Cisco Evolves Partner Program to Address Changing Marketplace

March 15, 2006

Network technology is rapidly changing and creating new demands by businesses and organizations of all stripes. In response, Cisco Systems is updating its industry-leading channel partner program to help the company's most important sales force, its channel partners, develop the skills and expertise they need to thrive. By Cisco's own estimation, the enhancements to its channel partner program are perhaps the most significant in the past five years. Cisco's channel partners, a global force of over 200,000 people in 20,000 independent value-added resellers, systems integrators and network consultancies, account for more than 90 percent of Cisco's commercial and enterprise revenue worldwide . Channel partners are the face of Cisco to the majority of customers, and their success is vital to Cisco's success. News@Cisco spoke with Keith Goodwin, Cisco's senior vice president of Worldwide Channels, about the program enhancements and how they will help the company's channel partners address the evolving needs of their customers.

In general, what changes is Cisco making to the partner program?

Keith Goodwin: While the overall framework and structure of the Cisco channel partner program is not changing, we are adding new requirements to our current partner program and adding new categories of support for the growing diversity of channel partner business models. The changes focus on three areas we believe will be crucial to the mutual success of Cisco and its channel partners. We want to help partners build the breath of their skills for integrating multiple Cisco technologies, develop greater depth of expertise in advanced technologies and applications, and create more sophisticated services capabilities for helping customers design and manage increasingly complex networks.

These changes build on our value-based channel strategy that we have used for the past five years. We will continue to reward partners through our incentive programs for developing expertise in specific advanced technologies, creating new business opportunities, developing more sophisticated networking capabilities by incorporating applications and other technologies, and helping customers upgrade their existing networks to be capable of taking full advantage of advanced "next-generation" networking technologies.

What are the strategic reasons for the changes to the partner program?

Keith Goodwin: The changes to the partner program are our proactive efforts to address to the changing nature of networking technology, the marketplace, and customer demands. The new program elements focus on helping our channel partners build new skills that are required for our mutual success and the success of our mutual customers.

A few years ago, our networking technologies were pretty much routers and switches, and channel partners only needed to focus on one thing: creating broadband connections. But those days are gone for good as organizations worldwide are embracing IP networks as the platform for all their communications. This is creating great opportunities for Cisco and its channel partners, but it also carries with it demands for new skills and expertise. First, our mutual customers now depend on their networks more than ever, which is dramatically raising their service and technology performance requirements. At the same time, networking technology is becoming more complex as voice, video and wireless communications converge onto what was once only a fixed data network. Most organizations now have bandwidth issues under control as they look to channel partners to help implement productivity boosting IP-based applications.

According to information from research organizations and channel partners themselves, channel partners not only need technical expertise but also superior services capabilities. While technical expertise provides the necessary foundation for any channel partner business, we can't emphasize enough how important we believe consultative-type services will be for channel partners. Overwhelming evidence shows that professional services is the key to increasing revenues, margins, and customer satisfaction. Given the changes in the marketplace, very few partners will be able to survive just on equipment sales or basic maintenance contracts. According to Cisco's recent survey of channel partners, they are making three times more margin on professional services compared to product sales. That, to us, is a pretty clear indication of where the money is in this market.

How is Cisco changing the partner program to better support channel partners' needs for integrating the growing array of communications options and technologies required to run a converged IP-based network?

Keith Goodwin: Most significantly, all Cisco certifications - Gold, Silver and Premier - will require channel partners to demonstrate expertise in a broader array of Cisco's "advanced technologies," with the goal of being able to integrate multiple advanced technologies on one network. This is the "breadth" part of our program. Cisco networks can now support multiple communications media, including voice, data and video. At the same time, all these communications methods need similar services, such as security and wireless capability. To properly deploy these technologies, they must be well integrated with each other, creating a coherent network system. So the aim of this part of our program is to ensure that Cisco Certified Partners have the necessary range of expertise to successfully build integrated IP-based communications systems.

How is Cisco changing the partner program to better support channel partners' needs for expertise in various advanced technologies?

Keith Goodwin: We have created a new specialization brand called "Master," which is now the highest category of expertise a partner can obtain in a given advanced technology. A Master-level specialization will be available first for our voice - or Unified Communications - and security technologies. Over time, we will add other technologies to the Master Specialization program. A Cisco channel partner can obtain a master specialization, regardless of its certification level. So, for example, a partner can be both a certified Silver partner, as well as holding a Master specialization in security.

What is Cisco doing to make it more cost-effective for channel partners to develop services capabilities?

Keith Goodwin: Cisco Lifecycle Services is Cisco's training and enablement program to help support channel partners' growing needs for professional services capabilities. Lifecycles Services provides repeatable, proven processes and tools to help channel partners with the network development process, from the earliest requirements assessment and design to long-term planning and management. The goal with Lifecycle Services is to help channel partners become more sophisticated advisors to their customers and to help them successfully deploy networks that can grow and adapt to technology and business changes. At the same time, we believe Lifecycle Services, as well as other consultative services, will open up opportunities for long-term and higher margin revenues.

Lifecycle Services is our approach to sharing the methods and "best practices" Cisco has developed in its two decades of designing and building networks. These tools and techniques come from Cisco's own Advanced Services group, as well as the thousands of Cisco engineers that create Cisco networking equipment. It covers our approach to the six stages of network development, which are prepare, plan, design, implement, operate and optimize. Also, we are tailoring Lifecycle Services training for each technology specialization. This training will help partners develop both pre-sales and post-sales capabilities. Most importantly, Cisco's proven Lifecycle Services approach gives partners a step-by-step "how-to" in deploying advanced technologies, helping reduce the challenges in selling, deploying and supporting Cisco's technologies.

These programs will require significant new training for channel partners. How is Cisco helping reduce the costs of developing these new capabilities?

Keith Goodwin: We realize the program changes will require channel partners to dedicate extra time and resources to training. In order to disrupt their business operations as little as possible, partners will have two years to prepare for new specialization requirements and meet the new certification requirements. Though the changes make new demands on channel partners, we have decreased total out-of-pocket costs to gain the same level of certification as before. Also, all sales and Lifecycle Services courses are free of charge, and 40 percent of all the other courses are offered free through our e-learning site. We are also offering specialization discounts for advanced Unified Communications, advanced Security and advanced Wireless LAN specializations, with tiered Value Incentive Program (VIP) rebates. And we have eliminated annual lab costs.

Our goal with the changes is not to make life harder on channel partners but to offer them the tools that will help their businesses thrive. As a result, we want these new programs to be as accessible as possible. We based the program in large part from the feedback we received from our channel partners. Certainly, we will use subsequent channel partner responses to adjust and improve the program to best meet their needs.

How is Cisco addressing the growing diversity of channel partner business models?

Keith Goodwin: We believe that the era of the one-size-fits-all partner program is over. In response, we are pioneering a partner program structure based on customer offerings, which recognizes that our channel partners have different business models and needs in order to be successful. Our "offer-based" program structure is unique in the industry in that it provides our channel partners with several program options. In addition to the local reseller program that we've had in place for many years, we are developing programs for channel partners focused on providing managed services, outsourcing, and global resale services. Since these models require different capabilities, the certifications will specifically address the capabilities channel partners need to successfully providing networking support using these business models. Partners will be able to qualify for more than one category if their business model and capabilities support such qualification. Our mutual customers want to acquire networking technology in different ways, and we need to support channel partners in their efforts to meet these customer demands.