Cisco Preps For Hybrid IT By Making Significant Changes To Its Channel Programs

| About: Cisco Systems, (CSCO)


Hybrid IT is changing the way vendors and resellers go to market.

CSCO announced major changes to its channel program at last week's Partner Summit.

The program changes shift CSCO partners from being product centric to service centric.

Last week Cisco's (NASDAQ:CSCO) reseller conference, the Partner Summit, wrapped up in Las Vegas. I have gone to every Partner Summit for the last eight years or so and at every event CSCO tweaks its channel programs to point the channel in the direction it needs to go. This year's conference had, by far, the most significant changes to CSCO's channel programs than I can remember in recent history. Why so many major changes? Well, the world of IT is changing and CSCO needs to ensure its channel partners have the right skills and incentives to compete in this new competitive environment.

During his keynote, SVP Edison Peres described the company's approach to channel incentives and highlighted an interesting lifecycle. CSCO utilizes a listen -> share -> incent -> require approach to channel management. What this means is that the lifecycle starts with listening to customers about how and what technology is being bought and listening to the channel partners regarding what's working or not working. After changes are proposed CSCO would then share the modifications with a handful of partners for further tweaking. The next step would be to put the new programs in place but only as an incentive to those partners that want to adapt to the new programs or modifications and further changes are made until they are baked. The final step is to turn the dials and flip the switches and mandate program changes to align the channel with current IT trends.

As I said, CSCO made a number of significant changes to its channel programs but many of the building blocks of these modifications have been available for some time now. But now it's time to require partners to make changes to the way they do business, causing CSCO to mandate the following:

Bye Bye Silver Partners

As of April 1, 2016, the Silver designation for partners will be retired. This move by CSCO is significant as Silver is the second most common status held by partners behind only Gold. However, many partners use Silver as a stepping-stone on the way to Gold so CSCO would prefer the partner just accelerate the path to Gold. If the partner does not have the breadth of business or, for whatever other reason, does not want to move to Gold, then the choice would be to hold the currently lower Premier designation and augment that with a Master Architecture specialization. The Master title is for partners that have achieved a level of knowledge within a CSCO technology that is unparalleled.

Gold Status Requires Cloud Skills

The Gold status is the most widely held partner designation and carries with it a certain level of breadth and depth that customers have become accustomed to. Breadth in the era of hybrid IT though requires partners to sell infrastructure but also cloud services. In the revised program, CSCO Gold partners are required to sell a minimum of four cloud or managed service offerings from the following:

  • CSCO Powered Cloud Services such as Hosted Collaboration Solutions (HCS)
  • CSCO cloud Services like WebEx, Meraki and Cloud Web Security
  • Partner created managed services or any of the 11 CSCO Powered Managed services for markets such as Data Center, Collaboration and Security

On a related note the new program requires Premier partners to actively sell at least one CSCO cloud or managed service.

Gold Status Requires Business Acumen

In addition to the above change CSCO Gold partners must now develop the ability to talk to business leaders. I have interviewed many a partner that told me they can often get the meeting with a business or corporate leader but they don't really know what to say in the meeting so the discussion turns back to technology. So now, in addition to having four CSCO CCIEs (Certified Internetworking Engineers - the highest technical certification Cisco offers), Gold partners will need to have at least one Business Value Practitioner. Lastly, the Gold partners will be required to hold four CSCO Advanced Architecture Specializations, including the new Security and Enterprise Network Architecture Specializations.

Broadening Architecture Specializations

As mentioned above, for technical partners, CSCO has an architecture designation called "Master." In actuality there are three levels of architecture specialization of which Master is the highest. Partners can also choose to gain Advanced or Express specializations. Currently, there are three architectures - Data Center, Collaboration and Security. CSCO will be adding two new architectures - Enterprise Networks and Service Provider Technology. I found the Enterprise Networks specialization interesting as CSCO used to have this specialization but retired it since every CSCO partner should have Enterprise Network knowledge. However, I think the return of this specialization is well timed as there are so many new technologies in Enterprise Networks including Fabrics and Software Defined Networks.

Simplifying and Beefing Up Deal Registration

These changes were met with applause from the partner audience. Today CSCO has a number of deal registration programs. Any discussion with Cisco partners regarding incentive programs includes terms like "SIP" (Solution Incentive Program), "OIP" (Opportunity Incentive Program), "TIP" (Teaming Incentive Program) and "VIP" (Value Incentive Program). In the second half of 2014, CSCO will launch a single deal registration process that will bring independent up-front discount incentives under one umbrella program called the CSCO Deal Registration Program. This will make it much simpler for partners to apply for incentives and be compensated for their full value.

Additionally, the partners who register deals with CSCO will qualify to receive a discount differential of up to 8 points now, up from the current 5 points.

While these changes to CSCO's partner programs may seem significant, they are necessary if CSCO and its partners are to continue to thrive together as they have in the past. IT is moving to a hybrid model, purchasing is changing as is the way businesses consume technology. Partners need to embrace these changes to remain relevant, otherwise they may go the way of the voice integrator.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Business relationship disclosure: My research firm, ZK Research has a business relationship with CSCO.