Cisco’s Daunting SMB Challenge

Cisco Systems, the IT networking giant, continues to expand and strive to dominate new markets. In this case, the market isn’t new, but the degree of financial investment and product portfolio is.

The company has had a “commercial” products division for years with products and partnerships aimed at the SMB market. Historically, SMB really meant enterprise products “defeatured,” re-priced and repackaged for down-market customers. However, Cisco recently announced an expanded set of resources and products aimed squarely at small business customers (those with 100 employees or less). That make me think they’re getting more serious. This investment now includes not only an expanded product set, but some new easy-access technical support models, some significant demand generation marketing and a dedicated field organization to cater to this market.

As one might expect, Cisco has high aspirations for its small business technology vision. Yes, the technology has to be simple to buy, install and run and “just work.” But, it also has to meet the evolving needs of small business around comprehensive security, an increasingly mobile work force and a highly collaborative work style between employees and their customers.

The specific product announcements supporting this vision include a new version of the spam and virus blocker recently acquired from IronPort, and several enhancements to the Smart Business Communications System including a new wireless IP phone, an enhanced secure wireless router and a complete network desktop storage system. This integrated IP-based small business product set all boasts under-15 minute configuration with an enhanced Cisco Configuration Assistant tool for easy management. The company has announced a new Small Business Support Center with staff trained in the common business problems unique to small business customers, plus an enhanced small business online support community including discussion groups, wikis and application notes.

The market proposition looks solid, and in keeping with Cisco’s heritage the products look robustly full-featured. What we didn’t see were some of the fundamental details supporting the go-to-market strategy here—details that frankly Cisco hasn’t really nailed for the small business community in the past:

• How compelling will the partner business proposition around supporting a self-configured, easy to operate, lower cost product set really be? The majority of Cisco’s channel community has historically focused on enterprise and upper midmarket customers and have been services-intensive businesses. To date, certified resellers have still sold the majority (65 percent to 70 percent) of the SMB product portfolio. But will the customer demand for this technology be enough to create a fundamental shift in what kind of partners promote and service the technology in the future? Will the 30 percent of the SMB product line through volume channels of today become more like 50 percent and greater? If so, how much will that shift the profit dynamics among the partner community?
• Will the price points be aggressive enough to compete with the myriad of point-product low- cost competitors? With VoIP, wireless and switching products becoming more predominant (and inexpensive) in this market, will Cisco’s price points (think around $400 per seat for the VoIP switching and desktop solution) really take hold? In today’s economy, I wonder if people will see VoIP and wireless technology as a luxury or a necessity?
• Will the demand generation marketing campaigns aimed at small business be sufficient enough to get small business customers to trust the enterprise products giant? Marketing to this customer set is a grass-roots effort, and partners will be key to this endeavor. Cisco did indicate enhancements to its partner co-marketing materials. But, will partners be willing to invest when their product margins will inevitably be lower than legacy enterprise products?

As a 25-year channel historian (and an ex Cisco employee), these lingering questions are not insignificant. Tackling a highly fragmented, support-intensive and extremely price-sensitive customer set in today’s economy is a bold and faithful move on Cisco’s part. Clearly, Cisco’s deep pockets and broad field resources will help it stay the course. But, if it doesn’t continually listen to the market, adjust price points as necessary, continually enhance the simplicity and diversify its channel volume capacity model, Cisco might just find that catering to small business is just too small of a business.

Beth Vanni is research director at Amazon Consulting, a full-service consulting firm that helps high-tech companies increase profitability through reseller channels and partner alliances. Amazon Consulting is a premier partner of Channel Insider.