Just a Flesh Wound?

By Chris Talbot  |  Print this article Print

Analysts say that tech giant Cisco may have lost market share to companies such as HP and Juniper. As we head into Cisco's Partner Conference, what does that mean for IT solution providers who choose to partner with this networking giant?


Cisco’s competitors are each biting off small pieces of the leader’s market share, but it’s an injury of a thousand cuts rather than the toppling of the giant, King said. He noted that there are only three or four major players trying to invade Cisco’s space, and although they may cause Cisco to bleed, it doesn’t mean Cisco is heading to the grave any time soon.

"They’re one of those companies where the products have been around for so long that it would surprise me to hear of any enterprise company that didn’t have some Cisco hardware in the data center," King said.

Increased competition in core markets is one of the reasons for Cisco’s hard push into what it sees as future and emerging technology markets.

"There’s been a lot of criticism or talk about Cisco. The Wall Street Journal commented on Cisco losing ground to Juniper. I found that interesting because Cisco over the past year to a year-and-a-half has made a shift in their strategy, more so a strengthening shift toward UC and telepresence and videoconferencing and social media and social networking tools," said Michelle Warren, president of MW Research & Consulting. There’s also a greater emphasis on serving the SMB market – something Cisco has been talking about for years.

With the core router and switching market facing challenges and reduced revenue and margins, Cisco is pushing partners to focus more on solutions and services, which is a more lucrative sell than hardware, Warren said. This change in channel strategy is being felt in all of Cisco’s North American regions. Of course, such a change in focus is not limited to Cisco; it’s also something that HP and other competitors have also been doing.

One thing does remain clear about Cisco’s place in the industry. Often considered to be on the forefront of channel strategies and programs in the past, Cisco is still considered to have the premier partner program in the networking space.

Although Doyle said Cisco’s earnings were not as positive as they would have liked, that’s more of a stock price issue than something for the channel to truly be concerned about.

"It’s not like their revenues are down. They’re not growing as fast the street wants," Doyle said.

According to King, Cisco’s channel program has been very aggressive in ensuring that partners have a stake in future markets like collaboration, cloud computing, data center virtualization and video.

Long-time Cisco channel partner Netarx has seen nothing but good things come out of Cisco channel programs. According to Michael Souders, president and COO of Auburn Hills, Mich.-based Netarx, Cisco has one of the best partner organizations he has ever seen. He must be happy, as he’s been a Cisco partner since 1994.

"Personally, I think over the last three or four years, our relationship with Cisco has gotten better every year, and this year I’ve seen specific examples of how it’s improved even more," Souders said. When there have been causes for concern, he said Cisco has always quickly stepped up to fix the problem.

Additionally, the partner organization has been quite stable. Souders said he has dealt with the same channel account manager for five years, whereas he’s used to seeing channel account managers come and go every year with other vendors. The stability of his Cisco channel account manager has saved him a lot of time because the account manager is fully aware of Netarx’s business and needs.

"I think Cisco’s just got it down. They’ve been doing it so long. They don’t have high turnover in their channel organizations," Souders said.

Dealing with Cisco does mean having a high level of complexity, though, but even that isn’t a bad thing for partners because it means having a wide selection of programs from which to benefit, Souders said.

"I think what it means is I need an accountant to help me with the programs. I do rely on a CPA. I have involved our business operations group much more in Cisco’s channel programs over the last six to 12 months because they have become very complicated," Souders said.

One of the bigger issues for the channel is margin pressure, said Doyle. It’s not a common complaint, but it is a fact their margins are under pressure, he said. If that trend continues, it could prove to be a long-term challenge for the company and its partners.

"The channel always complains about not having enough margin. That’s a given. If they don’t complain, then they’re doing something wrong," Doyle said. After all, who wouldn’t want to make more margin on any given sale?