Balancing Act: Do Core Products Suffer When Vendors Seek New Markets?By Carolyn April | Posted 2009-06-18 Email Print
If not diligent, leading technology vendors like Cisco run the risk of neglecting the core products that account for the majority of their sales as they ambitiously pursue newer, high-margin areas of focus.
Breaking ground on new and emerging technology areas is what keeps this
industry alive and kicking. Yet established, market-leading technology vendors
face a tricky balancing act when they set their sights on new frontiers. At the
same time they are opening their wallets and committing their engineering teams
to innovate the next best thing, companies can neglect the core products that
drive their revenue engines. Over time, complacency can result in eroding
product quality or simply lack of innovation or enthusiasm. That’s a
prescription for customer defections the next time a refresh cycle for core
products comes around.
It’s already happening in the case of companies such as Cisco, according to some solution providers in the field. Cisco has launched ambitiously and with great fanfare into sexy, high-margin areas like unified communications, blade servers and virtualization. But the networking giant also has been accused of taking its eye off its core switching and routing gear.
For integrator and hardcore Juniper partner Chris Burgy, CTO of Archer Technology Group in Southern California, Cisco’s distraction hasn’t been a bad thing. Several large customers, disappointed with the quality and innovation of Cisco’s core networking gear, have hired Burgy’s company to install alternative products.
"We just eat Cisco's lunch with a story that is really easy to articulate: one-third of the cost for operational expenditure, a much better product that’s less to buy and to maintain," Burgy recently told Channel Insider.
Burgy made a further point that’s salient. Can Cisco do both things well—enter a multitude of new areas while continuing to advance heritage products to keep up with more nimble alternative competitors?
"It’s challenging," Burgy said. "I don’t know how they keep their focus."
Cisco’s not alone in dealing with this dilemma. Microsoft is trying to blaze its way into new markets to catch up to rival Google and claim some identity in the rapidly growing software-as-a-service space. But at the same time, the software giant must keep the massive Windows and Office license renewal engine going or risk losing the overwhelming majority of its revenue base.
Vendors and solution providers need to continue moving forward into lucrative new markets and skill areas, where the opportunity for services attached to revenue and high margins is great. That said, solution providers should also keep an eye on how their vendor partners are tending to those legacy products before unhappy customers start picking up the phone wondering why you sold them this piece of, well, you know.
It’s also a good idea to have some alternative vendors in your lineup, so you aren’t caught flatfooted when a customer demands a change.
Have you heard any complaints? Let us know.