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Cisco routes to market expand amid cloud marketplace growth

Cisco cited a significant shift toward the cloud and a decline in reselling. However, the company said resellers will remain important to its sales approach.

Cisco channel partners can expect to see the vendor broaden its routes to market, which will include unconventional avenues such as cloud marketplaces.

Earlier this month, executives of the Cisco's partner program outlined updates to the company's channel strategy, noting how changing IT buying patterns affect the company and, ultimately, its partners. One key change: the growing importance of newer routes to market versus Cisco's traditional reseller focus.

"Customers have different buying motions, and they are radically changing for us," said Oliver Tuszik, senior vice president of global partner sales at Cisco. "When we look at the details, it's not [just] the motion. It's also the routes. Routes to market [are] the most important expansion we need to drive right now."

In this expansion, cloud marketplaces stand out as a high-growth area. Cisco works with distributor and service provider marketplaces and has begun to explore relationships with public cloud providers. Citing IDC research, Cisco said the total addressable market for public cloud marketplaces will grow 64% between 2020 and 2025.

Cisco continues to evaluate how it will deal with AWS, Google and Microsoft public clouds, Tuszik said.

"[The public cloud market] is by far the biggest shift we're seeing today," he added.

Growth in newer routes to market comes at the expense of the reselling model. IDC's research predicts that sector's addressable market will drop 2% between 2020 and 2025. Reselling will shrink as buying activity shifts into other routes to market, Tuszik noted.

That said, Cisco believes the reselling model has staying power. "It's pretty clear that resell will remain a big portion of our sales motion," Tuszik said.

Diane Krakora, principal at PartnerPathDiane Krakora

Diane Krakora, principal at PartnerPath, a channel consulting firm based in Menlo Park, Calif., suggested Cisco's views on the endurance of reselling reflects a wider market trend. Cisco, she said, has been "hanging onto resellers for a long, long time." However, the company now acknowledges customers' pursuit of new buying motions based on simplicity, flexibility and minimum time to value.

Those emerging buying methods have changed the distribution channel. "We no longer have the linear model," Krakora said, citing the traditional path of vendors selling to distributors, distributors selling to resellers and resellers selling to customers. "There are many more players and many more touchpoints," she said.

Alternate routes

In addition to cloud marketplaces, Tuszik cited managed service and "digital at scale" as other important new routes to market.

Customers' push for reduced complexity fuels the managed service route, where the addressable market is growing 17%, according to IDC.

Routes to market [are] the most important expansion we need to drive right now.
Oliver TuszikSenior vice president of global partner sales, Cisco

"[Customers] no longer want to build or manage something on their own," Tuszik said. "They want somebody to deliver it as a service."

Cisco, meanwhile, described the digital-at-scale route as an area where the company is developing an automated, digital experience to reach new customer segments. The digital-at-scale route complements Cisco's partner model, as the vendor shifts its business more toward software and SaaS, according to the company.

Within digital at scale, Cisco uses an agency approach in which aggregators recruit, support and pay agents that sell Cisco products. Cisco cited Intelisys as an example of an aggregator working with agents. The agency method will initially focus on specific Cisco SaaS offerings before branching out into other products.

The digital-at-scale route is forecast to grow at 2%, while the agency subsector is expected to grow 22%, according to Cisco and IDC.

Platform aims for profitability

Managing multiple routes to market presents a complicated challenge for Cisco's channel partners, but it also hammers their margins, Tuszik noted. Accordingly, boosting partners' bottom lines has become a key theme in Cisco's partner messaging.

"When we look at profitability, this is a thing that we can actively influence," Tuszik said. "We're going to do everything required to drive partner profitability."

Anurag Agrawal, chief global analyst at TechaisleAnurag Agrawal

"High profitability/margins is important -- very important -- to all types of partners," said Anurag Agrawal, founder and chief global analyst at Techaisle, a market research firm based in San Jose, Calif. "Cisco is ... doing the right thing by focusing on partner profitability."

Cisco highlighted its Partner Experience Platform (PXP), a one-stop shop channel hub, as an example of its investment in partner profitability. Cisco's platform aims to consolidate dozens of Cisco's channel partner tools to improve productivity. In addition, the platform's integration with Cisco's Partner Experience Cloud offers partners access to customers' Cisco product usage and telemetry data. Cisco partner executives said that data will provide insight into customer's technology adoption patterns, which could help partners hone their marketing campaigns, develop new services and optimize customers' IT environments. Partner Experience Cloud also lets partners build and sell custom offers -- an ask-the-expert service, for example.

Cisco's approach differs from other vendors' partner programs, Agrawal said. "The effectiveness of individual [partner] relationships and of partner programs and activities is measured in terms of sales impact," he explained. "Sales impact itself is generally driven, at least in immediate terms, by the quality of sales enablement and support."

The Partner Experience Cloud, with its customer telemetry data and custom offers capability, "will have direct sales impact for both the partners and Cisco," Agrawal added.

Krakora agreed that Partner Experience Cloud sets Cisco apart from other vendors. "Most companies we work with can't provide a rollup of customer telemetry data to the partner," she said. "The ability for the partner to see where each of their customers are in launching, using and renewing definitely sets them apart from 98% of the other vendors."

PXP is currently available, but updated features and new capabilities will arrive in the coming months. PXP's Partner Experience Cloud component remains in limited-availability mode, scheduled to become generally available to partners before the end of 2021.

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