What happens when everyone has a router?
What do vendors and VARs do when everyone in the market has their technology in hand?
It's a contingency that network vendors like Cisco Systems Inc. and VARs like NetworkGuys Inc., a network security provider, have been facing for several years.
The answer, said Tim Carney, CEO of Network Guys, in Fremont, Calif., is that the company relies on the technology refresh cycle—the need to upgrade technology every 5 to 6 years—to drive business opportunity.
And the potential opportunity has never been bigger than it is today, said John Growdon, Cisco's director of routing and switching in worldwide channels.
"At the end of the '90s everyone in business upgraded their network and IT infrastructure … to the latest version of late 1990s routers and switches," Growdon said. "In a single period of time, we put a large portion of product out in the world in the installed base and that's where it has stayed. Come five years later and it's ready to be replaced."
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Several factors, including the general age of that installed base, the growing demand (especially for bandwidth) users place on networks, the capabilities of the latest advanced technology and the need for embedded security that only new systems can produce present an opportunity to upgrade a large portion of the networks now in use throughout North America, Growdon said.
Cisco estimates that VARs and vendors have to potential to replace approximately $20 billion of infrastructure in the next two years.
To take advantage of the opportunity, Cisco has initiated Foundation Advantage, a program that provides cash incentives and sales tools to prod VARs and end users to replace the old with the new.
Foundation Advantage provides:
- TMP (Technology Migration Program) and Competitive Equipment Exchange—A trade-in program, providing customers credit toward new purchases based on the initial value of the old equipment (about 10 percent). End users upgrading to more advanced systems earn more credit.
- Partner Incentive—15 percent back-end rebate based on TMP credits.
- Automated Network Inventory Profile—A discovery tool, installed in the end user's network to identify devices living in the environment. The tool provides details on Cisco products, such as age and the state of support life, but merely identifies competitive equipment.
The program is Cisco's largest partner program, Growdon said, and is designed to "enable and encourage" VARs to the task.
"What VARs need to do is incorporate the concept of refresh into every single solitary sale," he said. "The best practice is every time out on a sale they need to look for opportunities. Look for older equipment.
"This is also an opportunity to go and do unsolicited bids with customers," he said. "There is no need to wait for an RFP [request for proposal] to come to the street. Partners [that] are more proactive here and understand the future opportunity and act upon it and take advantage have the largest potential benefit."
Next Page: Trade-ins and leasing give VARs an edge.
The trade-in program gives VARs a competitive edge, Carney said.
"This is an easy call," he said. "You are not only looking at additional revenue, but you are eating away the competition, by trading out. This is a really smart idea."
VARs pushing the trade-in opportunity will additionally benefit from the decreasing price of technology, Carney said.
"Going to a customer and saying, 'For less than you paid for that [Cisco] PIX, I can not only upgrade you, I can put you in a more advanced [Cisco] ASA, would you like to trade up?'" he said.
"That's not a difficult sale. No one is calling up and asking, 'Where do I send my money,' but it's easier than a lot of the other opportunities we see."
VARs will also benefit during this and the next refresh cycle by encouraging businesses to take advantage of vendor leasing programs, Carney said. "When it comes time for the next refresh you can upgrade at no additional cost, you just extend the lease with new equipment."
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The introduction to the customers and the discovery tool also presents an opportunity to deliver services, Growdon said.
"It opens up a door to look at everyone's net," he said. "When you understand the map and inventory of a customer's IT assets it leads you to customer intimacy and customer satisfaction. It's critical to say here's where we are at today, here's where we have to get you to tomorrow. A map gets you there."
VARs may also use the tool to deliver a network audit for free, outside of any services or upgrades, he added.
"Everyone benefits from a program like this," Carney said. "You can go into anybody's network and find that they need to upgrade. Everyone wants to stay current."
In short, "You have to ask, 'What does Cisco do when everyone has a router?'" he said. "Everyone has to refresh eventually."
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