Cisco is moving into the execution phase of a multi-year channel evolution amid plans to position partners for accelerated growth aligned to four strategic pillars across Australia and New Zealand (A/NZ).
Built by the ecosystem and spearheaded by COVID-19, the technology giant is heightening focus on the core areas of SD-WAN, software, managed services and customer success. The aim? To strengthen alignment between customer and channel to drive partner revenue and profitability growth.
“Cisco has been evolving over many years but we’re now entering the execution phase,” said Luke Power, director of Partner Organisation across A/NZ at Cisco. “We’re moving away from talking about technology to focusing on solutions and outcomes and to achieve that, we’re putting partners at the centre of everything we do.”
In short, Power -- appointed to run the local channel in July 2020 -- is shifting the conversation away from speeds and feeds to how partners can leverage an expanded portfolio of solutions to help customers transform.
“Take SD-WAN as a primary example, the discussion 18 months ago was that this was the latest and greatest technology,” he noted. “Now the focus is more on what SD-WAN allows partners to do at a customer level, whether that is to become more efficient or to run modernised applications.”
In moving away from technical jargon, Power is repositioning the ecosystem to capitalise on increased end-user demand for modernisation and transformation, underpinned by premium managed services offerings.
“The demand is there, it’s just different,” he observed. “Some of the larger and longer sales cycle projects still exist but what's important to customers and partners is speed and agility -- quick wins or quick projects that need to be executed.”
Due to COVID-19, Power observed that speed and agility is now “everything” with the majority of customers and partners requiring solutions “yesterday”.
“We've been really quick to address that by reducing wait times and ensuring that as businesses transition, they have the required technology to support that journey,” he said. “Distribution has really supported these efforts and we couldn’t be happier with our distributors across A/NZ -- they’re driving the same agenda that we’re driving.”
Sizing up SD-WAN
As first forecast by sister publication Network World, SD-WAN adoption has been on an upward trajectory for more than five years, accelerated by evolving enterprise demands but supercharged by COVID-19.
For context, this was a global market lingering at $225 million in 2015, ballooning to $1.19 billion in 2017 and now on track to reach more than $8 billion by the end of 2021. With the benefit of hindsight -- and inspired by rising demand on both sides of the Tasman -- the channel could argue that initial IDC findings were perhaps somewhat conservative.
"While digital transformation and the embrace of the multi-cloud paradigm remain central to enterprise IT strategies and continue to be key long-term drivers of SD-WAN, the near-term reduction in enterprise workers at the branch induced by COVID-19, and the resultant reduction in CAPEX budgets at key verticals such as retail, has caused the market to pause growth in 2020," said Rajesh Ghai, research director of Carrier Network Infrastructure at IDC.
"While IDC is not in the business of forecasting when the world will be free from the pandemic, the firm expects robust growth to resume post-COVID-19 in 2021.”
Although first iterated in mid-2017, the IDC assessment that “SD-WAN is not a solution in search of a problem” continues to ring true in a market redefined by new professional and personal realities.
“We have seen a lot of conversations with customers and partners in relation to SD-WAN brought forward because of COVID-19,” Power noted. “In March of last year when companies were told on that Friday to pack up and work for however long from home, some customers didn’t even have laptops so you can imagine the transition.
“We focused on ensuring both customers and partners enjoyed the same experience no matter where they worked -- whether at home, in the office or at the side of a road. Having the same experience and quality of service was crucial.”
As outlined by Power, such an approach triggered “huge demand” for SD-WAN solutions across A/NZ with partners stepping up to roll-out infrastructure without being physically on-site.
“SD-WAN is a technology which can be programmed at a headquarter location and then shipped out to remote sites allowing the customer to just plug in and start,” Power said. “This can be configured remotely because it’s software-defined.”
With strong market demand underway, plans are now in place to ensure the adjacent partner ecosystem is equipped to service customers in new ways, armed with SD-WAN services and solutions.
“We see huge SD-WAN appetite but as you can imagine, most customers and partners already have Cisco routers in place,” Power added. “Routing has been a founding technology of Cisco since the 1980s meaning the priority is evolving that technology and approach to transfer this to the software-defined era.
“The channel is supported by our technology and architecture pillars which includes SD-WAN architects, product sales specialists and system engineers who help customers and partners on a daily basis when making decisions related to SD-WAN.”
Full steam ahead on software
Amid sizeable market change, Cisco’s strategy of transitioning into a more software-optimised business is also continuing to pay off due to an increase in revenue growth via the channel.
From close to a standing start, the vendor now houses one of the largest software divisions in the industry with an annual run rate of approximately $14 billion in revenue.
To put this meteoric rise into context, Cisco is now the fifth largest software company on the planet -- behind only Microsoft, Oracle, Salesforce and SAP yet ahead of Adobe.
But as noted by Chuck Robbins when addressing 3200 partners during the opening keynote of Cisco Partner Summit 2019 in Las Vegas, this has been “one of the most complex transitions we’ve been through”. Crucially however, “partners represent a huge part of what we are doing in this space”.
Almost two years on from the last large-scale in-person event since the pandemic, the words delivered on-stage by the CEO continue to carry significant weight at a local level.
“We have partners that have been with us on the software journey for a long time,” Power said. “We’re continuing to transition and leverage our software success which is making our partners more profitable due to low overhead costs.
“We also have new partners that we’ve never engaged with before. They are hearing about our successes in software and want to be part of our channel.”
Despite acknowledging that different conversations take place between managed service providers (MSP), system integrators and born-in-the-cloud specialists -- in addition to the many other partner types now in play -- Power said one constant theme continues to run through the ecosystem.
“Partners understand the need to have a combination of both software and hardware,” he advised. “Software complements the hardware and if you look at routing and switching for example, there now might be a licence involved which is software and is capable of allowing partners to turn on extra functions and capabilities.”
Such an approach is playing out in the numbers with the technology giant recently reporting 10 per cent year-over-year total product order global growth during the third quarter of 2021, spanning all solution segments.
For the period ended 1 May, total worldwide revenue increased seven per cent to $12.8 billion, with product revenue up six per cent and service revenue rising eight per cent. Of note and encouragement to the local channel, Asia Pacific, Japan and China recorded a 19 per cent increase in revenue, out-pacing the Americas (up two per cent) and EMEA (up 11 per cent).
“The acquisitions of AppDynamics and ThousandEyes allows customers to run enhanced monitoring software on the network and application side which has naturally spiked due to COVID-19," Power added. "Software is also built into our security -- especially for endpoint -- as we continue to build out our portfolio.”
Maximising managed services
According to EDGE Research -- commissioned annually by ARN and Reseller News and delivered in partnership with Tech Research Asia -- managed services ranks as the number two priority for the local channel in 2021, behind only security on both sides of the Tasman.
This is primarily motivated by a desire to attract new end-user logos and grow annuity revenue streams, in addition to retaining current customers while enhancing experience levels.
Despite a turbulent pandemic period, 88 per cent of partners are planning to increase internal investment in the months ahead, with 84 per cent committed to increasing staff training as an immediate priority.
“We’re seeing more of a services-led approach at a customer level,” Power stated. “When looking at customer deployments around five years ago, 90 per cent of that project was Cisco. Obviously Cisco still retains a large portion of customer projects but this is now combined with so many other technology solutions.”
As a result, Power estimated that for specific projects rolled out today, Cisco represents approximately 30-40 per cent of the overall customer solution -- reflective of evolving end-user requirements and an avalanche of new technologies flooding the market.
“It’s less about the technology and more about the outcome and the solution,” Power acknowledged. “When I speak to customers, they still view the vendor as being incredibly important but in truth, less important than perhaps four or five years ago.
“Customers care more about the partner and the services they are going to provide. They care about the approach and the reputation of the partner, the customer success stories and case studies of work with other businesses.”
In light of this shift -- and as outlined by EDGE Research -- disruptive outsourcing is now a reality as partners incorporate both established and emerging technologies to drive innovation, speed to market, enhanced user experience and improved performance.
“Cisco has acknowledged the value of a services-led approach globally, regionally and locally,” Power confirmed. “Our role is to make it easier for partners to roll out managed services offerings and combine our technologies and we continue to add extra resources locally to support that.”
While a vendor such as Cisco -- born in the channel and armed with a loyal and commanding army of market-leading partners -- is seldom short of ecosystem expertise, increased focus on new technologies and business models has naturally extended reach into new areas of the network.
“We’re having more conversations with different types of partners,” Power said. “We obviously hold a great amount of respect for our current partners but through our acquisitions -- such as AppDynamics, ThousandEyes and Meraki -- we’re starting to see newer players emerge, ones we perhaps wouldn’t have worked with five or 10 years ago.
“Because we’re heading down the customer success path, we’re picking up more services partners and the landscape is very strong across A/NZ. We’re seeing growth across all partner segments.”
Enhancing customer success
Often evangelised at channel conferences and endlessly referenced in partner communications, the importance of delivering ‘value’ at a customer level is not lost on an ecosystem continually required to evolve and transform.
But while the statement checks out in theory -- a straightforward linkage between value and success on paper -- the practice has always plagued vendors intent on walking the channel tightrope. One thing to demand value-based selling, another entirely to enforce or incentivise.
As observed by ARN, traditionally, revenue has acted as the benchmark of success and the difference between metal plates, provider tiers and programmatic benefits. Yet as the market emerges post-pandemic, plans to measure partners based on value is picking up pace.
Often referenced as a gold standard for channel engagement, Cisco is no different amid plans to tackle an ideology that appears simple in practice, but subjective -- and therefore potentially ambiguous -- in theory.
“The strategy around customer success didn’t start yesterday,” Power said. “Any strategy always takes time and we’ve been on that journey with our partners from the very beginning.
“At the start it was challenging, especially when our heritage is a hardware company. Justifying metrics and performance when it wasn’t always tangible was difficult but we’re now starting to see some strong results during the past six months.”
With renewal rates also on the rise -- as a by-product of enhanced customer success focus -- Power cited a significant shift in mindset in relation to delivering on the promise of end-user experience, a philosophy shared across vendor, distributor and partner segments.
“In the past, we’d sell a piece of technology, walk into the customer site and that very piece of technology might still be on the floor in a box,” Power accepted. “Now partners are actually working with us to ensure our technology is activated and maximised to the fullest extent which is allowing the channel to measure that profitability.
“Partners are generating more revenue from the customer because they are servicing the customer in the correct way. They now have more touch points to work with which in turn is helping drive renewals and refresh cycles --no longer are partners revisiting customers they spoke to three years ago, rather last month.”
With an engaged and energised ecosystem, programmatic changes are also underway with plans to consolidate more than a dozen separate partner programs into one single program during the next 12-18 months, forming part of a channel overhaul designed to simplify go-to-market engagement.
Unveiled during Partner Summit Digital in October 2020, the initiative -- under the banner of New Cisco Partner Program -- will provide opportunity for partners to differentiate across multiple areas of the vendor’s portfolio, from resell to managed services, as well as developer and advisory practices.
Representing the “biggest changes in over a decade”, the modernisation efforts are anchored around four key partner roles; Integrator, Provider, Developer and Advisor.
Partners will be able to select one role -- or all four -- depending on specialisation levels and market priorities, shaped by Gold, Premier and Select ranking tiers. Crucially however, current Cisco partners “will not be asked to start over” upon launch of the new program, with the framework designed to reflect current ecosystem expertise.
The change is designed to provide agility for partners serving customers in different ways -- gone are the days of putting partners in a box or limiting the ability to showcase unique value.
“Not every vendor is going down the customer success path but we’re noticing the partners who have multiple vendors invested in this area, they are operating at the cutting-edge,” Power said. “The timing is perfect because we’re now seeing the tangible results and benefits of pursuing this strategy locally.”