As Cisco continues its massive channel play, its renewed focus is on digital transformation coupled with security play. “Cisco is becoming an anchor to train channels' workforce, educate them on consumption models and a significant player in software subscription services in the digital era," says Daisy Chittilapilly, managing director, Partner Organization, Cisco India and SAARC in extensive interaction with ChannelWorld India. Chittilapilly reveals more about creating spaces for channels in India, digital disruption affecting buyers and vendors, and Cisco's transition into an end-to-end solutions provider.
Digital disruption is happening in every sphere of IT, from what customers are buying to what vendors are selling in enterprise tech. How has it disrupted Cisco's channel ecosystem?
The channel is the final conveyor of the consumption model that customers want to use. Channel partners in India, are undergoing a massive model transformation, quite similar to their global counterparts. At the higher end of the partner ecosystem, besides technology and solutions, the commercial constructs of channels' engagement with their clients is becoming the basis for decision making. Partners are becoming selective on how they engage on basis of business model’s core strength.
They are also creating differentiating models which help pull customers. And they are demanding more of Cisco's alignment with those business models.
At the lower end of the ecosystem, the reseller-centric channel is more focused on adopting new consumption models and becoming cloud-ready. They are now concerned about growing the annuity services business and software subscription revenues. The partners are involved in conversations with us to build a bouquet of services and software subscriptions. As that is a new world for them.
Has the ‘tech OEM’ push changed to ‘customer-centric’ pull and how do you create the equilibrium between both partner sets – large and small?
For Cisco, there is not much of a shift as our strategy centers on high degrees of customer centricity across every function. The company's push on the partner has always been on early movements and traction he can focus on according to the segment. The advice to channels is to get digital ready, software subscription ready, and new compensation model ready as customers and markets are already moving in that direction.
“Cisco’s top end channels in India register business revenues of 40% in product & 60% in services.”
When we announced Cisco's digital transformation roadmap, we received no dissidence from channels. They too felt we were headed in the right direction. The only resistance was that some partners needed more time and extra help to get there.
Cisco’s top end partners receive an average of 40 percent in product revenue and 60 percent in the services business. But the ratio is 80:20 for the lower end partners (resellers). The smaller partners need a lot of handholding and guidance to move on this new path. They do not want to be left out of the cloud game. With the emergence of a new market, we have aligned with various types of partners. But we will remain focused on constructing a good play for existing partners from core IT.
Don't new partners--born in the cloud and ISVs--eat into the old and loyal channel set of system integrators?
There is always some pressure to cover more, especially when sales finds a new channel partner in the market. One way to maintain equilibrium is to ask - cover for what market to access through Cisco, which is true for channels and sales also. Our incremental strategy is to create influence, which means that new channels only add to reseller ecosystem and they are created for specific market access.
Daisy Chittilapilly’s Channel Mantras for 2017
Stay close to the customer in the fast changing buying behaviour.
Strike stack & services conversations with IT leaders.
Extend new touch points with customers’ C-Suite beyond CIO.
Rethink traditional business model to address the new markets.
Reskill company’s workforce transformation for the digital era.
Initially, there was discomfort among some partners we are building a completely new partner ecosystem for a particular market. But the conversations around smart cities and early manufacturing automation mean both channels can co-exist. Operational Technology (OT) partners which we have purposely built to create access to that market provide relevance but they still bank on IT partners to deliver. OT are not interested in competing with IT partners and vice-versa.
Cloud adds a bit of complexity to the mix. Cisco does not have a fixed position regarding where to keep workloads as the channels advice customer to make their own decisions regarding on-prem, hybrid or public. The channels should ensure to make the customer's workload journey seamless.
They can achieve this by indulging in conversations around security and management across the board. We work with new cloud providers through a formal cloud reseller program. In India, the largest partners have metro-centric sales motion and reseller’s channels have a more regional play. It becomes a lot easier to combine the two sets and have their ambitions met. There is a clear guidance to not fight any battles with customers and to not influence one above the other.
What about the channels’ fear of over-distribution with Cisco’s four distys in India as there are reports of one disty to be let off?
That’s not true. We do have enough play in the current distribution chain of Inflow Technologies, Ingram Micro, Redington and Compuage Infotech. Ingram is largely an enterprise disty while Redignton and Compuage are clearly more focused on upcountry market and SAARC. And Inflow continues to be laser-focused on value added architectures and services. There are different playing fields with broad line capacity amongst them. At present, we are neither adding nor dropping a disty in India.
Do you see the resellers’ hardware model crumbling with the advent of cloud and other newer tech?
Over 94 percent of Cisco's India business is channel-led. Resellers’ partner business is growing too. It is not about the resale slowing down, but new opportunities opening up around managed services and cloud. The whole intent with the market expansion strategy is to participate in new markets without missing on the old business. I don’t think our resellers are growth challenged, though there can be an occasional plateau in traditional business.
There has always been a dialogue with channels through multiple avenues - like the advisory board with partners, the offline voice of partner survey twice a year, operations board and regional executive meetings.
Let’s talk about HCI. How are tier 2 channels waking up hyper-converged wrt fairly crowded competition like Nutanix, Dell EMC, HPE, and others?
Hyper-converged is touted to grow massively. For channels, there is some degree of uncertainty because of several OEM players in the market. But I think it will phase out. Channels need to talk and execute projects because I don’t think channels belong to any one vendor at this point. We are taking HCI to channels, large and small - as a strong play.
SILVER LININGS FOR CHANNELS
Ticket size and use cases in hyper-converged are fairly limited. Use cases are limited which makes it simple for smaller partners to execute and implement HCI. It is affordable because of the average deal size which channels can service o the client side. Traction through disty is an ongoing process as they have a high degree of inclination to move channels towards HCI. Cisco has invested equally in both tier 1 and tier 2 with hyper-convergence as its main focus.
Every solution we add is a compliment to the channel. Cisco’s ability to introduce more architectures is a big plus for our channels. We continue to acquire tech companies and we are focussed on innovation.
How beneficial has it been for channels as Cisco is no longer a ‘switches and routers’ company and it has transitioned into an ‘end to end tech provider’?
The channels’ success depends on new conversations with their customers and how relevant they are to the new tech landscape. Partners are super loyal to Cisco as we offer them different architectures and enable them to strike new conversations and business opportunities with end customers. Acquiring new customers is tougher than farming more things to a particular client.
The Big 6 (Global Systems Integrators) have great skill sets as they grow ahead of the market for Cisco. They have become deep domain experts in India. They are interested in conversations around Stack, solutions and managed services. Pure reselling does not interest them. It's fantastic that they are bringing the domain expertise and niche portfolio GTM to India. Many progressive Tier-2 channels are also moving on these lines of Tier-1 partners for achieving next level of growth.