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For Cisco Partners, There's Gold in Them Hills

Cisco held its annual Partners Summit earlier this month in San Francisco, a city known for many things, among which the Gold Rush of 1848 that led to its founding. To me, this makes San Francisco a particularly fitting venue for the event, as Cisco partners now have a Gold Rush opportunity of their own as the world shifts to digital. Digitization should be of keen interesting to Cisco resellers as most of the building blocks of digital transformation are network centric in nature, raising the value of the network, something that was once considered "plumbing."

The theme of Partners Summit was "full speed," indicating it was time for Cisco and its channel to step on the gas and go after a number of new opportunities in front of them. However, capturing these opportunities requires a change with Cisco's partners, as the selling motion around digital trends is quite different than selling boxes and making money racking and stacking equipment. Let's look at some of the biggest opportunities that lie ahead for Cisco's channel and what needs to change to capitalize on them.

I've stated a number of times that I believe the impact of IoT will be far greater than that of the Internet, as it will create orders of magnitude more connected endpoints and enable a number of new opportunities. Cisco's SVP and GM of IoT and Applications, Rowan Trollope, discussed at the summit how hard it is to build a network to support IoT as it needs to operate differently than a traditional IP network.

Given Cisco's share as the incumbent network vendor, it can build some unique capabilities into its products and embed its technology into IoT endpoints, opening the door to new buyers and projects. However, here is where the change is required: Trollope provided an interesting data point, saying that 60% of IoT spend comes from non-IT buyers, meaning the addressable market for Cisco's channel just got bigger. However, many of the resellers I've talked to about this aren't all that comfortable talking the talk with line of business managers, facilities departments, and corporate executives. Cisco partners must accept this and not try and shoehorn IoT in through the IT department. Rather, the channel needs to be able to quantify the value of the technology in terms that the non-IT groups can understand. It's a hard change to make, but a necessary one today.

The Collaboration Business Unit at Cisco has experienced a remarkable turnaround over the past few years, going from a group that was in steady decline to a business that has now experienced many years of growth. However, much of that growth came from refreshing an older portfolio and aggressive pricing. That meant selling the same stuff the same way but with newer functionality at a lower cost.

There is a much bigger collaboration opportunity out there, though, and the ability to capture it comes from a new licensing model that enables broader subscription sales and meeting space evolution. As part of his event keynote, Trollope brought out a wheelbarrow of legacy collaboration stuff such as webcams, white boards, and computers. He also pointed out that only 5% of meeting spaces have Cisco technology in them. Cisco now has much improved, integrated meeting room tools to replace the stuff in the wheelbarrow and enable partners to be more aggressive in pushing broader solutions into different types of meeting spaces. Also, as part of Cisco's Digital Ceiling initiative, customers can now control lights, HVAC systems and other environmental systems from the conference room itself. Historically, Cisco partners focused on one small slice of the conference room -- most likely a phone and video terminal -- but now, they need to think more broadly about different types of meeting spaces that include huddle rooms, open spaces, flexible workspaces, and other areas where Cisco Collaboration technology can be used.

The other collaboration opportunity comes from the newly unveiled Spark Flex Licensing plan that lets customers buy all things Cisco Collaboration with a single per user per month fee regardless of whether the solution is in the cloud, on premises, new or old (see, "Cisco Simplifies Spark Decision, Buying Process" for more on this). The challenge here for the channel is shifting to a recurring revenue model, as this can bring a number of issues including those around sales compensation and post-sales support, but provides much greater predictability in the future. Recurring revenue will also lead to greater profitability in the future. SVP of Cisco's Global Partner Organization, Wendy Bahr, pointed out that Cisco's most profitable partners are at 40% recurring revenue where the rest are only at 17%.

Any business or IT leader I talk to today tells me that improving security is a "top three" initiative, with over three-quarters saying it's the top initiative. Being highly fragmented, the security market presents a massive opportunity for Cisco's channel. Cisco is currently the market leader in network security with about 8% of the overall share. In fact, the "others" category in security (depending on whose numbers are used) typically accounts for 30% to 40% of the market. If Cisco could capture just a small piece of the "others," it could more than double its revenue in security.

It's my belief that Cisco has never been positioned better in security, as its "network-as-a-sensor" and "network-as-an-enforcer" strategies take advantage of the fact that the company is the de facto standard for networking for most businesses. Capturing network data and analyzing it can quickly find breaches and malware, faster than with traditional point products.

Additionally, Cisco has released a flurry of new security products over the past year that range from the endpoint all the way to the core of the network. Furthermore, Cisco has made these products easier to purchase through the creation of Cisco ONE security software packages to ensure customers have the right technology in the proper places when needed. The change here for the channel? Completely rethinking security. Today, 90% of security spend is at the perimeter, but only 20% of breaches occur there. The sales motion for security must be directed at places inside the network such as the branch office, data center, and access edge.

Cisco's position in the cloud has been somewhat cloudy of late. It has some products that enable cloud providers, offers its own SaaS apps such as WebEx, and helps customer build private clouds ... but Cisco has never had an overarching cloud strategy. During his keynote, CEO Chuck Robbins was very clear about how the world should think about Cisco and the cloud. Its cloud strategy is to help customers move to the cloud any way they want and anywhere they want. This statement is very broad; it includes infrastructure for building private clouds, security, multi-cloud management with CliQr, professional services, Cisco-powered cloud services, and a number of cloud apps. The channel challenge here is multi-dimensional. First, while the vision sounds great, it's really broad and requires that partners adopt a services-led engagement model in order to fully understand what their customers are trying to do. This is something resellers should be doing anyway as it tends to lead to larger deal sizes that are more profitable, but for cloud, it's mandatory. Second, the world of clouds is actually very complex given the variety of cloud things there are out there. Cisco needs to work with its partners and build more turnkey solutions.

In summary, the resellers that embrace the "full speed" theme of the summit will indeed strike gold, but they need to make sure they evolve along the way.