Cisco $75 Million Channel Investment Only the Beginning, Says Top Exec

New funding for programs, support, incentives aimed at upping current $7 billion annual sales to mid-market, SMB segments.

September 20, 2011

D.H. Kass

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Cisco Systems Inc. said last week that it will inject some $75 million into new channel programs, pre-sales support, marketing, incentives and rewards during its fiscal 2012 to fuel sales to mid-market and small- to mid-sized businesses (SMBs).

The vendor currently generates about $7 billion in sales to mid-market and SMBs amounting to approximately 16 percent of its $43 billion in annual revenue. About 10 percent of Cisco’s overall sales stem from mid-sized businesses, with a core group of 1,000 channel partners worldwide landing 90 percent of the revenue.

Cisco reasons that by allocating greater resources to channel partners and cordoning off a significant swath of sales opportunities for them, it can capture a greater portion of the mid-market and SMB sectors aggressively pursued by its nearest rivals.

Andrew Sage, Cisco vice president, worldwide Partner-Led, said that the vendor is “laser-focused on opportunities to grow business for channel partners and ourselves.” He said that Cisco is “making the necessary investments to accelerate” mid-market and SMB segment growth.

Sage framed the channel program additions--which include custom support models, a new market development fund (MDF) geared to reward mid-market sales, a new partner relationship management (PRM) system, and access to engineering-level sales support—as “proof points of the new Cisco--more focused, more agile, leaner and slightly meaner.”

Cisco recently adopted the phrase “Partner-Led” to refer to the lead role worldwide it wants channel partners to take with mid-market and SMB sales. By contrast, the vendor calls its direct sales--encompassing about 5,000 primarily enterprise-class customers globally—“customer-led,” a portion of which channel partners, by customer invitation, may still participate, Sage said.

The vendor’s augmented SMB effort is entitled Partner-Led Velocity and its mid-market initiative is dubbed Partner-Led Named. Under Partner-Led Velocity, channel partners will home in on selling the vendor’s SMB-focused products, cloud services and managed services, Sage said. Most small business-oriented channel partners will be supported by Cisco’s distributors.

With Partner-Led Named, the emphasis will be on selling architectures, cloud services and managed services. Channel partners selling into mid-market accounts typically will carry Cisco certifications and specializations, said Sage.

Sage said that in Partner-Led segments, Cisco’s goal is to foster a “comfortable sense of trust and commitment--that we will do what we say we’re going to do in setting a more collaborative approach to selling.” Commitment to the channel, creating demand and “making it as easy as possible for partners to do business with us” comprise the three drivers behind the Partner-Led effort, he said.

New MDF for mid-market sales

Through a new MDF program, Cisco will add financial incentives based on the amount of revenue a channel partner generates from selling into mid-market accounts, Sage said. Channel partners will be able to use the money for activities such as marketing and training.

Sage said that because there is “program design work still to be done,” the actual allocation tables have not yet been finalized, but “the point is we want to reinvest in the partners that brought us to this dance.”

The vendor intends to initiate the MDF program on November 1, 2011, he said.

Cisco also will allocate additional funding to its Technology Solutions Network (TSN), through which engineers will be available to assist channel partners selling to mid-market and small businesses with pre-sales technical support.

“Pre-sales engineering capability is a big differentiator for Cisco,” Sage said. “For partners in the mid-market space, one benefit of partnering with us is the engineer-to-engineer pre-sales support inside Cisco,” he said.

The vendor will debut the TSN offering with about 300 channel partners on November 1, 2011, he said.

In addition, a portion of the $75 million also will be allocated to the vendor’s Fast Track 2 program, a vehicle it built last year to simplify distribution-level pricing through a suggested price list.

“We want to continue to drive down the number of touches that a partner has to go though to get a deal done,” Sage said. He said that in the last two quarters the number of channel partner transactions that didn’t get touched by a pricing action has doubled.

In the same support vein, Cisco has launched a Road Warriors program consisting of a new team conducting short training sessions with SMB partners, acting as partner advisors and a sales help desk, particularly to assist with information on promotions, Sage said. The offering will extend to distributors, he said.

“We’ve not previously had touch at this level before,” he said.

Cisco also will implement individual rewards for channel partners under its Partner 360 program. Individuals will earn points for selling Cisco products and/or for doing Cisco training, which can be used to purchase useful business equipment such as a tablet, said Sage.

The vendor’s PRM system, which Cisco has upgraded to accommodate the Partner-Led endeavor, houses key information such as account managers and system engineers that work for the partner, sales information, certifications and the like. Cisco executives will use the system to communicate and collaborate with channel partners, Sage said.

Lead management is another area to which the vendor will turn its attention in the second half of FY 2012, he said.

“We’ve had relatively clumsy lead management over the years,” he said. “We’re going to put more energy into fixing that in the second half of the year,” he said.

Should the vendor’s FY 2012 channel programs prove successful, its investment in mid-market and SMB partners will increase noticeably in FY 2013, Sage said.

TAGS: SMB,Cisco,mid-market,Andrew Sage,Partner-Led

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