Cisco's decision to form a new Strategic Partner Organization has some Cisco partners worried that the company...
is intent on tightening account control.
As broadly outlined in a memo sent to Cisco Systems Inc.'s employees last week, the new organization will encompass parts of the current Cisco strategic alliances and worldwide channels organization. Part of the push will be recruiting new partners -- always a concern for current partners worried about over-distribution and margin pressures. And it will seek to expand relationships with some existing partners.
The new Cisco Strategic Partner Organization "will manage specific accounts from both our Worldwide Channels and Strategic Alliances organizations with focused attention on the unique requirements that arise with today's complex and dynamic competitive and partner landscape," said the memo. The changes are due to go into effect when Cisco's new fiscal year starts August 1.
User account control at issue
Verbiage in the memo was difficult for even long-time Cisco partners to parse, but one common reaction is that Cisco, like other tech vendors, wants to make sure that it, not the partner, "owns" the customer relationship. In a world where more Cisco partners are moving to a managed service provider (MSP) model, the face and brand that the customer sees is very important -- and that no longer means the Cisco brand, but that of the partner.
Indeed, while channel partners fear disintermediation by vendors moving more services to their respective clouds, those same vendors worry that MSPs and other third-party service providers may dilute the vendor brands and customer loyalty.
As Microsoft launches more self-hosted services and software that compete with partner-hosted offerings, the company and its VAR army are navigating the same rocky shoals. Microsoft plans to talk about its Azure cloud pricing and channel model next week at its annual Worldwide Partners Conference in New Orleans.
One Cisco VAR that had not heard about the memo but was read the contents was surprised that his Cisco rep mentioned none of this to him at a lunch meeting just last week.
"This looks to me like they want a little more control of the end client," said Stefan B. Rohr, CEO of Fusion IP, a VAR and MSP in Mission Viejo, Calif. Cisco knows that many of its partners will offer a rival product if the Cisco offering does not meet customer needs, Rohr said.
He and others said Cisco's practice of calling customers directly near the end of each quarter to push orders has ramped up. "It starts on the 24th of the month at the end of the quarter. The phones are blowing up and its Cisco trying to place orders so they ship by month's end," Rohr said.
Cisco's field sales, partners say, are under pressure to make their numbers. Again, this is not a Cisco-specific problem. Oracle and other vendors often force or accelerate pending deals to close at the end of fiscal quarters so the revenue can be recognized. The recession ups the pressure on these vendors to make their quarterly earnings targets.
Cisco groups key technologies into architectural plays
The memo included other operational changes that could affect the channel, including aligning Cisco's sales effort around six broad architectural plays. They are Service Provider IP, Collaboration, Data Center, Borderless Networks, Small Business and Consumer. Cisco execs outlined those architectural groupings at its annual Partner Summit in Boston last month.
Gary Berzack, CTO of eTribeca LLC, a New York City-based Cisco solution provider, said the memo struck him as more window dressing than substance.
"You know [about] Cisco's borderless networks approach; well this is an attempt to align their sales team with that. Basically, they've got 30 days to reinvigorate and refresh everybody, to get everybody on board in time for Q1. This is one way to do that."
He and others in the channel reiterated that the vendor is under huge pressure to keep numbers up in a tough economy. "The number one area Cisco has always had challenges in making changes has been in sales. They're taking advantage of a downturn by making changes [because the sales numbers are down]," Berzack said.
Sales and services teams will work together to support these architectures -- something that some VARs laud as a good way to cut redundancy and overlap in field coverage.
Gia McNutt, CEO of SOS, a Loomis, Calif., Cisco partner, said she didn't see any attempt by Cisco to come between partners and accounts. Instead, she credits Cisco with trying to erase some overlap and confusion in partner-Cisco interaction, which she said can be "clunky."
At times, partners selling various products into different market segments must deal with a bewildering array of Cisco account managers. With this reorg, it appears that "Cisco will have a more partner overlay/segment overlay model, meaning not having multiple account managers cover a certain geography based on market segment," McNutt said.
VARs trading specializations for discount
In this reorg, SOS's McNutt said that Cisco has moved to rework its discount structure for VARs. Traditionally, higher level Gold and Silver VARs that buy through distribution got bigger discounts than Premiere partners. Now the differentiation between those discounts is going away -- in a move Cisco started talking about five years ago.
Gold and Silver partners that source products directly from Cisco still get deeper discounts. So now, the only way for Cisco partners that do not source directly to win better discounts is for them to show deep specialization in a given product area. After starting down this path five years ago, the company appears now to be putting some real muscle behind that policy, she said.