Wake up and smell the services

Wake up and smell the services

Cisco is sounding the services alarm as falling product margins and e-commerce continue to radically alter the channel's traditional business models.

"Wake up, smell the coffee, don't commodotise new technology early," warns Cisco's self-confessed "go-to-market guy" Tom Stevenson, VP of global partners.

Stevenson, visiting Australia last week as part of his "selling value tour", believes the vendor's large and small partners are yet to effectively work together on customer projects.

In addition, different channel companies such as integrators, project management firms, outsourcers and application developers must understand the value proposition of their business in the e-commerce world or face obscurity.

"The biggest pitfall is for a gold partner to get engaged with a consulting firm and not have its business processes good enough to the point that it screws up the installation for the consulting firm," he said.

Stevenson believes business consultants such as PricewaterhouseCoopers and smaller gold and silver integration partners must collaborate on customer deals to provide the services expected by e-commerce driven customers.

Stevenson said the increasing issue for resellers is to wrap integration and support services around "box sales" as network hardware continues to commoditise, leaving margins under the 10-point range.

With 75 per cent of Cisco's $US12 billion business conducted through the channel, the company faces the daunting task of keeping around 20,000 partners in step with its technology and business plans.

Cisco's biggest issue with smaller resellers is communicating the shift in technology from what Stevenson calls "old routed technology" to convergence.

"When you are talking to different companies about improving their value through e-commerce, that is a whole different discussion," he said. "As things commodotise, you run a risk of being over-distributed."

However, the company is treading carefully to avoid alienating its partners in the process of this education campaign.

"We need fewer, better providers of the product because distribution is not a limitation," Stevenson said. He clarified this by stating that Cisco expects its partners to decide on the most effective business model. "There will be some people who choose not to sell as much product," he said.

Geoff Zuber, general manager, partner and corporate affairs for Cisco Australia and New Zealand, moved to allay any concerns the company wants to reduce its reseller count.

"Our objective is not one of attrition - not to have a smaller base, but a larger base of channel customers with a depth of capability which is increasing, rather than decreasing," he said.

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