The company plans to treat its managed-services partners differently, with separate terms and conditions, contracts, and margins that fit the business model.Cisco Systems has rolled out a separate pilot channel program designed specifically for managed service providers and outsourcers that it said it hopes to make a standard element of its channel programs some time in the first quarter.
The program will offer different payment terms and conditions to managed service providers that have customers with service contracts of at least one year, and different sets of discounts for outsourcers that have customers under a minimum three-year contract, according to Surinder Brar, senior director for channel strategy and programs for Cisco, based in San Jose, Calif.
Cisco partners are welcoming the proposed change.
"We are seeing a lot more interest in managed services from our customers," said Brian Sims, vice president at Advanced Technical Solutions, a regional VAR based in Scott Depot, W.V. The company has been offering fixed-fee proactive maintenance services since its inception eight years ago, but also recently began offering application-based managed services two years ago.
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"Managed services offer VARs a steady revenue stream so they can hire more people, while at the same time they offer customers more of a fixed fee cost for their technology," he said.
Although details of the Cisco program are still under development, Cisco's move to create specific channel programs for MSPs and outsourcers should help address complaints about payment terms from solution providers that have adopted a managed service business model.
At the heart of that issue is the fact that while solution providers are now getting paid by their customers in monthly installments over the life of the contract, most vendors still require them to pay for the products that they sell within 90 days.
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"We're very happy that they are recognizing the difference in the business model," said Mike Fong, CEO of Calence, based in Tempe, Ariz. Calence is one of the largest pure-play network integrators in the United States, with 500 employees and a presence in 20 markets. "Managed services is a totally different business model from a VAR business model, although more VARs are migrating to this dimension of the business."
As one of the biggest vendors selling through the channel, Cisco's move to create dedicated programs for MSPs and outsourcers is likely to be closely watched by other vendors that as yet have not tuned their programs to meet the specific needs of those groups.
Staff writer Jessica Davis contributed to this article
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