Cisco senior vice president of worldwide channels Keith Goodwin gave a mini state-of-the-channel address during a web conference with Wall Street analysts Wednesday. Goodwin painted a picture of an evolving channel that is based more on selling integrated technology and services than on pushing volume.
“We have moved away from rewarding partners based on volume” to offering incentives “based on their investment in Cisco technologies and their ability to deliver value beyond fulfillment,” said Goodwin.
Currently Cisco has more than 46,000 partners worldwide. A little more than 10,000 of those partners are certified and another 36,000 are registered. Certified partners, of which only 563 are gold level, drive 90% of the channel business. Overall, the channel makes up 80% of Cisco sales.
During his address, Goodwin stressed the need to offer services and so-called “advanced technologies” to stay viable in the market and expand customer relationships. Cisco has been beating the services drum loudly this year, as has many of its competitors, since hardware sales are slowing industry-wide in rough macroeconomic times.
But Goodwin said there is customer demand for partners that offer “the full lifecycle of services” rather than just support services. Customers are also seeking solutions providers who are not just “providers of network infrastructure,” but who can “go deep” into advanced technologies like unified communications (UC) and data center, among others.
Running down a short history of the Cisco channel, Goodwin began with 1996 when Chambers “made the decision to commit to channels” and then moved on to 2001 when the company turned from volume-based incentives to value based. He then noted the dawn of the enhanced channel program in 2006 when Cisco began encouraging partners to offer integrated and advanced technologies.
The latest transition, he said, is now in 2008 as Cisco is working to form a collaborative channel in which solutions providers with complementary technologies and geographic markets actually partner with each other to offer more complete solutions to customers. Cisco began pushing collaboration at the spring partner summit and has implemented a number of partner initiatives. So far reaction among channel partners has been mixed.
Pushing into the small and medium-sized business (SMB) market was another underlying theme of Goodwin’s talk. Goodwin mentioned the SMB market at least three times, saying “the small business opportunity is huge in ’09.” Cisco CEO John Chambers said recently that the company would look to sign thousands more SMB accounts in the coming year.
At the end of the conference, Goodwin fielded a few well-monitored email questions from listeners. One listener asked whether Cisco would further expand the channel — a fear among some partners who don’t want to be swarmed by competition. “Primarily we are looking to drive growth through existing partners,” said Goodwin. That growth will happen as partners invest in new technologies, he said. Channel expansion could occur in emerging markets abroad and in some new technologies for which it would be useful to bring in partners who are already specialists.