As channel partners in every IT sector spin their wheels trying to win new customers in a dismal economy, Cisco is instead offering partners incentives to sell deeper into their existing installed base.
The incentives are part of a program called Navigate to Accelerate, which was launched at Cisco Velocity, the company's second annual channel marketing meeting held in Miami this week. The program focuses on new financing opportunities to spur sales, enhancing existing customer relationships and helping partners plan for the future.
One element of the program -- Accelerate the Core -- offers partners rebates to evaluate the networks of existing customers, which could then lead to upgrades. Channel partners can identify specific customers for a potential assessment. If Cisco agrees that the client is a good potential customer for additional products, the partner can bring that account to the Opportunity Incentive Program. Once a sale is consummated with that customer, the partner receives a rebate against routers and switches sold.
"Sometimes partners resist [network evaluation] because it's an up-front payment," said Wendy Bahr, Cisco's senior vice president of U.S. and Canada channels. And network assessments don't always end up in sales. Cisco's take is that -- at least some of the time -- analyzing equipment in the installed base can lead to sales and is "a great way to maintain customer intimacy and prepare customers for the future."
This new program is a departure from Cisco's typical partner incentives, which focus on bringing in new customers and selling new and emerging technologies.
"This doesn't mean we don't want partners to go out and create new demand," Bahr said. "We know that new customer acquisition is tough and expensive and takes a while."
Partners that are struggling are happy that Cisco is making concessions, but at least one says the incentives program is not enough of a guarantee.
"It's unpredictable what the rebate is going to be, but it's the right idea," said Gary Berzack, chief technology officer and chief operating officer of eTribeca, a Cisco-partnered solution provider in New York City. He said partners need more solid and specific rebates and incentives that they can depend on.
With collapsed credit markets, partners are having trouble not just finding customers but also getting them financed. So Navigate to Accelerate also focuses on getting financing out to more customers who can't find it elsewhere. Bahr said Cisco will offer partners no payments or interest for three months on many deals, an arrangement that will run through the end of the fiscal year.
There will also be special financing deals specifically for Select partners -- or those that serve the small and medium-sized business (SMB) space.
"There are large numbers that qualify for extended channel financing from Cisco," Bahr said. That means that partners have an extension of 90 days to make payments.
Cisco will also loosen financing requirements for some Select partners and their SMB customers, she said. At the end of last year, the company had seen requests for financing increase 70% during the year, according to Maryann Von Seggern, director of Cisco Capital. At that time, though, credit requirements wouldn't loosen much. But Bahr said Cisco has done "due diligence" with these partners.
"We've seen our competitors pull back from the SMB space [during troubled times]," Bahr said. "We believe there is an opportunity for growth there. We think the upturn will occur first in the [SMB] area."
Cisco is also extending a customized version of Partner Practice Builder to SMB partners. The Partner Practice Builder is a Web-based series of trainings typically centered around an advanced technology. The program brings partners through a series of mock consulting engagements, offers playbooks, and helps partners to learn to identify opportunities and then hold discussions at the executive level and below. Bahr said 35 partners that participated in a pilot program centered around unified communications saw a 400% increase in deals closed.
Whether all of these moves are enough is still in question.
"I believe we are in an operating vacuum," Berzack said. "We've cut our advertising by 90% in December and January, and we don't know in February how successful our marketing and promotions are going to be. You multiply that by 18,000 partners worldwide who are doing some form of that, and it's a big problem."
A better answer than incentives, Berzack said, would be to engage partners and their Cisco account managers more intimately so that they could plan discounts together strategically. For now, he said, Cisco cuts prices at the last minute to sign customers in need, and partners lose out along the way.
"You have a spiraling effect," Berzack said. "They need to start improving the relationship with the account teams, who have been [in] an ivory tower."
If partners and account teams approach a deal together and jointly decide to charge what the market will bear, he said, then Cisco should offer "reverse incentives" to partners who agree to compromise or to "collectively making less margin."