Cisco held its annual Partner Summit on October 28-29, 2020, where it announced its new partner program. Since then, I have been sifting through pre-event analyst briefings, at-event announcements, post-event partner discussions. It has been difficult to find flaws with the Cisco partner program's vision, trajectory, commitment, and investments that Cisco is making in an integrated execution model to simplify partner engagement, support profitability, and drive partner differentiation. Cisco is focusing on customer-in rather than product-out.
Rather than elaborating on each announcement's details, in this Techaisle Take, I am highlighting the three areas that showcase why Cisco is leading the charge in defining channels' future.
Future-ready partner profitability journey
The impact of the cloud on traditional channel business models is wrenching at all levels of business operations. Pay-as-you-go models are compelling to customers; there are higher rewards in business valuations for recurring revenue, and pursuit of as-a-Service calls for different sales approaches. Cisco recognizes that the profit model that was relevant yesterday, based on product lifecycle with margins, rebates, and close to the box services, is not the profit model that a partner will need to succeed. In direct contrast to several IT suppliers' narration about the customer journey, Cisco leads the partner profitability journey's conversation. Before the new announcements, the Cisco partner program was Cisco-out but not customer-in. Cisco put partners in a box, based on how they transacted or interacted with Cisco. The new program emphasizes the roles that partners play for customers. Besides integrators and providers, Cisco has added two new roles– developers and advisors. Developers who assemble solutions by leveraging Cisco components or building on Cisco's platform, and advisors who use their expertise to guide customers to the right solution, often in a pre-sales motion, or kickstart on the lifecycle journey.
Channel partners have looked to vendors for information on technology directions. They will continue to align new offerings with customer needs and internal resources with emerging requirements. This dependence grows more acute in times of structural industry change, as channel partners look to vendors for product insight and guidance on how to position their firms to ride with and not get swamped by the waves of change. However, the cloud has broken many of the links which connected channel and IT supplier business strategies. The buyer needs have become much more acute in the cloud era – meaning that the channel partner has an essential role to play in supporting mainstream businesses in IT acquisition. But the services/functions that have justified vendor payments to the channel have less direct value, which has strained the vendor/channel relationship. The channel's most significant opportunity is in meeting buyer needs – and that requires that the channel partner plot a path for the buyers rather than vendors. Cisco's new partner program helps partners be future-ready and build these capabilities to drive profitability by delivering full customer value across the lifecycle.
It is critical for partners to invest in new capabilities and differentiate their practices because the differentiated practices can jump-start their profitability journey. Front-end discounts and deal protection matter too for the partners. Cisco is inching towards a vendor-partner zero-friction future by introducing guided deal registration, which means faster approval time through a simplified process, apply the right promotions to offer the best discounts. Partners that are customer experience specialized will see incremental discounts and protection.
To align with the primary revenue model, cloud channel partners often view sales commissions as tied to a book of business, which is a challenging proposition to present to seasoned reps who have substantial quotas and variable compensation expectations. It is one reason why established channel partners have difficulty migrating from product sales to hybrid/cloud sales. To assist the partners, Cisco provides a bonus for maintaining monthly recurring revenue and a cumulative book of business. Lifecycle incentives vary from US$7500 (lifecycle starters) to US$100,000 (for defining a use case and then successfully delivering upon it) with the potential to earn up to 6% for additional software licenses sold.
APIs are essential to empower the consumption of Cisco technologies and enable partners to build tools and services on top. The shift to APIs isn't a matter of moving to where the market is going – it represents a requirement to accommodate a current need that will continue to increase in importance. Software-led business assessment is a tool that Cisco is introducing to help partners identify where they are in their journey. The tool identifies areas that partners may want to invest in or begin the process of becoming software-led and moving into the world of transformation. Associated with the assessment tool is a profitability simulator. Once the partner has determined the transformation path it wants to take, the tool simulates a profitability profile to ensure that partners get a return on their strategic investments.
Pivot to customer value creation through as-a-service
The notion that channel businesses need to add value - logistics, installation of software, upgrade, or implementation of a system, provision of services - to remain viable is old. Each value-add has an essential factor in common – it looks at what the channel does to enhance its revenue stream or differentiation. However, future-ready channel partners need to look at the issue from the other direction: how do the products and services delivered create value for the customer? What is my client able to do differently or faster, or more efficiently in a way that enhances their revenue stream or differentiation? In today's post-pandemic reality, customers are not especially interested in optimizing their hardware and software widgets' performance – they are focused on improving their businesses' performance. And this is where Cisco is focusing, empowering partners through agility, relevancy, and profitability to create customer value successfully.
We know that "as-a-service" is growing and is on its way to becoming the dominant technology acquisition model, as both a consequence of customer demand and a result of IT suppliers changing their business approaches to emphasize the as-a-service delivery model. Like HPE and Dell Technologies, Cisco is on a mission to empower buyers' preferences for rapidly deployable solutions through as-a-service, the need to work with managed service providers, realize value from technology investment, and assure the desired business outcome.
Cisco is estimating its as-a-service opportunity to be US$140 billion, two-thirds of which is potentially from the small market segment with pre-integrated solutions based on consumption models. Cisco is approaching the new technology acquisition business model holistically through three lenses: 1/ delivering exceptional outcomes, 2/ enabling and facilitating agility for Cisco customers by removing their operational burden when adopting Cisco solutions, 3/ regardless of the IT and cloud maturity as well as the size of the business, allowing them to adopt Cisco solutions in the most flexible manner.
Seeing the 'new normal' through the eyes of the customer
As per Cisco, its most profitable partners have been winning larger deals by accessing new buying centers outside of IT, by co-selling with ecosystem partners. Over the past six months, the need for partners that can support strategy, implementation, integration, and optimization has become much more acute. Business patterns changed by COVID-19 require businesses to accelerate digital transformation within their operations. In many customer organizations, purchasing authority has shifted from IT to business management. The shift requires partners to position their offerings and services in terms that emphasize business metrics, such as time to market and measurable revenue and cost impact, rather than technical specifications and targets. This business focus ripples through partner marketing and technical operations: marketing needs to emphasize time-to-benefit, the ability of individual solutions to contribute to overall business agility, and the direct application of IT features to pressing business needs; on the technology side, partners need to focus as much as possible on services centered around pre-built vertical solutions that can be deployed and integrated rapidly, with replicable processes and predictable outcomes, so that delivery matches the vision set by marketing and the requirements of the customer executives.
For decades, a turnkey solution approach worked well for customers, the channel, and vendors but it is out of sync with a hybrid world focused on a continuous path towards ever-greater levels of digital business capabilities. Business users are not committing to static systems that manage defined tasks/processes; instead, they are building approaches that allow for incremental deployment of new capabilities that increase reach and efficiency. And this is where Cisco is heading with a book of business aimed at the business buyer through a co-selling approach with Cisco sellers and ecosystem partners. To be successful, channel partners need to develop an ability to be flexible in their approach to customer needs. Cisco is committing to support this flexibility by enabling an ecosystem that can extend the ways solutions are deployable by adopting APIs that facilitate integration across complementary offerings. It also requires Cisco to establish alliances that help position these integrations as part of a strategy aligned with a digitally-transforming market.
Final Techaisle Take
In short, Cisco's partner program is ready for the future. It is a program that can help channel partners become the navigators in plotting customer digital transformation strategies.
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