Demand for supply

Demand for supply

The changes to Cisco's channel program, made public last fortnight, can be viewed in two ways.

Firstly, it represents the capacity for the networking channel's largest (and it has also been suggested most arrogant) source of wealth to admit that there are better ways of doing things. Cisco has been striving to win favour with resellers in the last 12 months, and believes the changes will make it easier for resellers to deal with the company.

Secondly, the change is a sterling endorsement of the two-tier channel model.

Cisco is already in the process of winding back the operation of its distribution facility, with insiders suggesting the whole facility will be closed down prior to the end of Cisco's fiscal year on July 31.

Although Cisco already outsources the running of its facility, it still represents a significant administrative burden on Cisco in having to process the orders and maintain inventory. Free of this load, Cisco's operation manager Steve Hill feels his company may now be able to better provide its two-tier partners with the resources they need, such as education and support services.

For Tech Pacific, arguably Cisco's largest distributor, the new arrangement represents a financial windfall. Although margins through the distributor may be kept low to appease former Cisco-direct integrators, Tech Pacific will nonetheless see a sizeable increase in Cisco product volume flowing out of its warehouse.

The Cisco changes continue a steady push by vendors into distribution. Late last year Novell returned to a more traditional distribution structure, with LAN Communications joining its fulfilment house Stream International to provide support for its new low-end NOS. Other industry heavyweights, including Microsoft, IBM, Bay Networks, ATI, Lotus and Netscape among others, have also added to their distribution channels.

Indeed, it would be difficult to find a handful of companies that have at least failed to add to their distribution options in the last 12 months, let alone reduced them.

Brad Howarth

Tel (02) 9902 2748

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