In an earlier post, I talked about how solution providers attending Cisco Partner Summit were totally jazzed about Cisco’s “Jabber for Everyone” decision, seeing as it will drive overall Cisco UC adoption, broaden the Jabber footprint and strengthen Cisco as it goes to battle with Microsoft’s fast-upcoming Lync platform.
But the other thing that got partners buzzing at Partner Summit was a blink-and-you-missed-it sort of announcement, and it’s something Cisco channel chief Edison Peres said from the stage toward the end of his piece of the Tuesday keynote.
Peres alluded to the very frequent pace of M&A among channel partners in the past two years — something I’ve written about quite a bit because of those moves’ significant bearing on the major enterprise networking vendors and their channel ecosystems. He said that Cisco is going to evolve the way it designs value-based partner programs to incorporate criteria investors use when evaluating solution providers they’re examining.
Peres told CRN that Cisco wants a connection between how its channel programs make money for partners and those factors that determine a solution provider business’ valuation — essentially, a shift beyond mere partner profitability to strong valuation creation. He check-boxed operating profit, growth potential, sustainability and business risk as the four things hawk-eyed money managers look for.
Compugen President and CEO Harry Zarek, as knowledgeable and perceptive a Cisco partner as I can think of, described this as a “fundamental shift in perspective” by Cisco.
“One prediction that Cisco will find out that they inadvertently do things that actually take away from partner business value rather than enhance it,” Zarek wrote in a post to the Compugen blog. “That would be a defining moment in the maturing of the relationship between Cisco and its partners.”
Peres’ announcement essentially formalizes an approach Cisco’s been favoring for a while now. Yes, yes, all partner programs promise at least some form of growth where channel partners are supposed to make money and prosper. But take a look at the Cisco Services Partner program, which collapses 47 global services programs into one and jacks up the potential profitability for partners the deeper they go with Cisco smart services — that’s a legitimate “do x, get y” discussion of bigger sales and bigger profits through services, and no hard deck strategy that limits the scope of that opportunity.
For Cisco, it’s a good time to be doing stuff like this — it’s just restructured, it’s getting the good press it needs to put the wind back in its sails, and it’s facing competitive assaults from a constellation of vendors both longstanding and emerging. If it can increase its influence over the current wave of channel M&A, its partner relationships become even more profound. (And hey, while in San Diego, I heard of at least four deals involving well-known Cisco partners in various stages of discussion — there’s going to be a lot for us Cisco channel scribblers to write about over the next six months.)
Consider that almost all of the major solution provider acquisitions from the past two years — everything from Presidio’s buys of BlueWater Communications and INX to a run of pickups by national partners ePlus, TIG, Transcend United, Softchoice, GreenPages, NWN and others – involve major Cisco or Avaya players. Makes sense; these are big vendors with big and churning channels, and deals happen for many reasons. But don’t Cisco-flavored deals and Avaya-flavored deals just seem fundamentally different?
Most big Avaya-centric mergers seem to involve forced exits and cheap valuations — burned-out Nortel partners, it’s often said, who don’t want to jump through Avaya hoops to get the favored status they need to compete. Add to that the fact that Avaya’s continued to squeeze solution provider margins on everything from maintenance services to UC wares — and is distracted with a forthcoming IPO and an exodus of major executives — and it seems like you have an Avaya channel consolidating with less of a long-term opportunity motivation and more of a short-term survival motivation.
Most big Cisco-centric channel mergers have a different tone. I talked this week with Jay Kirby, executive vice president of Troubadour, which has a good-sized Cisco footprint and fine-tuned networking and security practices. Troubadour just merged with Lumenate, a major Dallas solution provider with a sizable storage and data center business. Thanks to the Troubadour deal, Lumenate, which acquired two other VAR businesses in the past six years, stands to hit $100 million in revenue by next year, it says. Not a channel Big Mac, but not exactly a small fry.
Kirby, whose excitement is infectious, put it pretty simply: “There was just no reason not to do it.” Troubadour and Lumenate complement each other, they’re both strong in their respective Houston and Dallas markets, the combined portfolios get them to converged infrastructure faster, and they have cultures that appear to be simpatico. Game, set, match.
That conversation reminded me, not surprisingly, of the one I had with Bob Cagnazzi, Presidio’s new CEO, the day before Presidio’s acquisition of BlueWater was confirmed. Didn’t seem like something BlueWater had to do — it was growing admirably, and it’s tough to imagine Cagnazzi or his lieutenants ever having trouble getting a phone call returned from Cisco’s top brass. But as Cagnazzi said at the time, he felt BlueWater could be better positioned, and more quickly positioned, in managed and cloud-based services if it hitched its wagon to Presidio’s.
Presidio’s M&A moves have made it a channel tyrannosaurus. They accelerated its bid to control major markets where the IT customer spend is and get to them faster, or at least as fast, as anyone else. Presidio punches in a weight class of national and hugely influential networking and data center powerhouses few solution providers ever break into, has a galaxy of in-house value-added services expertise, and does all of it with bona fide footprints — not locally-based engineers they call on to partner with, fully-staffed regional footprints that seem to be as nimble in Massachusetts as they are in Houston or San Francisco or New York or Washington DC — in all of the geographies it seeks to dominate.
Cisco clearly likes what it sees in all of these moves: bigger partners with a foot-high pile of top Cisco statuses, certifications and specializations, that understand Cisco’s strategy, know its executive team, and can evangelize it as well as anyone on Cisco’s sales force, and who can stress-test major Cisco initiatives around cloud, services and data center.
Peres’ announcement ensured it will continue to gain from and influence the M&A rodeo in one way or another, regardless of which individual Cisco partners do.