Cisco's Peres: "Five Key Strategies" to Evolve the Channel and Grow Partner Profits

Channel chief outlines blueprint to move partners towards reliance on architectures, value, services and cloud computing. Emphasizes changing revenue and profit mix reflected by partners as trusted advisors: “Where there’s mystery, there’s margin.” Exec pledges to make it easier and quicker for partners to conduct business with Cisco.

November 5, 2010

D.H. Kass

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Cisco Systems Inc.’s Edison Peres, the vendor’s senior vice president, worldwide channels and its de-facto channel chief, said that the company’s channel blueprint calls for it to collaborate with channel partners more than ever before as the overall market tilts towards services and solutions.

In an IT ChannelPlanet interview, Peres outlined five key strategies as channel chief he intends to pursue to further direct partners away from business models focused on product sales and volume and toward architectures, value, services and cloud computing.

Peres said that Cisco wants to ensure that its channel, which now accounts for 80 percent of the company’s business, evolves as the market requires partners to command new technologies and sophisticated implementation schemes.

“As Cisco moves to transitional and adjacent markets, partners will play a more important role than ever before,” Peres said. “We want to collaborate even more with our partners,” he said.

Topping Peres’ list of actionable strategies going forward is to help channel partners remodel their businesses to home in on architectures and vertical market expertise.

“Partners that focus on architectures as a practice have a competitive advantage,” Peres said. “Partners also feel the need to become much more industry-verticalized in how they approach the market,” he said. “We’re supporting both of these transitions.”

The vendor will continue to target large vertical segments such as health care, government, education, and, in particular, look to expand its presence in energy with smart grid technologies, Peres said.

A Cisco survey of its partners last year revealed that only 30 percent of partners maintained a vertically-directed business but a similar examination this year indicated that 80 percent had moved in that direction, he Peres.

“What’s important now is that partners connect architectures and solutions to vertical industries,” he said.

Secondly, Cisco wants to earn channel loyalty by optimizing the role partners play in the value chain, Peres said.

At the beginning of the decade, the vendor began to urge partners to move away from volume and towards value, a strategy it has been evolving ever since, he said.

“We can earn loyalty with partners by supporting the value they offer,” Peres said.

Accordingly, Cisco is working to fully inject channel partners into the company’s sales process, particularly in collaboration with its direct sales team. Last spring it rolled out the Teaming Incentive Program(TIP), a schematic that rewards partners with a five point advantage for early entry into the sales cycle.

“The program allows partners to work with our sales organization where we may have found a deal,” Peres said. “We want to bring the right partner in early in the sales cycle,” he said.

“Internally, we’ve taken 20,000 sales people and optimized working with channel partners,” Peres said. “The idea is not just to change policy but also to enable our sales organization to team with partners and end users,” he said.

Peres said that Cisco has gone as far as constructing a teaming sales policy—soon to become an internally published document--guiding the organization in how best to work with partners.

“We’re investing in a teaming culture with the channel,” he said. “We’re piloting the program and policy in certain theaters around the world.”

Improve ease of doing business

Peres’ third strategy is to improve the speed and ease of doing business with Cisco for channel partners.

“We want to drive more program simplification, change and evolve our systems and policies to make it easier to do business with us,” he said. “Easing partners’ infrastructure costs will improve their profit.”

Cisco recently launched its My Cisco pull-down dashboard, a customizable interface that partners can use to easily and quickly access any aspect of their business relationship with the vendor.

So far, 23,000 partners worldwide have latched onto My Cisco, Peres said.

“It gives partners a vehicle to customize their relationship with Cisco and connect to web sites and other portals, a navigator,” he said.

A fourth strategic move on Peres’ list is to “enhance partner services value proposition,” essentially to help solution providers grow a services practice to “differentiate themselves and drive more profitability.”

He said that last year saw Cisco partners, as a group, generate more profit than in any prior year. Five years ago, Cisco’s channel partners were able to glean about 20 percent of profits from services, mostly from break/fix activities, but now “partners see 60 percent of profits coming from services,” he said.

“They found that the real lift in profit came from the services part of their business,” Peres said. “It has been, and will continue to be, our strategy to enable and drive the services business.”

Cisco believes that services is where partners can cement their value to end customers, addressing issues and solving problems through command and implementation of new technologies and thinking.

“Where there’s mystery, there’s margin,” he said, referring to the value of partners working with end customers as trusted advisors.

The fifth entry on Peres’ list surrounds the channel’s evolution to new business models equipped to provide cloud-based services to end customers.

“We’re helping evolve the channel to new business models for partners to offer cloud-based services, the ability to provide X-as-a-service,” he said.

In Cisco’s view, channel partners’ role in what Peres termed the “cloud value chain,” is segmented into three groups, namely cloud resellers or existing value-added resellers up-selling cloud-ready infrastructure; cloud builders, comprised of large system integrators that help enterprise customers build out their cloud infrastructure; and, cloud providers, or managed services providers capable of extending cloud-ready practices.

Peres offered that Cisco currently has thousands of cloud resellers, perhaps as many as 500 “actively involved” cloud builders, and “hundreds” of cloud providers.

“We’re spending our energy in all three categories of the cloud value chain,” he said.

Channel chief’s three areas of focus

Peres said that as Cisco’s in resident channel chief he has three main focal points, namely, simplicity, passion and the future.

“We have become more complex but I want to make sure that we integrate our programs and our messaging as clearly as possible,” he said. “Partners should know what we’re trying to say.”

Peres also said that “building a partner passion for Cisco” resides at the core of his approach to his role as channel chief.

“I want partners to see Cisco as the best path for their success,” he said.

Peres said that going forward partner profitability heads his priority list.

“We want to help reshape channel models to ensure that partners can profitably evolve,” he said.

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