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Editorial: All or nothing

Editorial: All or nothing

Ingram Micro's failure to bring hundreds of SMB resellers back into the Cisco fold should come as no great surprise (see page 1 of ARN, March 22 edition).

Cisco's decision to restrict the distributor's access to its SMB product range was and still is a massive demotivation for a company that has more than 100 vendors to look after. Why should it put much focus on the relationship when it is only allowed to carry low-margin products?

On the one hand, it is easy to see where Cisco is coming from. Existing distributors, Express Data and LAN Systems, were naturally concerned when the Ingram partnership was announced back in May because the vendor is a major part of both businesses.

But when a dealer picks up the phone and asks an Ingram staffer for high-end Cisco gear, it must be very frustrating to tell them they don't have it.

Despite the fact that Ingram is Cisco's largest global partner, the local relationship still feels like it is in a trial period. The vendor must decide whether to open up its range to Ingram completely or call it a day and revert back to a dual model with LAN and ED.

LAN claims to have grown its Cisco customer base by 30 per cent during the past 12 months, while increasing second tier Cisco market share and revenues by 25 per cent during the same period.

Cisco and Ingram have to decide if they really need each other. If full access isn't granted in the next few months, it would not be a big shock to see the distributor walk away. One of its key aims this year is to grow its higher margin Enterprise Technology Solutions (ETS) business. It would no doubt like Cisco to be a part of that push but the current set up is doing neither party any favours.

Staying with Cisco, the channel program changes it announced at its annual partner summit last week have been largely welcomed by resellers as they should improve partner profitability. But building the necessary skill sets to take full advantage of the new incentives is not going to be an easy process and only those prepared to make a significant commitment stand to make major gains.

The most important aspect of the announcements was the vendor's drive to get its resellers more heavily involved in service provision. Cisco estimated the annual global networking hardware market at $US42 billion but said associated services like integration and maintenance were worth $US44 billion (see page 4).

While the Australian market only accounts for a tiny portion of those figures, services passing hardware in terms of dollar value is great news for local networking resellers because they are better equipped than anybody to deliver them. There is also a warning in the message: resellers that stand still will soon be unable to compete.

Many vendors have been urging resellers to go down the services path for some time as a way of alleviating pressures created by falling product margins. The new Cisco program is one of the most significant to date in terms of actively driving resellers in that direction. At a recent IBM event in the US, Big Blue was making similar noises. Expect other major vendors heavily reliant on the channel model - such as Microsoft and HP - to make similar moves in the not too distant future.


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