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SAN FRANCISCO -- Cisco was founded on networking hardware, but the company and its partners are now making software a key part of the business mix.
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Speakers at Cisco Partner Summit 2016 this week described a number of ways in which software plays a more central role for Cisco and its channel partner allies. The scope of the Cisco software strategy encompasses software the company develops, ISV offerings and custom-developed software. The Cisco software approach also dovetails with some of the company's broad initiatives: Cisco's moves in digital transformation, security and multipartner collaboration all have a software dimension.
For some Cisco partners, software has already dramatically changed the way they do business.
Altus, based in San Jose, Costa Rica, had been a traditional, hardware-centric Cisco partner. But Altus found it difficult to sell hardware among bigger rivals. Jose Bogarin, chief innovation officer at Altus, said he believed software could provide competitive differentiation, but the company's expertise was in networking.
"We didn't know how to develop software," Bogarin recalled.
But in 2014, Bogarin encountered Cisco's DevNet program, which seeks to encourage developers to create software for Cisco's product platforms. DevNet got Bogarin up to speed on Cisco APIs and best practices for software development. He pitched the software idea to Altus' senior executives, and the company eventually hired a couple software developers.
Two and a half years later, Altus now leads with its software portfolio, which includes an offering for managing contact centers. "Clients ask for our solutions, which we complement with Cisco hardware," Bogarin said.
Other Cisco partners focusing on hardware can't compete for those software-driven projects. As a result, Altus is capturing more deals and boosting its software earnings. This year, software surpassed hardware as the company's largest bottom-line contributor.
"Selling Cisco hardware was the main profit center," Bogarin said. "And now, software development is our main profit center."
Cisco software: Strategy part of transformation
Cisco and its partners' pursuit of software comes at a time when networking functions are being virtualized and more data center infrastructure components have been labeled software-defined.
Jose Bogarinchief innovation officer, Altus
"Software is very strategic for Cisco for our transformation," said Pankaj Gupta, senior director of enterprise marketing at Cisco, who participated in a roundtable discussion on software at Cisco Partner Summit 2016.
Gupta cited three factors behind the increasing importance of software. The first revolves around one of the pivotal themes at the summit: simplification. Software plays a role in simplifying "many of the complex problems" customers experience, Gupta said.
Second, software is part and parcel of Cisco's ongoing move to recurring revenue and the subscription-based consumption model. That shift spans Cisco's infrastructure, collaboration, security, analytics and internet-of-things portfolio.
And third, cloud computing is absorbing many formerly hardware-based functions, such as firewalls. Other devices that remain in hardware form may be managed in the cloud, Gupta added.
Cisco ONE Software, which debuted in January 2015, provides an example of the company's software thrust and one that involves partners. Cisco ONE incorporates numerous networking software features into a bundles, which cover areas such as wide-area networking, switching and wireless infrastructure, data center networking and security. The individual features included in Cisco ONE are referred to as entitlements. A customer may initially only use a couple of entitlements, but can expand usage over time without buying more licenses.
"This [Cisco ONE] has opened up a huge opportunity for us to educate clients on entitlements," said Dean Romero, practice manager for software and lifecycle services at World Wide Technology Inc., a technology integration company.
The software approach benefits customers, as well. Once they own the software, they have access to ongoing innovation, Romero noted. In the past, software was linked to the lifetime of a given networking hardware product and had no value beyond that span.
"What you purchase today grows in value over time," Romero said.
Cisco ONE, meanwhile, also generates greater hardware pull-through, Romero said, as customers add networking devices that can take advantage of Cisco's software.
Steve Wells, vice president of sales at DynTek Inc., an IT consulting and systems integration company in Newport Beach, Calif., said Cisco ONE's security package makes it easier for the company to address customers' security issues. Cisco ONE's range of features lets DynTek, which does more than half of its business in cybersecurity, work with customers to "pick and choose" the security features that meet their needs.
"We find out what is valuable to them and deploy it," Wells said.
Overall, Gupta said 2,700 partners are now selling Cisco ONE.
While Cisco develops its own software, it also cultivates relationships with ISVs. Those ISVs, in turn, team up with traditional Cisco channel partners, providing broader services in what Cisco officials call a multipartner route to market.
Software often takes a central role in the multipartner setting, particularly when the customer is looking for a particular business outcome or is engaged on a digital transformation project. In those scenarios, a functional or industry application "is leading the way," noted Beth McRae, senior director of Cisco's global strategic partner organization. McRae spoke during a roundtable discussion on the partner ecosystem at Cisco Partner Summit 2016.
Cisco, she said, helps expand the ecosystem if a partner needs a particular application to complete its offering to a customer.
"If we have a gap in a solution that a channel partner wants to provide, we will work with the channel partner to bring on an ISV into the expanding ecosystem," she said.
At present, Cisco has more than 900 ISVs that participate in the company's Solution Partner Program.
McRae also pointed to Cisco's partner connections initiative, which launched at Cisco's February/March 2016 summit. In partner connections, Cisco invites ISVs to make eight-minute pitches to channel partners at either live or virtual events. Over the past eight months, Cisco has made more than 1,000 connections between ISVs and channel partners, according to McRae. Cisco, she said, is following up on those matches to turn the initial connection into "a real sales opportunity."
Cisco's DevNet effort, meanwhile, supports software developers. Altus' Bogarin said DevNet's backing helped his company cover the distance separating Cisco hardware devices, on the one hand, and the customer's actual need, on the other.
"You need software development in between to bridge that gap," he explained.
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