Cisco Systems Inc. reaffirmed last week that it is putting tremendous effort into expanding its market among small and medium-sized businesses (SMBs), and is counting on the channel to manage -- and profit from -- that expansion.
The vast majority of the growth -- at least the growth Cisco execs publicly claimed as a target -- will come from companies that are currently not even certified as Cisco resellers. They're Registered partners -- meaning they sign up online for no cost and little benefit, in order to be classed as a reseller rather than a customer when placing orders from Cisco.
Between 40% and 50% of the $1.5 billion per year Cisco brings in from the SMB market comes from its largest partners -- primarily Gold partners such as Verizon, AT&T, IBM, EDS and other large companies.
The other $750 million comes, collectively, from the 25,000 or so Registered partners, but mostly from the top fifth of that group, according to Andrew Sage, director of channels marketing for Cisco.
That group -- about 5,400 companies that are the biggest of the smallest of Cisco's partners -- are the ones Cisco is currently focused on enriching and expanding, Sage said.
The Gold partners -- plus some Silver and Premiers -- who dominate Cisco's SMB market "are swarming with Cisco people," Sage said. "We pay a lot of attention to them; give them all the help we can."
"The SMB needs to be segmented," Sage said. "Premier partners are primarily focused on selling to the mid-market; normally the S of SMB is being served by Registered partners."
Smaller partners -- which signed up for an SMB-specific marketing program Cisco launched two years ago -- are more general contractor than specialist, with businesses that owe only about 15% to 20% of their revenue to Cisco products, Sage said.
That revenue could be $4,000 per year, or $100,000 per year, but Cisco wants to triple it, according to Surinder Brar, senior director of channels strategy for Cisco, and the architect of the current channel incentive program. It also wants to expand the number of its key SMB partners to about 10,000.
"SMB has been our fastest-growing segment the last seven quarters out of eight," Sage said. "We have a market share opportunity in the S of SMB, and we're building a group of partners focused on that."
"There is a LOT of money in SMB and a lot of room for growth, so Cisco's right to be focusing there," according to Douglas E Sabo, senior product manager, data CPE BSG marketing for Verizon, out of Tampa, Fla., who focuses primarily on Verizon's SMB business. "Cisco already owns the enterprise, so SMB is the growth market."
The "S of SMB" -- a phrase used at some point by nearly every Cisco executive doing press interviews -- refers to companies focusing on customers with fewer than 100 computer-using employees. Cisco created its new Cisco Select Certification -- a new fourth tier in the Gold-Silver-Premier channel program -- for those resellers.
"The S of the SMB space needs a lot of certified partners," Brar said. The number of companies in the U.S. with fewer than 100 employees is between 7 million and 8 million, depending on the source of the estimates.
Cisco has increased its share in the SMB market from 10% to 17%, according to IDC. It created the Select category to help give the most productive of its small-business-specific partners more training, marketing assistance and new products, Brar said.
Having more products that apply to SMB customers will be a nice option and may bring in more sales, according to David Campos, CEO of Empire Computing and Consulting, a Premier Cisco Partner that provides networking, security and VoIP services in Daytona Beach, Fla. But Cisco's expansion of its SMB focus won't help in and of itself.
"We address customers from 250 to 1,500 [end users], generally," Campos said. "Moving to expand the SMB portion of their client base is a good strategy for Cisco; there are a lot of SMB customers out there.
"But for us, it's probably not going to change our focus," Campos said. "An SMB sale takes the same amount of work a bigger customer does. There are a lot more of them out there, but it doesn't even up, really, because the contracts are a lot smaller."
"I'm not sure why they were pushing that so hard," agreed Alan White, security practice leader for Premier Cisco Partner Advanced System Designs.
"We have a combination of enterprise and small business customers, and we like the small business because the profit opportunity is so much higher. Small businesses need a lot more in the way of services and so there's more opportunity to do more for them there," White said. "But I'm going to have to go back and figure out why [Cisco] is putting so much emphasis behind SMBs and telepresence and some of the other things. We see a lot of growth opportunity, but maybe not that much."