Inside the new-look Cisco channel

By By James Henderson Jun 20th 2017
Inside the new-look Cisco channel
Tech giant establishes five routes to market across expanding ecosystem.

Cisco is placing partners at the heart of its transformation strategy going forward, as the vendor builds a broader and more collaborative channel.

Triggered by new technologies and changing buying patterns, the vendor’s route to the promised land of software and recurring revenue will be defined by the depth and capabilities of its ecosystem.

Because despite an enviable line-up of partners - coupled with healthy local market share figures - the networking giant can no longer rely on its heritage.

It’s a dilemma faced by many a large vendor, a vendor that has dominated hardware markets for decades, yet now stands at a crossroads.

“I am pleased with the progress we are making on the multi-year transformation of our business,” Cisco CEO Chuck Robbins said.

“The network is becoming even more critical to business success as our customers add billions of new connections to their enterprises.”

Addressing analysts following third quarter financials released in May, Robbins said the company is “laser focused” on delivering value through highly secure, software-defined, automated and intelligent infrastructure technologies.

While the cynics will no doubt argue that pivoting is becoming the new failing in Silicon Valley - with an endless stream of struggling vendors hiding pain through fancy terminologies - Cisco is driving change through its channel, leveraging a diversified network of partners to progress.

The channel shouldn’t be fooled however. Turnarounds take time, change can be challenging and alterations are arduous.

A quick glance at the networking giant’s recent round of financials shows a vendor tackling tough internal transformation strategies, with 1,100 additional job cuts issued as part of an extended restructuring plan.

This follows over 5,000 cuts in August 2016, impacting an estimated seven per cent of its workforce.

But as Cisco takes it one quarter at a time, the titan of industry is not alone, with Microsoft, IBM, Intel and Dell all taking a hit during the past 12 months.

Chuck Robbins - CEO, Cisco

Chuck Robbins - CEO, Cisco

According to Fortune, layoffs in the technology sector were up 21 per cent to 96,017 jobs cut in 2016, compared to 79,315 the prior year.

New-look channel

Cisco isn’t alone in instigating change, but crucially, the vendor acknowledges that only the channel can deliver on the potential of a digital world.

“Digital means a million different things to a million different people,” Cisco senior vice president of global partner organisation Wendy Bahr observed.

“We explain it to our partners as the convergence of innovation and technology that has connectivity. And if you think about what a traditional Cisco reseller does, that’s what they do all day and every day.

“They converge disparate technologies and make them available through a connected network.”

Despite a clear definition for digital transformation lacking however, end-user appetite is growing across Australia and New Zealand, driven by a boardroom desire to leverage new technologies to innovate both internally and externally.

But partners are growing tired of identical vendor marketing rhetoric, rhetoric that talks in digital generalities and delivers very little in terms of clear-cut routes to future progression.

And while providers take comfort in aligning with channel-friendly vendors, the time for adulation is over. Today, partners value vendor roadmaps and direction more than ever.

“We have five strategic routes to market through the channel,” Bahr explained.

Speaking to ARN, Bahr said the new-look Cisco channel is made up of traditional resale, multi-partnering, IT service providers, Internet of Things specialists and a cloud marketplace.

Outlined as five paths to profitability for partners, Bahr - who was quick to stress the continued importance of traditional resale players - explained the value of creating a multi-partner environment within the Cisco ecosystem.

Tapping into the collaborative wave taking over the channel, Bahr said win rate improves when partners work together, advocating the value of like-minded providers creating alliances within the wider network.

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“It was naturally slow in the beginning but multi-partner is the second fastest growing part of our channel,” Bahr said. “It’s incrementally drove over US$1.1 billion during the past 12 months.”

But as an experienced channel veteran, Bahr acknowledged switching to a collaborative mindset isn’t as instinctive for traditional aspects of the industry.

“Change is always hard and especially if you have been wildly successful and we have been with our partner community for more than two decades,” Bahr said.

“But we realise this is the first step down the path of expanding value, providing an outcome and having an impact on the customer.”

Alongside the rise of managed service providers, IoT-focused specialists are emerging to build tailored solutions for line-of-business leaders, coupled with born-in-the-cloud providers capitalising on virtualised routers, security and firewalls - all sitting within a cloud marketplace.

Collectively, it paints a very different picture of what it means to be a Cisco partner in 2017.

And that’s because, quite simply, the buyer has changed.

New-look customer

Technology spending funded by non-IT business units will reach US$609 billion in 2017, as new influencers of IT emerge across the enterprise.

Representing an increase of 5.9 per cent over 2016, IDC research findings point to a changing buying landscape for the channel, one which sees line-of-business leaders gain greater control of the technology buying process.

“Our partners are beginning to understand the opportunity to sell not just to IT,” Bahr said. “We’ve had a long and wonderful history of selling to the IT department but they’re also moving into the line-of-business buyers.

“They have the budget and creating a digital impact is also often a strategic imperative.”

By 2020, IDC expects line-of-business technology spending to be nearly equal to that of the IT organisation.

Vicki Batka - Vice President of Partner Organisation APJ, Cisco

Vicki Batka - Vice President of Partner Organisation APJ, Cisco

Specifically, innovation accelerators have put line-of-business units in the frontline of the digital transformation.

“For example,” Bahr explained. “If you’re the marketing department, you need to know more about your customers and need to extract data out of the wireless network to know more.

“If you’re in HR you need to know how you can communicate with your employees more effectively using video in a real-time manner.

“We’re trying to connect the digital impact to the line-of-business buyer because we think that our partners - who are well positioned within convergence - can go in and have a different conversation and create a digital outcome.”

For Bahr, this new breed of IT buyers have the budget and influence to matter for partners.

“But the secret sauce is when you go back to IT and inform them about what the line-of-business leaders are doing,” Bahr said. “IT departments are just trying to keep up with the onslaught of applications and the quest for digital capabilities, which means the partner can play an important role in the middle.”

To assist the channel in digging out new buyers with new IT budgets, Cisco has created industry-focused training for partners, designed to provide specialised knowledge and expertise, aligned to particular sectors.

“We build horizontal technology solutions which can be applied to line-of-business buyers and verticals,” Bahr said.

“We’ve built industry specific training, which includes the profile of the buyer and how technologies can create an outcome, alongside details of buying indicators and the taxonomy.

“If you can’t speak the language, you’re not going to have credibility.”

In taking the role as the horizontal supplier of technology, Bahr advised partners to assess customer bases to uncover hidden vertical capabilities.

“We encourage our partners to look at their install base because they might have 30 percent of business in retail or 25 percent in health care or 60 percent in manufacturing,” Bahr said. “So go where your business already is and then try and adapt.”

But even when partners learn the language of industry, and recognize the key decision-makers within it, Bahr said that’s still not enough to secure the deal.

“Partners must link up with an applications provider that has written an application specific to that market,” Bahr added.

Today, more than 80 percent of Cisco product and service revenues go through an ecosystem of resellers, distributors, service providers, systems integrators, cloud service providers and independent software vendors (ISVs).

And in this digital world, ISVs are taking centre stage.

Citing retail as a key example, Bahr said Cisco is unearthing cloud marketing companies that take Wi-Fi data and mash that together to provide value to the CMO.

“When you partner within an application provider such as that, they do know the CMO and if you can create a relationship, there’s a value exchange to be had,” Bahr said.

“So when that customer buys the application, the partner can say to IT that the application will acquire X amount of network connectivity, Wi-Fi etc. The partner is providing value because the IT department is no longer blind-sided.

“And crucially, when it goes to procurement as a bundle which includes the ISV application alongside the network provider, it makes it harder for procurement to pull the deal apart.”

Adopting the multi-partner approach, according to Bahr, increases deal frequency by 5-7 times, deals that become more profitable and secure, creating stickiness and relevance inside the customer.

“We’re showcasing our developers to the channel,” Bahr said. “This is about creating the pathway so that our traditional resale partners and our ISV, consulting and services-only partners can create a multi-partner outcome.

“This is often built on the back of digitization and we’ve started to create ecosystem exchanges because this is a completely different channel.”

As part of its broader partner strategy, Cisco is aiming to work more strategically with this new type of partner to develop business solutions that capture market transitions such as IoT and digitalisation.

To achieve this, an immediate priority continues to be building and enhancing a connected partner ecosystem.

“Our partner ecosystem is changing,” Cisco vice president of partner organization APJ Vicki Batka added. “Our mix is moving away from traditional resale and we need to do more to talk to these new partners.

“We need to step up and show up a bit differently. We used to go to consultancy partners and say come to us, hear our digital story and we’ll work with you via an industry. But they already have their own ecosystem in say healthcare for example, so we need to go to them. It requires a subtle change in approach.”

Tara Ridley - Director of Partner Organisation A/NZ, Cisco

Tara Ridley - Director of Partner Organisation A/NZ, Cisco

In offering a regional view of the Cisco ecosystem, Batka said the vendor has - and continues - to change its approach around the new breed of partners emerging, altering how it engages with born-in-the-cloud providers as the industry evolves.

“At first we didn’t have the right way to fit these partners in and it was difficult to talk to them and build Cisco preference,” Batka acknowledged. “But if you look at those five routes to market, that’s how we are evolving and changing with the market.”

Crucial to this change locally will be Tara Ridley.

As reported first by ARN, Ridley has recently taken charge of Cisco’s partner business group across A/NZ, with Jason Brouwers now leading the vendor’s commercial sales business.

Following an internal reshuffle in mid-May, Ridley now oversees all partner relationships and strategies going forward, alongside volume sales responsibilities and a small to medium business growth remit.

Since joining the tech giant in 2007, Ridley has worked across a range of divisions, with roles including partner account manager, sales manager, enterprise segment director and services sales director.

“Our role is changing,” Ridley told ARN. “The role I performed as a partner account manager ten years ago, and the skill sets and conversations I had have changed.

“The way we show up has changed and we’re continuing to improve our ability to help build this new ecosystem of partners, through establishing key relationships and demonstrating ongoing value to our customers.

“It’s our role to bring that ecosystem together because software is a totally different game.”

With global, regional and local initiatives underway, coupled with partner expansion plans, Cisco in 2017 can be defined by two words.

Channel and change.

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