When it comes to vendor mergers and acquisitions, the usual rule of thumb in the channel is that the smaller vendor will be assimilated and any and all resistance to that is futile.
What makes the acquisition of IronPort by Cisco so extraordinary is Cisco's commitment to continuing to manage the IronPort channel as a distinctly separate entity from the rest of the Cisco channel.
IronPort, a maker of security appliances that assign trust levels to different types and sources of data, was formally acquired by Cisco on June 25. The normal course of affairs would be to see the beginning of a massive effort to integrate the IronPort products into the Cisco channel, resulting in a huge rise in the number of solution providers selling IronPort products.
But because IronPort makes most of its revenue selling additional services for its appliances under a subscription model, Cisco is finding that it needs to maintain a separate IronPort channel. Cisco's own channel systems are built around selling products that don't have a downstream set of subscription services driving additional recurring revenue. Ultimately, Cisco would like to use that model for all of its products. For now, however, the company needs to sit back and learn how IronPort delivers its services with the goal of copying that model within the larger Cisco channel down the road.
In fact, what Cisco ultimately envisions is integrating the IronPort technology with Cisco firewall products to create a true self-defending network in which all the products share intelligence about potential threats and attacks. Naturally, those products would need to be continually updated via a set of subscription services.
Now, there's nothing particularly new about a subscription model. SonicWall and IBM's ISS (Internet Security Systems) unit have been providing the same type of recurring subscription revenue model to their partners for years. But as Charles Weaver, president of the MSP Alliance, notes in his newly published book "The Art of Managed Services," reselling managed services from vendors can create a conundrum for solution providers that aspire to deliver managed services.
On the one hand, it's an easy way to get into the managed services arena without having to put up too much capital. On the other hand, it creates a potentially problematic bond between the customer receiving a branded managed service and the vendor, particularly if the vendor decides to take the service direct or switch it out to another solution provider.
Weaver recommends that solution providers sell their customers on the need for a particular managed service that they create and deliver under their own brand in order to maintain maximum account control. The difference, he says, is that in one scenario the solution provider is the be-all and end-all for the customer, whereas, if it is reselling a service from a vendor, they are merely selling add-on services around a product sale.
The path a solution provider takes will be largely dictated by his set of circumstances. But the good news is that vendors are increasingly committed to building products that make it easier for themselves and third parties to deliver additional downstream services. And that spells more opportunity for everybody.
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