Cisco Shifts from Supply to Demand in Cloud

Edison Peres at Cisco Partner Summit 2013

Edison Peres at Cisco Partner Summit 2013

In the two years since Cisco Systems Inc. introduced a three-pronged, cloud-centric partners program at Partner Summit 2011, it focused heavily on programs for those that build private clouds for their customers, and for those that want to create and market cloud services powered by Cisco gear and technology.

Those two programs represent the supply side of the cloud equation in the Cisco partner community. But with changes to its programs and incentives announced at Partner Summit 2013 in Boston this week, the company declared its intention to start building the demand side of the equation.

Over the last two years, Cisco built up a strong stable of cloud builders and Cisco-based cloud services. The company boasts 1,7000 cloud certifications and 350 Cisco-powered cloud services in the market, with an almost equal number in various points of development. But the company did little for those not yet at the point of rolling their own cloud services or standing up clouds on behalf of their customers.

The developments, announced at Partner Summit, go a long way to level that playing field. For the first time, the company will allow partners selling XaaS offerings to use the Cisco-powered brand for their business, not just the services they resell or market. And the company will also allow those partners to claim Value Incentive Programs’ back-end rebates for the Cisco portions of the Cisco-powered cloud services they offer. The company also announced plans to make sure its own field resources are motivated to help partners sell Cisco-powered cloud services, boosting the compensation for Cisco salespeople 30 percent around most cloud services, with a 100 percent uplift on its Hosted Collaboration Solution.

With all of the Cisco-powered services now in the marketplace, and the acceleration of customer demand for cloud services that’s starting to happen, now is the time to, as a minimum, reseller cloud at the same time as doing on-premises,” said Edison Peres, Cisco’s worldwide channel chief. “Embrace it. No, drive it — make it a strategic priority.”

It’s a big bet for Cisco. The networking vendor has reminded partners of its own decision not to stand up public clouds (notwithstanding cloud services like WebEx that have long been Cisco-hosted) and instead rely on its partner base to build and market cloud offerings based on Cisco hardware and software.

The networking vendor used the word “ecosystem” a great deal at Partner Summit this year, more than it has in past years. Clearly, the nature of cloud is changing the relationships that power its business, from a direct line from Cisco through solution providers to customers to one that will include a less linear path of solution providers brokering and reselling one or more cloud-based service as part of their connection to the networking vendor. By opening up its Value Incentive Program (a longstanding crown jewels of its partner program) to third parties, Cisco is hoping to influence behavior throughout that ecosystem. While the main path of compensation in such cases will be between the solution provider and the cloud service provider, the extra kick-in from Cisco may add enough profitability to sway solution providers away from competitive services and “keep it in the family.”

The program also extends other partner program niceties, including demand generation and marketing support, to those reselling cloud services based on Cisco technologies.

For the solution provider, it creates an easy path to explore cloud services on a more profitable basis. It allows the cloud provider to make their offerings more profitable for solution providers, with Cisco offsetting some of that cost. And it helps ensure Cisco-powered cloud services grow and puts the vendor at the center of a growing network of cloud providers.

“We have 600 applications in various stages of submission, and I suspect every provider will have some number of resellers for all the same reasons we have a number of resellers,” said Arjun Lahiri, senior manager in the worldwide partner organization at Cisco.