Cisco unveils partner stimulus package

Boston: Acknowledging the importance of channel in their scheme of things, at the annual Cisco Partner Summit in Boston, the company unveiled a slew of initiatives and made additions to some of its channel partner programs.

Starting his keynote by summing up the events of last year Keith Goodwin, Senior VP-Worldwide Channels, Cisco said, “What a year it has been from the last partner summit to this one. The current economic scenario has made us shift all our priorities on to the partners and the result of which is the 'Navigate to Accelerate' initiative. As part of the initiative Cisco will focus on four key things-finance, customer base, future and changing needs.”

Among the slew on announcements that Goodwin made, the one that got most cheers was the financial stimulus package that Cisco announced under which not only will Cisco help its partners in managing their credit and cash flow but will also provide its select partners with enhanced credit period.

Announcing the enhanced credit policy Goodwin said, “Starting June 1, 2009 for the next six months we will provide an additional credit period of 30 days to all our participating partners, which means effectively the credit period is now up to 90 days. This is Cisco's way of investing in channel financing to support partners with working capital during the economic downturn. Since October 2008 the credit support provided by Cisco to its partner has managed to drive additional $2 billion in sales. Partners have grown in sales by 20 percent and because of Cisco Capital the deal size has increased by 30 percent.”

However, Cisco is not content by just offering the program to its existing partners but is also looking at diversifying and bringing more channel partners under its ambit. Speaking about the plans Edison Peres, Senior VP-Go-to-Market Group, Worldwide Channels, Cisco said, “There will be enhanced focus from us on channel financing. We are looking at accelerating the use of Cisco Capital especially in markets like APAC and Europe where the adoption has not been to a great extent. At present only 10 percent of our partners are using this financing scheme but it has been very successfully where ever it has been used. Case in point is that 60 percent of business that we have done with channel from November 2008 onwards has been through Cisco Capital.”

Elaborating on the reasons why financing makes sense for both Cisco and channel partners Peres added, “There exists a huge opportunity in the market to increase business right now. There exists equipment worth $23 billion in the market which is around five year's old, which means that most warranties would have run out by now and support provided by the vendor is also limited. That apart there is $9.5 billion opportunity in replacing equipment which is more than 10 years old, which is at the end of it's life cycle, all support has ceased for it and there is a need to replace it. With the help of such financing schemes we believe that our channel is poised to make the most of this opportunity.”

Managed Services is the key

In a session which saw Goodwin unveiling offers galore he also announced some exciting rebate schemes for partners and a simplifying and expanding of their managed services channel program. Under the core accelerator program Goodwin announced a 15 percent rebate on switches and a five percent rebate on routers. He also announced a five percent increase in partner development fund and also a growth in the distributor funds.

In an effort to drive growth through managed services segment Cisco announced the growing and simplification of its Managed Services Channel Program (MSCP). According to Goodwin this move would help partners take advantage of a $40 billion market opportunity that continues to grow by nearly 20 percent annually. “At the moment roughly 80 percent of partners offer some kind of managed service, but only 10 percent of them are using the MSCP. The reason behind the low usage being as most feel that the barriers of entry are too high. To correct the same the next-generation MSCP will now allow partner-to-partner collaboration through a white-label agreement that lets two partners work together to deliver a managed service using one network operations center (NOC),” Goodwin explained.

What this means for the smaller partners is that it takes out the need to make investments in a NOC to offer managed services. To help the partners more Cisco is now providing a single discount base on the partner level attained in the MSCP across all Cisco products that the partner manages instead of discounts based on a specific service. The new additions means that a partner no longer has to pre-submit bill of materials to avail of the program.

Surinder Brar, Senior Director-Worldwide Channels, Cisco added, “Managed services make more sense for partners because it is a more profitable business model with a more predictable revenue stream and an ongoing customer relationship. It makes sense for the customers because it has less technology risks and they get to pay from opex rather than capex. Because of this new addition we foresee a shift from more volume to value business.”

The next generation MSCP will launch from August 31, 2009. the current set of partner who are a part of the program and those who have enrolled prior to June 1, 2009 will not be affected by the changes till their anniversary date after which the modalities of the new program will kick in.

Lastly, Cisco also unveiled an evolved Value Incentive Program or VIP program, under which partners with a specific practice get a rebate for products shipped through that practice over a six-month period. In its new avtaar the focus will shift from selling advanced technologies like unified communications, data center, security and wireless to selling architectural capabilities around collaboration, virtualization and borderless networks. In addition, VIP will now reward partners for selling routing, switching, storage networking, wide-area networking optimization and emerging technologies, like Cisco TelePresence, into one of those architectural plays.

Brar also added that under the evolved VIP master and gold certifications, partners will still get extra 'kicker' rebates, while an additional rebate will be offered to partners that sell into the borderless network track. This is to give additional benefits to partners who sell end to end Cisco solutions.

The attributing the reason for this financial stimulus package Brar said, “These are tough times if governments are unveiling such packages to help the industry get back to its feet, I think it makes sense for a company like Cisco to do the same for its channel partners.”

Or as Goodwin summarized when he asked all Cisco people to give a standing ovation to all their channel partners, “It has been a tough year out there and we have never appreciated our partners more than we have now.”

(The author is being hosted in Boston by Cisco)