Cisco’s strategy of transitioning into a more software-optimised business is paying off due to an increase in revenue growth through the channel.
During the past 12 months, the vendor’s software business delivered via partners increased 26 per cent, backed by indirect subscription and software-as-a-service (SaaS) growth of 63 per cent.
Enhancements through the supply chain align with Cisco recording US$51.7 billion during FY19 - as reported in August 2018 - representing growth of seven per cent year-over-year.
Representing a “record year” for the vendor, revenue numbers have coincided with the highest percentage of revenue going through partners, standing at 80 per cent during 2018.
“Partners represent a huge part of what we are doing in this space,” said Chuck Robbins, CEO of Cisco. “This is one of the most complex transitions we’ve been through but we’re going to make this work together.”
Addressing 3200 partners during the opening keynote of Cisco Partner Summit 2019 in Las Vegas, Robbins acknowledged the channel impact of the vendor’s ongoing shift towards software and subscription services.
“We had to adapt and change and we’ve attempted to do this during the past few years,” he said. “We embarked on a business model change and it impacted our partners. We’re still in the process of this transition but we promised to increase software content in our portfolio, which we have achieved.”
Four years ago, Robbins said software and subscriptions represented roughly $2.5 billion in revenue, increasing to approximately $13 billion during FY19.
“Our customers believe that if you can solve a problem with software, you should, and we agree with that,” he added. “Our shareholders also like software businesses because it creates more predictability and for the channel it creates new opportunities.”
During the past 12 months, 13 per cent more customers were served through the Cisco channel, with 14.5 per cent more deals managed via partners. This is in addition to over 10 per cent growth through distributors and small partners across the world.
Collectively, partners accounted for 80 per cent of the vendor’s revenue in 2018, spanning more than 80 countries and over 145,000 customers.
To further increase software growth through the channel, the vendor has rolled out a new partner specialisation recognising software development capabilities, alongside incentives rewarding lifecycle adoption.
This will be delivered through DevNet, a developer program designed to allow developers and IT professionals to write applications and develop integrations with Cisco products.
“Partners are building businesses around this,” Robbins added. “This begins with the value proposition of partners building automation capabilities. This then provides a phenomenal opportunity to give partners the capability to create unique IP on top of these platforms.
“Over time, we are going to see application developers understand this more and take advantage of the infrastructure and technology that we will deliver together over the next 5-10 years. We have to think about how aggressively we build out our capabilities in this space.”
Specifically, Cisco is “mainstreaming DevNet” through the channel with the introduction of a new specialisation for partners. The specialisation will recognise Cisco partners with “proven software development capabilities and business practices” around network automation, DevOps and digital transformation.
“We believe differentiation and growth are intrinsically linked,” said Marc Surplus, vice president of partner strategy and programs at Cisco. “Everything we are announcing is designed to allow our partners to build unique capabilities and establish their competitive edge.”
According to Surplus, Cisco partners are “embracing” new skills and building new practices around software, DevOps, IoT and automation. Today, more than 50,000 network engineers from across 9000 partners are now members of DevNet.
Furthermore, DevNet career certifications will count towards eligibility for a partner gold certification, in addition to DevNet specialisation. The new training and certifications provide software skills for network engineers and software developers who work with Cisco technologies and APIs.
“Our customers are asking us different questions,” added Susie Wee, senior vice president and CTO of Cisco DevNet. “They’re asking us to automate their infrastructure and leverage new network capabilities to solve their business problems.
“This is creating opportunities for Cisco partners with software skills to build unique offers and accelerate business innovation for their customers. The new DevNet specialisation will reward and differentiate the partners who are embracing the new era of networking and can help customers succeed in their digital transformation journeys.”
James Henderson attended Cisco Partner Summit 2019 in Las Vegas as a guest of Cisco