Cisco Systems' CEO John Chambers knows that good things can come in small packages, particularly when you are on the lookout for new market opportunities.
With a more-than-commanding grip on the enterprise networking market, where Cisco flaunts number one rankings across a variety of technologies, the company is ramping up efforts to make the outfit as dominant a player in the small and mid-size business market as it is in the enterprise.
Since Cisco's SMB business is 100 percent channel-driven, its invigorated SMB push should help solution providers increase sales and develop closer ties with the company as it rolls out new products, partner programs, service offerings and a reorganised sales team that includes dedicated SMB personnel.
'I believe we will get more business as a result of the changes,' says Raymond Benoit, president of RTM Communications, a US-based Cisco partner.
'Will it be 10 percent more ... 15 percent? I don't know, but it will have a positive effect on SMB [customers'] perception of Cisco,' he says.
No stranger to the SMB space, which Cisco Systems Australia managing director Ross Fowler defines as customers with fewer than 150 seats, the vendor already lays claim to a significant share of the market, citing an amalgamation of analysts' research.
In Chambers' view, that is just the jumping-off point.
'The commercial marketplace, the SMB if you will, will be both the fastest-growing segment of the market in growth but also in absolute terms. We also only have 40 percent market share there, so there's an opportunity for potentially dramatic market-share gain as well as growth,' Chambers tells CRN in an interview. 'If you combine the two, it gets pretty exciting.'
On top of that, industry surveys indicate that 40 to 60 percent of future IT spending over the next five to 10 years will come from SMB customers, Chambers says.
SMB products currently account for about 25 percent of Cisco's US$17 billion-plus product revenue and could grow over time to represent as much as 40 percent, he says.
To help fuel such growth, Cisco in April disclosed that it is in the midst of a $2 billion SMB investment that will carry into the next two years, aimed at boosting the vendor's product portfolio, enhancing channel programs and building awareness around its SMB offerings.
'This year is really the year of commercial for us. We've got both the go-to-market strategy and the technology strategy going,' says Paul Mountford, senior vice-president of worldwide channels at Cisco.
In Australia, the company last month launched its own version of the global company's SMB channel drive with a new program dubbed Simply Cisco Engage.
Aussie managing director Ross Fowler told CRN at the time that many resellers were finding it difficult to become a Cisco partner. Quite clearly, the networking giant - not satisfied with its dominance in the enterprise and service provider market - wants SMB channel partners to drive harder into SMBs.
And the same time, the vendor wants to apply pressure to traditional SMB-focused competitors D-Link and Netgear.
Under the program, Cisco is offering joint marketing funds to its base of 1500 Premier partners in Australia and would fund up to 75 percent of any approved marketing activity up to a maximum of US$5000 with the partner funding the remaining 75 percent. Cisco's finance arm Cisco Capital is now financing deals as low as $2000, way down from the minimum of $150,000 prior to the launch of the new program.
In addition, the company has just recently appointed Josephine Lanzarone as its new channel sales manager to drive the SMB push. 'My role is to invigorate SMB for us. The majority of customers in Australia are SMB customers for us. We're going to build that loyalty with resellers again and start working more closely with them.' This would roll out through better training and discount programs via distribution partners Express Data and LAN Systems, Lanzarone says.
'With the new channel account managers that we've hired in Sydney and Melbourne, they'll be working very closely with the distributors to look at coverage plans for resellers and discount programs through distribution,' she says.
Cisco has hired three additional channel account managers in NSW, and one each in Western Australia, South Australia and Victoria. Reps will be teamed with SMB-focused channel partners in their regions to help those solution providers find and close deals with end users.
Cisco had spent time over the past eight months talking to resellers, and in some cases resellers were trying to juggle too many vendors. 'It's a powerful message when Cisco and Linksys combine together to save them [resellers] time and hopefully make them more profitable selling the products together,' Lanzarone says.
Cisco is also working to alleviate any reseller concerns over when to sell Cisco to SMB customers and when to sell its Linksys SOHO and consumer solutions.
Cisco's Fowler put it quite simply. SMB customers that want a managed networking solution would choose Cisco while for basic internet access in the SOHO market, Linksys would be a better fit.
Brian Allsopp, regional manager, Australia and New Zealand at Cisco-owned Linksys, says the company's market in Australia is 90 percent SMB and telecommunications companies. 'SMB is what we've been focusing on over the last nine months putting the product in and we've had some good wins out of that so far, and now as Cisco takes on a new focus in SMB, Linksys is a great fit with that,' Allsopp says.
'[Users] can use Cisco in head office locations and Linksys in branch offices or maybe education ... maybe Cisco at the core and Linksys cards on the edge,' he says.
Allsopp believes that resellers do a good job of knowing where to sell Cisco and Linksys. 'At a product range level, we don't have a product set that competes with Cisco head-on. What are resellers good at? They're good at understanding customer requirements and putting product in. We're not going to get fussy about which part of the pie that they present to the customer as long as they present a solution based around our product sets,' Allsopp says. 'We want to be number one or number two in every product category - that's the goal.'
Products do not overlap and there is a clear delineation, he says. 'If I look at the product layer, Linksys only has broadband routers that rely on ADSL/cable. So we don't have an ISDN router, we don't have a Frame Relay router. If I've got an ISDN or a Frame circuit, I want it in some managed fashion - I want to be able to call the service provider and that's a classic Cisco opportunity,' he says.
Lanzarone agrees that there is minimal crossover. 'Resellers are telling us that as well too. They're all saying it's a good message and good opportunity to reposition Cisco and Linksys together. In some cases, some partners didn't even realise Linksys was Cisco-owned,' she says.
According to Allsopp, high margins in the SMB market will come from services offered by the reseller channel. 'I still think the headline message in that is there's still good margin in the Cisco business. This is not like some of the licensing programs where it's on one or two points margin.
'Into SMB, it's still double digit business [in hardware]. Secondly, if you can sell maintenance on the product ... that's 15 points margin and then there's all the professional services,' Allsopp says
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