Cisco’s Goldilocks Product Strategy for the Channel

One of the oldest and better-known sayings in this business is that where there’s mystery there’s profit, and nothing is better for the channel than when high demand and mystery come together at the same time to create high-margin opportunities in volume.

That seems to be what’s happening in the network infrastructure space as a long-awaited product refresh appears to be well under way after five long years of waiting. What’s driving this refresh is the simple fact that routers and switches tend to be upgraded about every five years. After years of adding more application load to the network, the sheer weight of all the additional applications and protocols appears to be finally taking its toll on the infrastructure.

This naturally creates an opportunity to sell upgrades, but rather than just provide bigger, faster routers and switches, companies such as Cisco and Juniper have injected a little mystery into the process by delivering devices that are really full-fledged platforms for running specific types of applications that are network-dependent.

For example, this week Cisco expanded its Integrated Services Router lineup to include modules for integrated WAN and application acceleration and another for a new approach to virtual private networks called Tunnel-Less VPN. Similarly, Juniper Networks is working on bringing together a series of products acquired over a couple of years underneath a common platform that will run the JuniperOS.

When you take a look at the architecture underneath the various approaches being taken by the network hardware vendors, the products they are rolling out tend to look a lot more like dedicated blade servers for running communication protocols, with each blade in the server dedicated to performing some specific function that for the solution provider represents another product opportunity.

The upside for solution providers is that you have to be a lot more knowledgeable about how to specifically tune these products to be successful, so it makes it harder for big telcos and trunk slammers to simply drop prices to pick up a sale.

This should go a long way to reducing complaints about product margins in the channel, but like everything in this world, all good things come with a cost. In this case, the expertise required to successfully sell, deploy and manage these solutions is significantly higher than it was several years ago, which for the solution provider means more upfront investment in training and customer support.

And that seems to be the lesson of the day. If the channel wants products on which vendors can protect margins, those products by definition are going to have to be more complex than in days gone by. Sure, there will always be demand for products that provide a simple out-of-the box experience, but once that experience is baked into the product, you can bet that the product is about to become the next overnight low-margin commodity sensation that doesn’t do a whole lot for the bottom line.

So the next time you’re out picking a vendor partner, you might want to spend a lot more time thinking about the product engineering strategy of that vendor and how it relates to your business because you don’t want things that are too easy to sell, nor do you want things that are too hard to sell, like supercomputers. Instead, what you need is something in the middle that, as Goldilocks once said, is just right.

Michael Vizard is editorial director of Ziff Davis Media’s Enterprise Technology group. He can be reached at michael_vizard@ziffdavis.com.