Cisco Partner Summit, Nov 4-7, Las Vegas, was a whirlwind of interlocking, interdependent, important set of announcements to guide and assist channel partners to transform, own their competitive edge and target an elusive yet huge small and midmarket opportunity. The genesis of a transformed partner is the idea of relentless focus on Customer Lifecycle and begins with rebranding to Cisco Customer Experience (CX) Success Portfolio. Oliver Tuszik, Senior VP, Global Partner Organization is committed to developing a partner program that delivers customer success. Under the leadership of Maria Martinez, Cisco has thought through the channel enablement levers – customer content and assets, digital tools, co-marketing, co-selling and incentives at each “mile-marker” along the entire “race-track” aka, customer life-cycle.
Naturally, Cisco is expecting and forecasting many upsides for its channel partners including and not limited to 15% increase in revenue because of bigger deals and new deals, 20% increase in professional services that are fixed-price / right-sized deals and 5%-10% increase in HW pull-through. Partners who embrace the CX Lifecycle can hope to double their business in 3-5 years.
It is a very ambitious initiative. Out of the 60,000 Cisco partners, a majority may not have the skills and staffing to follow-through and pull it off. Cisco is not naïve. To some extent Cisco is relying on its distributors for enablement of the tier 2 partners. It is no doubt a touch ask and the onus will lie on the partners to make themselves heard, align and participate. But distributors can play an important role in driving tier 2 partners to develop CX practices. To make that a reality, Cisco is making investments in the foundation for partner lifecycle services. Cisco has developed a framework, or model, and is providing tools and resources to help partners monetize customer success and how to organize and operate their businesses for sustained success.
Cisco launched CX Certification and Specialization to help partners develop the talent needed to support customer success and to help them differentiate their business. Cisco is providing role-based training so that partners can ingrain customer success in their organization and deliver lifecycle services at every step of the customer journey.
Cisco is a partner-driven organization. Revenue through partners was 85% in 2019 as compared to only 38% in 1996. It is a major shift with a steady 6% average CAGR over the last 13 years.
Recap of announcements
Here is my recap of the announcements that I have grouped into five areas.
1. Customer success is #1 target
2. Partners remain default GTM for the entire lifecycle
3. Align Cisco internal teams
4. Want and support all partners
Requires increase SW content in portfolio, cultures and teams’ alignment, design programs to increase profitability.
1. Platform-Enabled (Programmability + DevNet)
2. New Buying Centers (Segmentation & Sales Plays)
3. Customer Success (Lifecycle & Recurring Revenue)
4. Multi-domain architecture
Reimagine customer applications, secure data, transform their infrastructure, empower teams
1. 2T growth engine -Distis to spend time, energy on tier 2 partners
2. SMB execution – scale, touch small and midsized firms
3. Simplification & scale to drive operational excellence
4. CX lifecycle - contribute to renewal strategy
Disti business ranges from 30% - 40%; 2/3rd of $20B is from VAR, Tier 2
1. Lifecycle Advantage
2. Joint engagements & digital renewals
3. Collaborative intelligence
4. Refreshed re-branded portfolio
Invest US$50m in assets and programs in last 1 year. Expectation is that partners can make up to $50K incentives on customer lifecycle
1. Marketing Velocity Program
2. Partner marketing velocity central
3. Marketing Velocity Activate
4. Portfolio Explorer
10,000 partners are using marketing velocity central and virtual demand center - moving away from leads to qualified leads
One of the big announcements of the week was a renewed focus on the SMB segment with purpose-built products supported by marketing programs.
Techaisle’s latest research forecast shows that in 2021:
- WW SMB IT spend will be US$738 B (excluding telecom services)
- WW SMB Cloud spend will be US$156 B (excluding telecom services)
- WW SMB Managed Services spend will be US$65 B (excluding telecom services)
It is too huge an opportunity for Cisco to not be a major player. Cisco therefore announced two key initiatives:
- Cisco Designed for Business: purpose-built and curated products for small businesses. For example, Meraki Go (zero touch deployment for indoor and outdoor WiFi access points, security gateway & switch), Catalyst 1000 series switch. Cisco’s collaboration solutions WebEx and newly announced WebEx Desk Pro built for all businesses of any size is suitable for small businesses also. I am delighted that Cisco has formalized and is operationalizing its stake in the market. Cisco Deigned for Business is not only a concerted effort to appeal to the small business segment but also an announcement to its smaller resellers and distributors its seriousness in addressing the needs of small businesses by offering purpose-built product solutions. However, I caution Cisco not to be completely swept away in its “race track” customer lifecycle journey with respect to small businesses. Cisco will derive better benefits by connecting its Designed for Business with SMB business outcomes.
- Ignite the Midmarket: with upfront margin and good discounts, bonus for sales growth, simplified deal registration, deal protection, sales playbooks that provide value propositions, multi domain reference architectures, CX customer journeys and integrated industry use cases with step by step process
- Cisco has the right strategy to enable, empower and transform its channel partners
- Cisco’s focus on customer lifecycle along with its partners can accelerate their customer’s path to success at every stage of the lifecycle to deliver their business outcomes faster
- Small businesses, specifically midsized firms are the battleground for the next decade and Cisco has announced its intent at the right time supported by an effective plan and program
- Two problem areas have been overlooked – time and resource allocation by Cisco partners and vendor partnerships as compared to overall channel partner community
Channel partner transformation
The core changes in the demands on different areas of the channel partners’ businesses are critical and challenging. In all aspects of channel business, long-held business tenets are being replaced by emerging realities that have been ushered in by the move to cloud and amplified by many other trends – changes in buyers and buyer behavior, as well as management and process changes, and evolutions in service/technology delivery. Techaisle has identified twelve areas where channel partners must abandon ingrained behaviors and move to new approaches that will enable NEXT (Networked, Engaged, Extended, Transformed) channel businesses and Cisco’s hits many of the 12 points of transformation.
Customer Experience and Lifecycle
Let us dig into customer value creation and meaningful customer partnership, that is, customer lifecycle.
Most vendors have long demanded that their channel partners provide ‘added value’ to products. This value has tended to come in one of two forms: technical or logistical. Increasingly, though, the vendor’s perspective on value addition is less relevant than the buyer’s view of whether/how their suppliers create value for their businesses. Technology is a strategically-important input to most businesses, and also, a major expense category. The buying groups within most organizations include business stakeholders as well as IT professionals. This represents a major change for both channels and vendors who are typically more engaged with, and more comfortable with, IT decision makers (ITDMs) than BDMs. Cisco seems to be committed to guide their channel partners to ensure that their sales and marketing resources align with business outcomes rather than technical thresholds, and to that extent Cisco seems to be planning to support this motion by positioning its products in business language and working with their channel partners to establish and support business-relevant SLAs.
If the market is moving from value addition by the channel to value creation for the end-customer, isn’t it essential to move beyond ‘trusted partner’ status to becoming, in a meaningful sense, a partner of the customer, invested in their business success? In the post-transactional world, driven by cloud, contracts will need to specify the anticipated benefits resulting from technology implementations, and rewards will need to be tied to achievement of these objectives. Becoming a ‘meaningful customer partner’ demands that channel partners change their approach to structuring customer contracts, to measuring progress on agreements, and to billing for services – in essence, moving from a tactical approach tied to ‘solving a customer problem’ to a more strategic focus on ‘delivering customer success’. And exactly this seems to be the premise of Cisco’s focus on Customer Lifecycle.
P2P collaboration within a vendor’s partner ecosystem is a key area of evolution for the next channel partner. Technology solution packaging isn’t a ‘religious issue’, it’s a ‘customer choice issue’ – and customers are clearly choosing to move to hybrid environments that can be aligned with their evolving needs; this will also require an accelerated frequency of partner-to-partner collaboration (not opportunistically but strategically).
Techaisle data illustrates an important feature of this migration: it increases both the scope of projects that the channel partner can engage in and the profitability of those engagements. 65% of channel firms that consider themselves to be “very successful” in selling cloud report that they frequently collaborate with other channel partners; firms that struggle with cloud success are much less likely to proactively work with peer channel firms. Drilling into the data from 2014 to 2018, we find that the opportunistic collaboration has increased by 69%. There are many sporadic efforts but not many vendors are formalizing and enabling this P2P collaboration.
Cisco has initiated three tools to unlock new buying centers through partner-to-partner enablement. These tools are:
- Portfolio Explorer – at a basic yet extremely useful level it allows partners to find use cases and architectures in specific industries (more details at cs.co/explorer). It is a new platform which is aligned to Cisco sales plays and industry use cases. The goal is to accelerate P2P for use cases by searching and connecting with ISVs, IHVs, and DSIs
- DevNet Ecosystem Exchange – suitable for developers and partners with in-house development teams (more details at developer.cisco.com/ecosystem). It is an ISV / IHV solution catalog where not only end-customers but VARs and field sales can search solutions from ISVs, IHVs, and DSIs
- Partner to Partner Exchange – enables P2P on a digital platform that allows multiple partners to collaborate, build multi-partner solutions, manage pipeline and share data. At announcement it was a pilot
Areas for improvement
Drilling into Techaisle’s latest channel study and isolating Cisco-focus partners and comparing them with overall partner community, data shows three important areas:
- A higher percent of Cisco partners is spending time and resources on lead generation which arguably Cisco is trying to address through its Virtual Demand Center (VDC)
- A lower percent of Cisco partners is building skill sets on SD-WAN and security which is detrimental to Cisco
- Cisco may have wallet-share and mind-share issues as Cisco partners tend to a higher number of vendor partnerships with 56 percent of them recommending and architecting best-of-breed solutions of which Cisco product may be a component. Hence, managing and maintaining a customer lifecycle program may become a daunting task. However, Cisco Solution Support, partners and customers can benefit from a primary point of contact with comprehensive solution-level support for every platform and domain from Cisco.
Final Techaisle Take
Regardless of the problem areas, Techaisle data shows that:
- 76% of small business-focused and 69% of midmarket focused partners trust Cisco
- 50% of small business-focused and 52% of midmarket focused partners say Cisco has cutting-edge technology
I liked what I heard. I liked what the executives told me candidly and transparently. I liked how the partners have responded. Cisco has a bold initiative. The race-track will be fraught with pitfalls and littered with traffic cones but Cisco has a stellar team in place to navigate not only itself but be the GPS for its partners.