Cisco (NSDQ:CSCO) Chairman and CEO John Chambers said the reason Cisco has outlasted so many of its former networking peers and now finds itself well-positioned to become the world's premier IT company is because it's been able to see market transitions more quickly and reinvent itself when necessary.
More than 53,000 active partners bank on Cisco, said Chambers, because Cisco is the best opportunity to boost their top and bottom lines. And now that Cisco is a more streamlined organization, he added, it's easier to do business with and is better able to serve the channel, which touches 80 percent of Cisco's $46 billion in annual revenue.
"When you partner with Cisco, you partner with a company that doesn't lose," Chambers told CRN in an exclusive interview from the company's San Jose, Calif., headquarters this month. "When we need to reinvent ourselves, we do."
Last year, Cisco mounted a massive, companywide restructuring that eliminated more than 15,000 jobs, removed $1 billion in operating expenses a quarter earlier than expected, moved executives around, pared down Cisco’s cumbersome internal system of councils and boards and streamlined other processes that Cisco observers said stymied decision-making.
Cisco also promised partners and customers that it would focus on its most important priorities, including core networking, data center, collaboration, video and business architectures vs. the "30 to 50 adjacencies" it had previously been touting. Since then, Cisco earnings have stabilized, Cisco adjusted its previously lofty growth targets to a more realistic 2 percent to 4 percent, and the company is gearing up for what Chambers said, if done right, will be a non-event CEO succession.
Cisco took its medicine, Chambers said, and it's come out of the chute looking much better -- and a far better bet for channel partners -- than most of its tier-one vendor peers.
"We have never varied off of consistency," he said. "Even though we were challenged, we see those challenges one, two, three, sometimes four quarters ahead of everyone else. Oracle (NSDQ:ORCL), IBM (NYSE:IBM), Juniper, HP (NYSE:HPQ), Dell (NSDQ:Dell). What is their year-over-year growth? Negative 2, negative 3, negative 4, negative 5, negative 8 percent. And remember two quarters ago when
Intel (NSDQ:INTC) said we don't see the problems in enterprise spending and the global environment that Cisco's seeing? Four months later, they miss a quarter by $1 billion. There may be no reward for being transparent, but that's who we are as a company."
Chambers and Cisco (NSDQ:CSCO) as a whole have taken a significantly more aggressive tone toward competitors than in the past -- even against vendors that also strategically partner with Cisco, such as VMware. That tone was spurred on by the knocks Cisco's taken from other vendors in recent years and Cisco's comparative bounce-back, so expect that to continue, Chambers said.
"We told you we were going to beat Juniper. Now they're on the defensive. They're really being challenged now," he said. "Avaya, who was going to outexecute us in collaboration. Make no mistake: They are struggling. We're beating them very bad. And Hewlett-Packard (NYSE:HPQ), which saw we were going to exit the data center a year after we got into it. Well, there's 22.5 percent market share in North America in UCS for us, and it grew at 58 percent last quarter while our peers grew in single digits. Perceptionwise, we hit some rough sledding, we clearly did. We needed to change. But our competitors went through the same and did much worse. There's not a challenge I'm aware of that our peers didn't have to go through too."
Chambers said that partners should look back over the last 20 years and realize that Cisco's done that several times already.
"Over the years, after each challenge, we've emerged stronger," he said. "Our competitors from 15 to 20 years ago: Cabletron, Wellfleet, Synoptics, and probably 20 to 40 other companies. How many exist today? All gone except for Cisco. You could say the same about 10 to 15 years ago. All gone, except for Juniper, and right now, Juniper is questionable. And five to 10 years ago, remember it was Alcatel-Lucent, Nortel, Ericsson, Siemens, and they were going to eat our lunch. They said we couldn't spell telephony. Well, we might not have been able to spell it but we got 65 percent market share in business and IP telephony."
Continued Chambers: "More recently, all these competitors who said they were going to pull away from us? We're about 70 percent market share in switching again, and margins are back to where they were, plus or minus 1 or 2 percent."
"If a partner had bet his future on any of the peers I just mentioned, would they have a future today?" Chambers added.
Think of Cisco in terms of the Apple model, Chambers said, in that it is building whole-architecture solutions it can control every piece of, instead of the more fractious Android model, which relies on a number of different players.
"We're going to move from the No. 1 communications company to the No. 1 IT company," he said. "IBM (NYSE:IBM) had that opportunity with the mainframe and took it. Other companies had it with the mini-computer. Microsoft (NSDQ:MSFT), Intel (NSDQ:INTC) and Dell (NSDQ:Dell) were a classic combination. But our model is now more the Apple (NSDQ:AAPL) than the Android. We provide the pieces -- the ASICs, the software and the hardware, not just the ASICs, or the software or the hardware. And if we do as well as we have in the past, we've shown the ability to take on the merchant silicon players and beat them."
Attendees at a Cisco (NSDQ:CSCO) Partner Executive Exchange (CPEE) meeting in early October -- the first presided over by new Cisco Senior Vice President, Worldwide Partner Organization Bruce Klein -- said Cisco’s slimming down and partner enablement are a work in progress, but that it had been years since they’d seen this type of focus on partners at the field level.
Not only is Cisco is engaging better, but it's also taking administrative headaches out of things at a transaction level, such as a newer initiative, talked up at CPEE, to simplify the licensing of Cisco software to basic categories and user-based pricing instead of the massive, SKU-based pricing catalog available now.
"My impression from them was steady as she goes. It's been very encouraging that they can be a stable and supportive entity," said Harry Zarek, president and CEO of Compugen, a Richmond Hill, Ontario-based Cisco Gold partner. "As long as we're communicating both ways there's lots of opportunity for business growth."
Whether it's newer programs under Cisco's global Partner-Led initiative -- including the rebates and resources in its Partner Plus program for midmarket enablement -- or taking a more consultative approach vs. a top-down approach to helping partners, the biggest difference partners see in Cisco is a simpler, more focused business relationship: easier approvals, streamlined programs, meeting partners halfway.
"Some of the changes they've made are paying off," said Michael Gleason, managing director of Cherry Valley, Ill.-based Global Enterprise Technologies, a Cisco Gold partner. "We spend a lot of time in the midmarket space, so Partner Plus is a way for them to recognize there's white space there and then empower their partners around sales and marketing. I think the biggest difference is that they're being more consultative: what resources do we need, and how can they be a lot more tactical and strategic."
"I've seen them put a lot of investment into vertical markets and training -- and it's the right resources to understand the challenges in industries like health care," said Jessica Mayo-Pike, business development leader, advanced solutions for IPLogic, a Latham, N.Y.-based Cisco Gold partner. "The big difference now is that they're more active about being a resource to channel partners. We've seen much more emphasis on granular details and making sure they're helping us."
Cisco's distributors -- a less-heralded source of strength for the networking king -- are also seeing major benefits. As Cisco restructured its legions of channel account managers, for example, it pared down the number of partners assigned to individual reps -- from 50 to 20, in many cases -- and handed much of the field-level support over to distributors like Tech Data.
A move like that had potential to be a relationship-shattering disaster, but Cisco deftly managed the transition, said Angie Beltz, vice president, Cisco Solutions Group. Now, Tech Data gets a higher touch relationship with many more Cisco partners, Cisco reps have an easier time providing attention to their partners, and everyone sees fewer management layers and administrative headaches.
"There was some frustration over that at first but we quickly got to a point where no one has complained," Beltz told CRN. "You really do see a difference in Cisco's focus now and a lot more field-level emphasis on partnering."
As to whether Cisco can withstand the competition, solution providers applaud the ecosystem approach the company is taking, where it compartmentalizes the relationships it has with, say, EMC or VMware or IBM, in terms of compete one day, cooperate another.
"Cisco is dealing with so many different technologies now," said Sudhir Verma, vice president, consulting services at Force 3, a Crofton, Md.-based Cisco Gold partner and federal government integrator. "One day, you're a parent company, tight with someone, and on the next, you're competing on a different product line. That ecosystem approach is not going to change. So as a VAR, that's where you really add value for the end customer: you keep them away from those politics, you manage the relationships, and make sure it doesn't trickle down to them."