ARN Exclusive Report: Cisco considers direct-to-partner model

ARN Exclusive Report: Cisco considers direct-to-partner model

It's early days yet, but Cisco Systems is currently in consultation with its channel, which could eventually see the networking giant bypass its distributors and sell directly to its top-tier Gold Partners.

It's a channel model Cisco employs everywhere around the world except in Australia. To supply a customer's order, Gold Partners can choose to either purchase directly from Cisco or go through existing local distributors. While it already occurs in Australia, mostly in relation to large deals, the difference is that Gold Partners will now be able to purchase directly from Cisco at the same price as distributors.

If a Gold Partner has a customer that wants stock quickly, or values the service provided by a third-party distributor, then the customer will have to pay a certain premium for it. However, if a customer can wait for the product to be shipped from overseas, or sees no value in the services provided by a distributor, the Gold Partner can bypass the distributor and purchase directly from Cisco at distributor prices.

According to Kip Cole, Cisco Australia and New Zealand channels manager, there are two reasons for the move. Firstly, it will align Cisco's Australian operations to that of Cisco's strategy worldwide. Secondly, and more importantly to the channel, Cisco wants to offer its partners the ability to differentiate themselves in the market.

The way to do this, says Cole, is to give customers the ability to see exactly which company they are paying their money to, and exactly which service is provided.

"If [a customer] doesn't value distribution or the logistics they provide, then [they can] buy from a partner who gets it directly from Cisco," said Cole. "Customers should have the opportunity to see all the elements of cost."

The move will mean significant changes to both Cisco's distributors and Gold Partners. Distributors are nervous that a large chunk of their business could go directly to the Gold Partners they used to deal with. On the other hand, Gold Partners may have to invest in developing the logistics capabilities to handle direct orders so as to benefit from a better buy price.

The good news for all parties is the model has no set implementation timeframe. Cisco is currently assessing all options in discussion with its channel partners, Cole said.

Read about the channel's reaction in ARN's full investigation:

* Would the real value-add please stand up? - A look at Express Data, LAN Systems and other distributors. Who will survive the value crunch?

* Acer case study - Acer introduced a direct-to-partner strategy last year on the back of a comprehensive e-commerce partner site. How is it faring?

* History repeats - For those old enough to remember, Cisco used to handle all its own logistics. Is this a return to the bad old days?

For all this and more, see this week's issue of ARN, out now.

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