Cisco pushes VAR profitability on ISR G2 router sales

Cisco VARs taking advantage of VIP and OIP perks can push margins to 25% on new Cisco ISR G2 routers.

Cisco really wants VARs to sell its new integrated services routers (ISRs) and it will make it worth their while to do so.

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The networking giant has upped the margins and rebates on qualifying ISR G2 sales: VAR discounts can go as high as 53%, and margins that in the past would have been 10% can hit 25%, according to Cisco VARs.

The new ISR routers target branch office use and can accommodate VoIP and video with relatively easy upgrades. Customers can grow into these new capabilities using the same router over time, said Larry Van Deusen, Dimension Data's national practice manager for network integration.

"They take a proven platform and let you add functions and services on demand," he noted. The routers rely on the same IOS software and preserve users' and VAR investment in some older router modules.

Cisco Systems Inc. is trying to wean customers off of older but still working network hardware, and that has proven tough in a tough economy.

Cisco ISR G2 routers enable new apps, support older modules

Ashish Upadhyay, senior manager of advanced technologies for St. Louis-based World Wide Technology Inc., said VARs will be compensated to help customers recognize the advantages of these new routers.

"They're not just doing pure routing and maybe one or two verticals. Now they can handle video, cloud computing, added services. Customers can buy them today and get unified communications tomorrow and video the next day," he said.

But perhaps the biggest plus is that the new ISR routers will run modules customers have already bought, Upadhyay added.

Cisco Gold partners and those that participate in the company's Value Incentive Program (VIP) and Opportunity Incentive Program (OIP) can sell these routers at a good profit, said Wenceslao Lada, vice president of worldwide channels for borderless networks architecture for Cisco. VARs that incorporate the VIP program for both routing and switching can earn rebates of up to 15%, up from 5% on the solution sale, he said.

Van Deusen said it is possible to see overall discounts up from 42% to 53% or 54% if VARs play their cards right.

As Cisco pushes more next-gen applications, like unified communications, it will face more competition from Microsoft and traditional telephony players like Avaya. One factor in Cisco's favor is that its UC solutions are seen as higher end and higher margin than Microsoft's. Put simply, VARs generally feel they can make more money implementing Cisco rather than Microsoft unified communications products.

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