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Techaisle Blog

Insightful research, flexible data, and deep analysis by a global SMB IT Market Research and Industry Analyst organization dedicated to tracking the Future of SMBs and Channels.

Cisco makes enterprise-grade small business solutions affordable and easily deployable

Post-pandemic, as small businesses look ahead to focus on getting back to growth, Cisco has identified the small business segment as a key priority and one of its most significant opportunities. Cisco is committing more resources than ever before to energize and activate Cisco partners' prospects in this space. Cisco identifies its addressable opportunity to be US$30 billion. It is no doubt less than Techaisle's global IT spend forecast of US$230 billion in 2021. But then, Cisco's product portfolio is not all-encompassing, and its definition of small business is on wallet share, any company that spends US$200K or less on Cisco products and services. However, Cisco's is sharpening its focus on the sub-$50K wallet-size small business segment, where Cisco's market share is minimal.

Let us analyze how Cisco is planning to address the small market.

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New partner program from Cisco seizes the channel transformation conversation

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.

Key announcements:

  • New partner program organized around four roles (Integrator, Provider, Developer, Advisor) while maintaining three-tier structure (Gold, Premier, Select)
  • Partner Experience Platform (PXP), a digital house to deliver a single source of truth and provide actionable insights, API-enabled for more automation and higher efficiency for partner success; consistent eight-month initiative resulting in a move from 166 siloed partner tools to a unified platform approach
  • Business Critical Services (BCS 3.0), a set of advisory services for customer use cases, for example, a secure remote workforce, trusted workplace, cloud transformation, multi-cloud networking, workload management, and automation
  • Significant increases in incentives for participating in BCS, Success Tracks, and Solution support

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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Post-pandemic lead generation is proving problematic for channel partners

Six months have changed how SMBs and enterprises operate, how employees work, how customers purchase, and how products/services get delivered. A shift in go-to-market imperatives has become problematic for channel partners. Techaisle leveraged its panel of 225K channel partners to understand the impact of the pandemic on channel business. 49% of channel partners have allocated resources and budget for lead generation, but 60% rely on leads from vendors, an increase of 18% from pre-pandemic. 29% more channel partners than previously are finding social media as one of the most effective methods of lead generation. 46% of partners have increased their usage of analytics to drive leads, and 60% have increased influencer marketing.

Techaisle survey research data also shows that for 42% of channel partners, driving growth is the top business issue, especially with a clear focus on increasing the effectiveness of sales and marketing. Despite pandemic, 68% of channel partners expect revenue increases in the next year but have tempered their revenue growth expectations from 19% to slightly over 10%. Channel partners deploying digital transformation solutions expect ~2X revenue increase compared to those who are still not focused on digital transformation offerings for their customer base.

The requirement to focus on digital discovery conveys some hard truths. The first is that channel partners need to reach a large and diverse buyer population, extending beyond the IT department into business units and the executive suite, which means that marketers need to create and place various messages to keep the sales process on track. Another important implication is that prospects who engage with a vendor will represent a relatively small subset of the total potential market, as many buyers will disqualify suppliers before drafting a potential vendor list. The third implication follows the first two: to maximize the addressable market; channel partners need to embrace digital marketing as a way to gain entree to accounts that have not yet self-identified as prospects. Channel partners that rely on traditional lead generation campaigns realize that these funnels are reaching a diminishing share of the market.

Marketing has not been a primary focus for most channel businesses, and those that have invested in marketing staff have typically tasked them with optimizing access to vendor investment funds. Marketing’s need to add advanced digital competencies is challenging most channel partners. Vendors will need to provide programs that support content and digital marketing to ensure that their partners can engage with the largest possible number of prospective clients. Techaisle’s research highlights the core issue. Buyers, working in teams that average 5.1 individuals, typically don’t have meaningful contact with a supplier until they are 70% of the way through the purchase process.

All four of the top IT suppliers – Dell Technologies, Cisco, HPE, and IBM – have made partner marketing a priority.

  • Dell Technologies’ Cheryl Cook, SVP, Global Partner Marketing, is made it a mission to equip and educate partners with a series of guided podcasts and webinars
  • Cisco’s Boon Lai, VP, Global Partner Marketing, is enhancing the marketing velocity program
  • HPE’s Laura Seymour, Senior Director, Global Channel Marketing, is focused on Marketing Pro and Partner Marketing Concierge
  • IBM’s Catherine Solazzo, VP, Partner Ecosystem Performance Marketing is driving My Digital Marketing platform

If the customer journey begins with research conducted via the web, the marketing imperative must start with digital discovery. The channel partner marketing teams should take advantage of their IT suppliers’ initiatives, invest in putting thought leadership messages in front of prospective customers, and in the processes required to nurture new contacts to the point where they become sales-ready leads. Leaders at traditional channel partners will recognize this endpoint – but the process needed to arrive at this point is much different in the post-pandemic world.

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US SMB and Midmarket Video-collaboration adoption may increase by 184 percent

Techaisle data shows that the percent of US SMBs using web-video conferencing solutions is likely to increase from 38% to 89%, a change of 184%. It is common knowledge that cloud is being adopted by SMBs and midmarket businesses for business agility and video-conferencing is playing an increasing role in contributing to SMB agility - decision agility, productivity agility, customer agility and innovation agility - for high-growth and innovative businesses. Businesses without modern collaboration solutions are scrambling to catch up with those that are already capitalizing on the benefits video-conferencing solutions. As new adopters are learning from firms that have already made early investments in the technology, Techaisle is seeing reasons for launching collaboration initiatives rapidly evolve. A comparison of early adopters to firms that are just now embracing advanced collaboration systems finds that the pace set by early adopters is forcing other SMB firms to invest in collaboration solutions to address current and future market issues.

This next generation of SMBs & midmarket business collaboration solution adopters is responding to specific pain points, more than their predecessors and video-conferencing is figuring in their collaboration strategies, specifically because:

• They cannot coordinate meetings involving employees in multiple locations
• Customer satisfaction is declining
• The pace of decision making is too slow
• Email is not an adequate means of connecting staff with each other and with customers
• They are trailing competitors and want to catch up
• They have to keep pace with market uncertainty and want to find new avenues for business viability and growth

Survey data finds that these firms have begun using video-collaboration solutions as a reaction to business problems that are preventing them from achieving their business objectives of growth, productivity, time to market, customer retention and operating cost reduction.

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