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Distributors report rise in Cisco gold business

Distributors report rise in Cisco gold business

Express Data and LAN Systems have reported a growing trend for Cisco Systems gold partners to source product through distribution. The spike in business saw LAN double the amount of stock it ordered from the networking giant between April and June.

"The last quarter has seen a dramatic shift in the way gold partners are buying," LAN Systems' Cisco business manager, Tony Heywood, said. "It might be something to do with Cisco putting prices up and partners wanting to place orders quickly so they can fulfill before those changes take effect.

"Alternatively, Cisco lead times may have blown out a bit or users could be demanding the completion of projects before end of financial year. Either of those scenarios would make gold partners turn to distribution."

Express Data hardware manager, David Peach, said it had also experienced steady business growth from Cisco gold partners. During the past 12 months, he said these sales had improved by more than 30 per cent. But in his opinion, it was more likely that these heavyweight resellers had realised the benefit of working with a distributor.

Gold partners had to source Cisco product through distribution until about two years ago, when the vendor gave them the choice of buying direct. While it is cheaper to buy from Cisco, Peach suggested this was often false economy.

"When the change was first made, people were saying it was the end of Cisco selling through distribution but I think gold partners have realised that it doesn't always make sense," he said. "We do staging of equipment and test configurations whereas direct purchases are just delivered on pallets and the reseller has to get it to the customer site. We also get leant on by gold partners for technical resources and can specify what they need for a particular opportunity."

While still procuring the majority of Cisco kit direct, Getronics manager of converged communications, Rob McCabe, said the integrator was increasingly looking to distribution. Part of this shift was driven by late end-of-financial-year orders.

However, he said the key benefits of working with a distributor were billing and payment flexibility as well as the ability to pre-order equipment prior to receiving the official customer order.

"It's not a significant risk for them as someone else is likely to buy the stock. With ordering from Cisco, we would have more difficulty if the deal fell through," McCabe said.

"Cisco charges partners when the equipment leaves its manufacturing facility, so you get a number of days to pay. Through distribution, you pay when it gets shipped locally. There's an extra week or more of benefit and this can be significant in terms of cash flow with larger deals.

"It also works well with a staged approach for customer rollouts, as you pay for each site shipment."

McCabe claimed Cisco distributors had been actively targeting gold partners for sales, and were providing more value-added services. For example, LAN and ED had bulked up pre-sales support and were offering staging services, such as pre-building product or pre-loading software onto devices. Distributors were also keen to assist with joint marketing campaigns to drive business for both sides, he said.

"As we get busier with the market being more buoyant, we have called on distribution to help with putting build materials together and asked for advice," McCabe said. "It's a great back-up. They've come a long way in 12 months."

McCabe said Cisco's decision to introduce a third distributor in the form of Ingram Micro could have been a catalyst for the development of these additional services. Ingram is currently unable to service the Cisco gold tier but is lobbying hard to gain access when the vendor enters a new financial year in August.

But the additional fee involved in ordering through distribution was still an inhibitor, he said.

"It's still a very competitive market and any level of margin being paid to a distributor can make a difference," McCabe said. "Even 2-3 per cent can be a big deal."

Dimension Data corporate communications manager, Martin Aungle, said it had always purchased Cisco products via Express Data.

"The main reason is that it removes the headaches for customers, exchange rates and stock rotation," he said. "There's no need for us to have to deal with those issues."

Cisco was unable to provide a spokesperson at the time of going to press.


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