Cisco Systems Inc. will announce the next step in its relatively recent courtship of the small- and medium-sized business (SMB) market next month, by offering a new segment of its reseller channel access to its financing programs.
Cisco Capital, the company's financing division, plans to announce on January 8 an agreement that will let value added resellers (VARs) who work through mega distributor Ingram Micro Inc. join the Cisco Express Leasing program.
Approximately 3,000 Ingram Micro partners would be eligible for the program, which makes it quicker and easier for potential Cisco customers to finance or lease Cisco equipment.
The program is designed to streamline the financing process, which can be the biggest holdup in SMB contracts, according to a statement from Maryann Von Seggern, director of worldwide channel development for Cisco Capital. Leasing and financing is a key part of Cisco's push into the SMB market by reducing or eliminating the partner's out-of-pocket payments for Cisco products or services.
A major part of the program is an extension to Cisco's zero-percent progress payment schedule, which allows VARs to arrange deals under which Cisco will pay the VAR for portions of the deal as project milestones are reached, even though the customer doesn't make any leasing payments until deployment is completed.
There are no finance charges for the first 120 days of those deals, 80% of which can be funded before the lease begins. Only partners holding Cisco IP Communications Specializations can access that part of the program, and only for deals in the U.S. or Canada that equal US$50,000 or more.
The program, along with the EasyLease program Cisco announced last month, is designed to increase the value of contracts VARs can develop with SMB customers by making credit and lease applications faster and easier, decreasing the size of the deals eligible for financing, and making financing more attractive with offers such as zero-percent financing for as long as 36 months.
And it's effective, according to Matt Briggs, director of sales for Single Path, a voice-over-IP/Unified Communications specialist Cisco named its Midwestern Regional SMB Partner of the Year for 2006.
About 39% of Single Path's Cisco transactions involved Cisco Capital leasing, but that only tells part of the story.
"We've been able to use Cisco's leasing and promotions and pricing as a weapon," Briggs said.
"We have a 40% attach rate with the deals we get into with leasing, compared to industry average numbers I've seen that are more along the lines of 10% or less," Briggs said. "We're trying to sell on total cost of ownership over a five-year period, and when we can show Cisco Capital Lease rate numbers wrapped up with the maintenance and service, it makes that deal a lot more attractive."
Extending leasing programs, developing SMB-specific products and attracting partners who work primarily through distributors are all ways Cisco is ramping up its presence in the SMB market -- an area the company has identified as needing improvement not only in the U.S., but worldwide, according to Keith Goodwin, senior vice president of worldwide channels for Cisco.
"We're putting a strong marketing focus on that space," Goodwin told SearchNetworkingChannel.com at the company's C-Scape analyst conference in San Jose, Calif. last week. "We need to double our SMB resellers. We don't want all our partners to go there, but we want to build up classes such as distributor affiliates and get them into the Cisco business model where they can grow profitably."
"Cisco didn't focus on SMB a few years ago," Goodwin said. "Now, for the first time we're building purpose-built products for the SMB space and our partners can take advantage of disruptive technology, such as unified communications, to grow their businesses."
"Disruptive" technology such as VoIP tends to attract a different kind of customer than simple upgrades, Briggs said. Company owners, rather than their IT directors, often drive the deal in order to make their phone systems more flexible and effective, he said.
Cost and cash flow still play a major role, however, and financing greases the skids.
"We've sold probably three times more than we would have if we were educating [customers] on TCO alone," Briggs said. "There are big sales months where, if you look at the statistics, in some cases 75% or 100% of the deal is on leases, and that's how we closed the business."