Cisco: Partners Need to Lean In to New Business Models, Market Evolutions

By TC Doyle

CISCO PARTNER SUMMIT — Consistent. Predictable. Steady. In past years, these are but a few of the ways partners have described Cisco’s annual worldwide partner gatherings. But not this year.

The 2014 annual Partner Summit in Las Vegas (and the 2014 Virtual Partner Summit that runs in parallel with it) was a blur of new messaging and calls for change. Among other things, Cisco launched new partner programs, unveiled new technology and articulated a strategic, technology vision that could put the company at the center the most important trends in all of computing today. This includes cloud, mobility, security and more.

For perspective, Channel Partners turned to Wendy Bahr, senior vice president of the Americas Partner Organization at Cisco. Why so much disruption all at once? She says there are three reasons, which amount to “a perfect storm for change.”

“We have new technology, which is fantastic. We have new consumption models, which are very different than before. And we have new buyers, which is a result of the budget for technology moving out of IT,” Bahr says. “This is the ‘why’ for so much change. If you can understand the ‘why,’ then you can come up with a prioritized attack plan. That’s what this week is all about.”

In a far-reaching interview, Bahr discussed everything from emerging partner business models to ways to penetrate vertical markets. She also gave a nod to Facebook COO Sheryl Sandberg when she advised business partners to “lean in” when it comes to discussing cloud opportunities with their customers. Here’s a closer look at some of her thinking.

Channel Partners: This week was all about changes and market transitions. But I wonder if partners feel lost. What are you saying to partners to help them find their differentiation in the market?

Wendy Bahr: It really is all about prioritization. Where’s your unique value proposition? That’s what I ask partners. It could be geographic, it could be vertical, breadth, it could be a particular understanding of software applications, or a relationship with ISVs in the ecosystem. It could be not one but a several of these at once. We’ve been talking with partners, and helping them understand the strategy and road map to the Cisco Open Network environment, and what the power of a programmable network really means. I’m a very pragmatic salesperson. So my session with the partners went like this: “OK, there’s a lot of change, but how are we going to deal with this change?” The answer lies in understanding the future, being able to determine where the market is going, and understanding how you can play in the market.

CP: How about an example?

WB: Let’s look at new consumption models. If you look at the wins we have had with Meraki, it’s not about selling to the standardized IT department. It’s about selling to multiple locations, etc. I think partners sometimes feel that the Meraki solution is relegated to the low end of the market. But in fact, the top 20 deals for Meraki grew from $250,000 in 2011 to $620,000 in 2013. So Meraki as a new consumption model represents a significant opportunity for our partners.

CP: Earlier in the week, both [Cisco CEO] John Chambers and [President] Rob Lloyd said Cisco saw an inflection point around nine months ago when it came to cloud adoption. The partners you talk to and engage: Did they see this at the same time or are they seeing it now?

WB: Like anything, there’s a range. Some partners moved in at the very, early adoption phase — arguably even before we did. We have had some tremendous success with some of the partners who have leaned into the ecosystem, who have leaned in to the programmability of the network …

CP: [interrupts] … Is that my heading? “Partners Need to ‘Lean In’ to the Cloud”?

WB: I won’t take credit for the idea; I think another woman has used the “lean In” idea to great success, but it does apply here. You have these front-edge partners who did lean in early and have enjoyed great success as a result.

CP: Are these born-in-the-cloud partners? Traditional partners who carved out new capabilities? Who exactly are they?

WB: There are examples of both. Take our [Geo] global partner of the year, Nexus IS. Nexus “leaned in” to the opportunity of open source, Open Flow and other technologies. They have programmers on staff that are looking at application development, plus they are very verticalized when it comes to health care. They had their employees follow clinicians in hospitals to better understand workflow. This partner understands that “going vertical” is not just about understanding a customer’s information technology (IT) needs, it’s also about understanding and anticipating their operational technology (OT) needs. When you push those together to the betterment of a business outcome, you’re no longer having a technology conversation. You’re having an industry conversation. In this case, it just happens to be about helping a clinician improve patient outcomes, from the moment when he or she walks into a hospital and clicks a badge onto their lab coat. We are seeing tremendous success with partners who think about the cloud, about the Internet of Everything and other trends like this. It’s not the entire partner population, but it’s not a small number, either. We also have some partners who say they want to move in this direction but want our help. With enablement, advanced technologies, services and more … it comes down to putting the programs in place, the training in place and more to ensure that our partners enjoy the success in the future that they have enjoyed in the past.

CP: When do the new models and technologies start to become 30, 40 and even 50 percent of your business?

WB: That’s an interesting question and I’m not even sure any one individual has the perfect answer. The way the cloud model is evolving makes it difficult to predict. Just three years ago, there was some skepticism about the cloud’s viability. Is it real? People were asking that. Not today. In fact, many customers don’t fully understand that they are actually in a hybrid cloud because so many of their lines of business owners have gone out and swiped their credit cards and sent their data out to a public cloud unbeknownst to their CIO. So the role the partner can play is to assess how hybrid clouds have penetrated a customer’s environment. Once we get those assessments, I think we will have a better sense of how fast this is tipping over. Our gut tells us it’s tipping over pretty fast. But we don’t have those statistics. The market is going to determine how fast we move in some instances. We just have to be sure we are ready in case it tips over immediately. This includes looking out for our partners with appropriate programs and technologies to help them make the most of the opportunities at hand.

CP: A year ago, some of your executives were still saying that on-prem technology sales were going to grow for years to come. I don’t hear that as much. Am I’m just not hearing that talk, or has the conversation inside Cisco simply changed that much?

WB: Given our success in converged infrastructure – we are No. 1 according to many of the experts – I think it’s sort of become a fait accompli. Every one of my partners is out in the converged infrastructure space selling private clouds. It will remain the predominant form of business. I think customers will buy the base and rent the peak, so to speak. They will put commodity workloads into the public clouds for things that do not involve data sovereignty or require stringent security. That business will take off. I even see it with my Cisco Powered Cloud Services. When I look at Infrastructure-as-a-Service in the U.S., for example, we are growing by 300 percent. When I look at hosted, collaboration solutions, we grew by 82 percent in the first half of fiscal 2014. Those aren’t off tiny numbers. This shows where the transition is occurring. I think we have many partners with a combination of premise-based, private cloud sales and off-premise, public workload sales. I think the future is going to be an interesting blend of revenue for partners. That’s why creating the right programs for partners is so key.

CP: Can Cisco do it?

WB: Well, I feel for [Senior Vice President of Worldwide Channels] Edison Peres. Programmatically, we have prided ourselves on consistency and governance globally. In a traditional product resale model, that’s something we have been recognized for. This is a much more complex model. So therefore, our programs have to evolve to keep pace with these changes. We need to be globally consistent, reward specific behaviors and provide the right incentives. But between premises-based, managed, public cloud, private cloud and hybrid cloud models, things can start to look like a Rubik’s cube. We want simplicity for our partners, but recognize things are getting more complex. I give Edison and his team a lot of credit because they are continuing to evolve a world-class program to include these models. But it’s not easy.

CP: Let’s talk simple ideas. Tell me about an unheralded opportunity that’s just primed for partners.

WB: That’s easy: How about the installed base? I have over $3.5 billion worth of installed base in the Americas that is past the last day of support. What I’d like to see Cisco do is come up with a comprehensive and compelling promotion and/or program that helps our partners prepare our base of customers for the future.

CP: How much of that base is upgradeable and how much is just out dated stuff?

WB: I think 90 percent of the $3.5 billion is upgradeable. It’s a lot. To keep pace with changes in technology, you cannot let your infrastructure get too far behind. If partners don’t get that business, it will simply go to the cloud, which may be where it should go. But I think it’s an easier transition for our customer to upgrade the base. They should upgrade the switching and the wireless now. That way customers’ mobile data, which is so valuable and critical to the VP of marketing and data analytics, can be best put to use. These are conversations partners can be having now.

CP: Looking ahead, do you see any one partner business model prevailing?

WB: No. We wouldn’t have changed our Gold partner program to the extent we did if we saw one business model dominating in the years ahead. Five years from now, “hybrid” will be the play. The majority of our partners will need to be able to play in a hybrid landscape. The majority of partners will need to understand the power of a programmable network. And I would love to see the majority of our partners not just become applications-centric, but develop true, programmable skills or partner with those who customize and write code.

CP: Can they make the jump?

WB: I think we’ve gone from a Web economy to an applications economy. And I think we’ve gone from a premises-based solutions set to a hybrid-based solutions set. I think partners, at least the ones that I have seen be successful in these early days, embrace that philosophy.

CP: What about vertical market penetration? What can partners do to increase their footprint in select vertical markets?

WB: There’re two ways to think about this. There’s “vertical focus” and there’s “vertical practice.” So what do I mean by this? A vertical focus is when you take a horizontal application, learn the taxonomy, the lingo and applications that apply to a market like health care, for example. When you do this, you become proficient at calling on clinics and doctors. That’s taking a horizontal application and applying vertical relevance. A partner who does this can make great inroads into a vertical. Another partner might take that a step further by hiring someone from health care — a clinician, perhaps. With resident expertise, they can then develop a vertical practice and sell relevant applications and, thus, become more integrated with a health-care client’s vertical solution subset. Not every partner can do the latter. But more can do the former.

CP: What do you want to leave this annual partner conference with?

WB: I want to know if our partners are with us. Every year we test them to a certain extent. But this year especially. We have new programs, new technologies, new messaging and more.

CP: Would you say that you have stress-tested them this year more than before?

WB: I certainly did in my Americas [presentation]. It was heavy in content, heavy in change … Despite that, I wanted to convey that we were with partners and not wavering in our commitment. They have responded in kind.