Since Chuck Robbins took over as CEO, Cisco has increased its focus on software, to the point where the company known almost unanimously as “the networking giant” identifies itself first and foremost as a software company.

In the latest step in that journey, Cisco has overhauled how enterprise and commercial customers buy software, introducing a new Enterprise Agreement (EA) that will cover any or all of its software assets.
The new EA can cover any or all of the company’s software offerings — its Cisco One infrastructure software suite, collaboration, and security, and presents an “easy way to buy and manage” software from the company, said Mark Hill, vice president of the offer monetization office at Cisco.

“We’ve developed a very big software business to complement our hardware business. There’s a proliferation of Cisco software, and we have bold ambitions to expand that portfolio dramatically,” Hill said. “Customers have been telling us that they’re going to buy a lot of software, and they want a way to understand what they’re purchasing, and what they’re using or not using.”

The EA covers deployment of any of its software over the course of three- or five-year terms whether on a physical or virtual machine, on-premise or in the cloud. Customers can start with parts of the portfolio and later add other parts, and all purchases will end on the original contract termination date, regardless of when additional seats or modules are added.

With software such a growth product for Cisco, the company was clearly thinking growth when structuring the EA. The terms include the ability for customers to grow their software usage by up to 20 per cent over the course of the deal. And those who need to grow better than that will pay for the extra in what Cisco calls a “true forward” system. Distinct from the more traditional yearly “true up” structure for software agreements, whereby a customer who’s using more than it’s licensed to have is expected to pay retroactively for additional used licenses, the “true forward” only expects to increase payments for future use.

“We don’t look at anything in the past. If you’re using more than your growth allowance, you just pay for it going forward with no punitive charges,” Hill said.

The license is also portable across hardware — software functionality that’s purchased for a switch can be added to a replacement switch without additional payment, for example. Hill added that customers will get EA credit for existing software purchases, creating a degree of investment protection for customers.

To have access to the EA, a customer must have $50,000 of annual spend in one of the three Cisco software suites. Especially for a mid-market and SMB nation like Canada, that means expanded opportunity, said Rebecca Leach, general manager for software sales at Cisco Canada.

“We didn’t have offers that were right-sized for our market before,” she said. “With this launch, we have access to a huge amount of TAM that we couldn’t have approached previously.”

The company is looking to its channel to help get the new EA out there, into existing and new opportunities. Jason Gallo, global director of enterprise networking and software partner go-to-market, said that more than 85 per cent of the company’s software sales are done through or with partners, and the EA has potential to expand that. Gallo said EA will make it easier for partners to secure bigger, longer-term deals, and to tie their own services into the mix over the terms of the deal, and will help partners sell more across the Cisco software portfolio.

“With True Forward, it helps partners who want to have a growth conversation with their customers,” Gallo said. “They’re not having to go back and tell them they ‘over-consumed’ and now have to pay more, they can help them grow.”

In the past, Cisco had various enterprise agreements across the various suites. Combining them into one deal structure signals how big Cisco’s software ambitions are, Hill said.

“This has been a big change internally for Cisco as we’ve moved away from all these products groups to a consolidated operation. It’s because we want to go after the software business and help customers get value out of their software,” Hill said. “We intend to sign tens of thousands of these agreements, and that’s why we need our partner channel.”