When you're up against a giant, it's nice to have a little help from your friends. A bevy of infrastructure vendors hoping to tame networking giant Cisco Systems is turning to the channel for a helping hand.
With an array of new partner programs to back them up, vendors in the IP telephony, switching and routing markets are courting channel partners with promises of higher margins, less congested partner ranks and competitively priced products.
Cisco is facing pressure at the low end from vendors such as Netgear all the way up to the high-end enterprise space from IP telephony vendors such as Avaya.
These vendors are finding willing partners among the ranks of networking resellers and integrators that do not necessarily want to anger the biggest vendor in their market but, faced with the chance to boost their margins, are more inclined than ever to sell non-Cisco gear.
Netgear, for one, sells wireless access points for hundreds of dollars less than the equivalent Cisco products and boasts of 30 percent margins on its 100 VPN tunnel firewall product. Netgear chairman and CEO Patrick Lo says it is 'impossible' for Cisco to match his company's margins on these types of low-end products.
Ian Mclean, managing director at Netgear in Australia, adds that over the past 12 months, the vendor has seen an increasing number of Cisco resellers joining the Netgear channel fold. 'There's a high cost of involvement in being a Cisco partner. It's a low margin return and the channel pricing structure [of Cisco] - for many people there's not a profit in there for them,' he says.
'From a technology perspective, what we had two years ago is now a lot easier [to configure]. The technology has got simpler and allows them to support applications with Netgear products that they thought they couldn't,' he says. The vendor's hardware is also now easier for the dealers to support with offerings such as four-hour and next-day replacement services, says McLean, 'rather than having to get a Cisco on site contract'.
Nevertheless, he believes that it is still easier for people to maintain the 'status quo' and buy a brand given that there is a delta between what a user gets when they buy a Cisco solution as opposed to Netgear. 'Some players have an interest in keeping the status quo supplying the products that they've always supplied,' he says.
Dealers - which were once only Cisco shops - were increasingly looking to second and third sources. In addition, Netgear was now seeing its brand recognised in the enterprise market, an area where it had traditionally not played, McLean says. Research conducted by a third party around 18 months ago on behalf of Netgear found that between 65 and 70 percent of enterprise organisations in NSW recognised the Netgear brand, he says.
In the corporate market, the battle may be just that bit harder. Grant Morrison, operations manager at Alcatel distributor VExpress, claims the distributor had seen a 'level of interest' in Alcatel products from existing Cisco resellers, but it was 'nothing to get excited about'.
'It's been well proven that it's been a hard grind to sell anything against Cisco - but it's slowly changing. The channel will encourage people to have a multi-vendor policy and there's still a lot of momentum around end-users to have multiple vendors on your network. There's a gradual building of awareness that you need to have alternatives to Cisco at a channel level,' he says.
With more than 50 percent of the market, Morrison says Cisco will always be the dominant vendor. 'The question needs to be asked: are the smaller channels capable of selling against Cisco?'
However, vendors competing with Cisco have been aggressive in their channel marketing with Alcatel, for instance signing at least half a dozen fresh partners this year, Morrison says.
He says that in the SME market, companies like Netgear and D-Link were more likely to capitalise on a move away from Cisco. At the SME level, a $500 switch from D-Link and a $5000 switch from 3Com do the same thing. However, big corporations generally want recognised brand names, he says.
For the corporate players like Nortel, Alcatel and 3Com, which are offering good channel incentives and discounts, selling against Cisco is still a hard game. 'I hate to say it but at the end of the day, the status quo is probably the most likely outcome for the foreseeable future despite the size and scope of the other [competing networking] vendors. In all honesty, Cisco has to maintain the status quo - it doesn't have to do anything special,' Morrison says.
He says that people who scream the loudest that they cannot make money from Cisco sales are generally the ones that have not done the work.
However, he is finding that more resellers are not blinkered or close-minded. 'It's been a tough four years - at the end of the day they'll look at all vendors.'
He encourages all resellers to 'get another notch' on their belts against Cisco. He says it is still the 'usual suspects doing the usual things' despite alternative vendors coming out with good products and the promise of healthier margins. 'If that's all it took - at Cabletron, we would have taken over the world a few years ago.'
He says even if a competing network offering from an alternative vendor is 20 percent cheaper than Cisco's, there would still be a 1:50 sales ratio compared to the networking giant. 'But the next three years are going to be growth years and other vendors are going to get more aggressive,' he says.
Tony Warhurst, national sales manager at new VoIP market entrant in Australia, Zultys Technologies, has recruited around seven reseller partners since launch in May. Some of these partners are also existing Cisco resellers. For example, one Wollongong-based Cisco shop, AVC Computer Networking, took on Zultys' products recently.
Warhurst says the company had managed to attract interest from smaller integrators dealing in Cisco, but the larger players such as Dimension Data were more loyal to the top ranking networking vendor. 'The biggest ones are more loyal to Cisco and are [more] reluctant to take on another product line in case Cisco put the brakes on the relationship,' Warhurst says. He claims that Zultys' average profit margins of between 25 and 30 percent on its IP telephony infrastructure products are 'pretty healthy in comparison to Cisco'.
The company is often asked the 'brand question', according to Warhurst, as many customers are still concerned about the perceived requirement to buy an established and recognised brand. 'We do get asked the question: what is your financial background and will you be around in five years,' he says.
Zultys is working on around half and dozen potential sales, but since May, has not made any sales. Warhurst says that it is 'always going to be difficult when the company walks into a Cisco house with a Cisco focus. 'We'll do what we can there, but we're not going to change everybody's mind,' he says.
Oliver Descoeudres, marketing manager at integrator and big Cisco shop NetStar, says consultants are recommending vendors other than Cisco because it gives them a role to play - if you're just buying Cisco, why would you need a consultant?' he says.
Still, Cisco's dominance is 'under no real challenge' in the networking space, he claims. 'If you're talking about WAN [infrastructure] in particular, then I can't see that changing.' He says, however, that in
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