Avnet Enterprise Solutions, Tempe, Ariz., is one such reseller. While Teter said he thought the deal was a "smart purchase" for Cisco overall, he suggested that concerns about cannibalization could be voiced by solution providers that have invested in building their own network operations centers.

"It goes without saying that some people are going to see this as competition," he said. However, Teter's company already private-labels the NetSolve technology into a managed monitoring service. "But if Cisco is truly doing this to enable its partners to broaden managed services, I think it will work out fine," he said.

Richard McLeod, director of IP communication for worldwide channels at Cisco, said the company was planning to deliver these services through a resale model, a wholesale ASP model, and through its Advanced Technology Partner program.

McLeod added that Cisco would incorporate Austin, Texas-based NetSolve into a broader managed services offering and would not operate the company as an independent business unit as it does with Linksys.

Under the agreement, Cisco will pay $11 per share for all outstanding shares of NetSolve stock, or roughly $190 million.

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