Transforming the Channel – The Cisco Way
This past week I spent time with new CEO Chuck Robbins and SVP of the Global Partner Organization Wendy Bahr at the Cisco Partner Summit in San Diego. What I wanted to learn about was how Cisco is shifting its channel to embrace digital transformation opportunities. Specifically, how they are shifting the channel from a traditional hardware mentality of “build and install”, to one of software & services, long term customer relationships and business outcomes. I was particularly interested in Cisco because it has one of the most successful channels in the business with 85% of its $50 Billion revenue being channel driven. Yet despite its immense size and success Cisco is facing the self same challenges to realign its channel that much smaller tech firms are facing, the difference is simply one of scale. I learned a lot, it was a productive week and from it I want to share three key elements from Cisco’s current channel strategy that should be of interest to tech vendors and channel partners of all shapes and sizes.
1: Partnering with other partners
The words ‘partner ecosystem’ are bandied about everywhere but in reality most so called ‘partner ecosystems’ are just the same old sales channel that has been in place for years. Partners are recruited and promoted solely based to their ability to generate revenue. Of course revenue generation is paramount, however the process of building a channel today needs more layers to it than this. According to Cisco you need to build a channel of partners that can actually complement and work well together, rather than a mass of partners that see one another as competitors. That may even mean current channel high fliers need to come down a notch or two to further the common good. An effective ecosystem needs to have a clear process in place that deals effectively with the question of ‘who owns the customer’ as this is too often a point of contention. Major projects seldom involve one piece of technology and one partner, they are instead joint efforts where perceived rivals find themselves working alongside one another. From a customer perspective in such complex situations they want to have a single ‘anchor’ partner to work with. This by default means many others in the deal will have to accept a secondary role. Just being clear on who the anchor partner, and who owns the customer is crucial to success. In turn, technology vendors also have to recognize many partners may not be monogamous, instead they will play in other technology channels and at times competitive technologies will be chosen to run alongside your own. Ultimately an ecosystem by definition is a diverse set of players with interrelated relationships that together can sustain the whole. Its no longer a winner takes all situation.
2: Recognize that everyone is in a different place
Digital transformation is a real revolution and it is one that will play out slowly over the next couple of decades. But few firms today actually have a strategy for transformation, they are not as the vernacular goes ‘digital ready’. It may be a spurious statistic but at Cisco I heard the following “75% of firms have no strategy for digital transformation”. Regardless of this statistics provenance it’s not one that many in our industry would really argue with other than to say that 75% may be a bit on the low side. The bottom line here is that everyone is in a different place and that goes for partners in the channel as much as it does for their clients. Getting both buyers and channel partners to recognize the need for change is one thing, but it is hampered by the fact that they are each at different stages of the conversation. Further, many potential customers and partners literally don’t know what change would even look like, after all what exactly is a digital transformation? Talking about the internet of things (IOT) and adding data intelligence to data packet routing is technically clever stuff, but how can such capabilities actually translate to real world business outcomes? Ultimately then, education and acceptance are the key here, acceptance of what is truly feasible and digestible for both partners and customers at the point they are currently at, and then undertaking the hard work hard to educate both on the future possibilities.
3: Feel the partners pain
If it is hard for partners to recognize and address digital transformation opportunities, Cisco believes that it may be harder still for partners to make the change to new trading models. For partners that have long been focused solely on installing technology, a shift to deeper involvement in business processes and outcomes is an uphill challenge, one they may not actually be able to make. Combined this with the fact that partners are now being asked to also change their fundamental financial model. For as tech vendors have rushed en masse to cloud style subscriptions, that policy can have a harsh impact on the channel. Consider that moving from a $10m a year transactional business to one of $10m recurring, means acquiring many newer customers just to keep the lights on. That financial hit combined with buyer’s unfair notions about how cheap and low cost IT should be, and you have a recipe for trouble. Vendors need to feel the partner pain, they also need to help them embrace the challenges ahead and maybe even consider financially helping and incenting the move to new pricing models as well as providing training and education for a sales engagement that will goes beyond build and install.
According to Cisco, channel managers across the tech spectrum need to see the error in statements like “I can tell by the numbers how aggressive my sales guy was……”. Moving forward it’s increasingly going to be more than simply getting a deal done, its going to be equally important to actually gain adoption for the technology sold. At the end of the day even though change, adaptability and new digital transformation opportunities sound wonderful it is all tough stuff to do. Some partners will inevitably fall by the wayside in the shift, but at the end of the day this is a transformational change to our industry that will reap rich rewards for the survivors down the line. Cisco may be the techiest of tech firms involved in everything from hyper converged infrastructures to sensors to transforming the network edge. But Cisco’s channel challenges reflect the same concerns and issues of CEM and business application vendors at the other end of the tech stake alike. Moving to the next digital age requires a major rethink in how technology is sold, configured, implemented and serviced and that work is largely undertaken by the channel, not the tech vendor itself. Yet it’s the tech vendors that need to lead that change.