Cisco is banking on the idea that it is easier for partners to drill further down into the existing installed base than it is to crack new customers in a tough economy. And the company predicts that there are opportunities worth $23 billion to upgrade equipment that is at least five years old.
"We have a massive installed base. We're putting in all the right elements to help partners go after updating it," said John Growdon, Cisco's senior director of Worldwide Channels.
The enhancements are part of the Navigate to Accelerate program, which was launched in February as a long-term strategy to help partners navigate through a tough economy partially by focusing on existing customers. At the start of the program, Cisco offered partners rebates for re-evaluating customer networks in order to sell upgrades. Cisco also extended financing to its small and medium-sized business (SMB) partners.
This time around, Cisco has moved to simplify its deal registration program -- the Opportunity Incentive Program (OIP) -- and lower the size of a deal that can be covered under the program.
Previously, OIP had three segments -- Advanced Technology (AT) OIP, SMB OIP and Core OIP -- but now they have been combined into one plan called U.S. OIP. In the old program, deals had to be in the $40,000 to $50,000 range in the Core and AT segments to qualify. Now, under U.S. OIP, a deal worth $10,000 can be registered no matter what equipment is being sold or the size of the customer base. In addition, all certified partners are eligible for the program.
"That we had three of them looked a little complex to the partner," Growdon said. "We've unified all discounting, and we dropped the size of the deal down considerably so we can get into small deals. The smaller you go, the more you expand the opportunities."
Navigate to Accelerate embraces the core
Since its inception, Navigate to Accelerate has focused on selling core equipment rather than on Cisco's typical push to sell emerging technologies. Now, as part of this latest round of incentives, Cisco is offering a program called Core Acceleration, which includes back-end rebates on core routing and switching equipment sold through the OIP. Previously, partners received 5% rebates on routers and 10% on switches sold through OIP. Now, they will receive 15% on all products sold through the program. The rebates, which were introduced to partners in the U.S. in December, have been extended to partners globally and will be on the books until the end of the fiscal year.
"They get front-end protection [with OIP] and back-end rebate for Core Acceleration," Growdon said.
Cisco has also extended lifetime warranties for its wiring closet switching line. Now, the Catalyst 3000-E and 4500 switches will go from 90-day warranties to lifetime coverage. Cisco also equalized software policy across all of its Catalyst switches. Previously, Cisco had different policies on software updates, depending on which switch customers bought, ranging from lifetime coverage to nothing. Now, for base images across the entire Catalyst line, Cisco offers lifetime support for bug fixes and other upgrades. Customers still need service contracts for major software updates.
"We've found that there are [some] customers that make their product purchase decisions based on warranty," said Sherry Liebo, vice president of Cisco Services. She added that she expects to see an expanded market for switches that haven't had a lifetime warranty. "The second thing is that we've made it less complicated."
Finally, Cisco is also offering a set of product bundles that will lower overall pricing for switching products. Cisco will now offer the Catalyst 2975 with 48 ports at $10,000 instead of $13,000 and the 2975 96-port version (using two units of the 48-port switch) for $20,000 instead of $23,000. There will also be discounts across the 4500 line -- with 48-port bundles selling for $11,000 and 96 ports for $18,000. In June, Cisco will launch the 2960 LAN Lite PoE switches, which executives describe as a "radically simplified version of a layer 2 switch." That line will have both 24- and 48-port models that will range from $1,295 to $3,495.