Techaisle Blog

Cisco and the SMB market

Cisco has established an undisputed leadership position in the enterprise market. The company combines a widely-adopted and well-integrated portfolio of networking products with a highly-skilled (and paid) direct sales force to manage/expand its presence within major accounts.

The SMB market is a separate challenge. Here, buyers are less likely to require integration across multiple network components and more likely to emphasize price. They are also more likely to receive advice/management from channel partners, further reducing Cisco’s control over the acquisition process.

Against this backdrop, Techaisle’s SMB Channel Trends research illustrates the strengths and challenges Cisco must manage, as it looks to expand its share in the SMB segment.

Cisco Commands High Trust and Reputation

Within the channel community, Cisco enjoys a sound reputation and a high degree of trust. Techaisle’s latest SMB channel partner survey shows that 78 percent of Cisco’s SMB channel partners trust Cisco, a higher percentage than is registered by competitors such as HP and IBM. Nearly 70 percent of the partners believe that Cisco has quality products – again, the highest ranking recorded within the ‘hardware leader’ group including Cisco, HP, IBM and others. However, only 52 percent mention that Cisco has cutting edge technology, a percentage lower than that for both IBM and Microsoft. Moreover, 60 percent of Cisco’s SMB channel partners say that they Like Cisco, lower than corresponding rates for HP and Microsoft, only slightly higher than is found for IBM.

In its 2013 Annual report Cisco has written, “A substantial portion of our products and services is sold through our channel partners, and the remainder is sold through direct sales.” With specific reference to SMBs, Cisco wrote, “Generally, we define commercial businesses as companies with fewer than 1,000 employees. The larger, or midmarket, customers within the commercial market are served by a combination of our direct salesforce and our channel partners. These customers typically require the latest advanced technologies that our enterprise customers demand, but with less complexity. Small businesses, or companies with fewer than 100 employees, require information technologies and communication products that are easy to configure, install, and maintain. These smaller companies within the commercial market are primarily served by our channel partners.” Techaisle’s data shows that Cisco has attracted positive attention within this channel partner community, but that its technology and relationships do not leave it especially differentiated from competitors.

Technology Shift has Created SMB Messaging Challenges

In recent years SMB technology demands have shifted to cloud, mobility, analytics, social media, collaboration, managed services and virtualization. Cisco is seeking to capitalize on this market transition through the development of cloud-based product and service offerings that enable its customers develop and deploy their own cloud-based IT solutions.

In communications channel partners in the U.S. including those specializing in the SMB segment – Cisco has been steadily driving them to offer products and services that deploy cloud, mobility, virtualization, managed services and data center solutions. This is by no means an easy task as most SMB channel partners are being actively courted by competitive vendors that also want to grow their emerging technologies’ business. SMB channel partners selling advanced technologies have an average of 3.46 vendor partnerships which average jumps to 4.21 for Cisco SMB partners, a difference of 21 percent. With this increased contention for mind/market/wallet share, it can be difficult for Cisco to manage brand identity and its related messaging.

This difficulty is illustrated by study findings showing that of all the Cisco SMB channel partners, 44 percent consider Cisco to be their top partner. The other 56 percent mention Microsoft, Oracle, HP, IBM and several others. Within the VAR/SI community, Cisco’s share of preference is 48 percent and drops to 39 percent amongst the MSPs/SPs that are viewed as critical to the success of future cloud initiatives.

Cisco’s SMB Channel Partner Brand Equity

Techaisle believes that it is time for a new metric to represent presence (and opportunities for growth) within the SMB market. Techaisle refers to this second-generation measurement approach as Brand Equity Management. It is measured by a robust proprietary index, the Techaisle Brand Equity Score (BES-360).

Techaisle believes that it is important for IT vendors to measure their Brand Equity within SMB channel partners as well as SMBs. Techaisle’s Brand Equity Score, BES-360, helps to identify areas where IT vendors can improve to increase share of wallet. BES-360 is a KPI (Key Performance Indicator) that measures the strength of brand within a segment.

Cisco’s Brand Equity Score within its SMB channel partners is higher than most competitors – but lower than scores for both IBM and Microsoft. The implication of these findings is that even through Cisco has high brand equity amongst its channel partners; it is not necessarily true that its entire SMB-focused channel base is firmly wedded to Cisco’s game plan.

SMB Channel Partner Brand Equity Measurement– the New Prescription

Breaking down the data for Cisco, Techaisle’s study finds that almost 25 percent of Cisco’s channel partners have a Brand Equity rating of 80+. This group forms Cisco’s core partners. The data also shows that almost 35 percent of Cisco’s SMB channel partners have equity of less than 40. These are the partners that Cisco needs to work on.

Interestingly, small business focused channel partners give a higher Brand Equity Score to Cisco than mid-market focused channel partners. This is a segment that Cisco should address as the mid-market has become a battleground for most IT vendors and there is yet no clear dominant player.

Among all SMB channel partners of Cisco, VARs are actually driving up the Brand Equity Score. In fact 41 percent of VARs constitute the HBE (High Brand Equity) group. On the other hand, MSPs constitute only 20 percent. In order for Cisco to continue to grow its CMSP program and build on its initial successes, Cisco has to turn its attention to the MSPs that serve the SMBs to understand the key reasons for lower brand equity which when fixed can lead to better wallet share among MSPs.

Drilling down further into the data, Techaisle finds that Cisco is not doing better within the overall managed services community than it is within MSPs focused on cloud. A higher percentage of Cisco’s HBE partners are offering managed services to SMBs whereas a higher percentage of ABE (Average Brand Equity) partners are offering Cloud to SMBs. Cisco’s SMB cloud ambitions would benefit from moving some of these ABE cloud partners to HBE segment. The HBE segment offering cloud services need extensive training on cloud solutions to become more successful in offering cloud to their SMB customers. More than 40 percent of these channel partners are working with SMB customers that have private cloud. This may be good for Cisco in the short-term but it does not represent best practice in this segment, and it is misaligned with the ongoing acceptance of public cloud as a preferred IT delivery platform.

Product resale revenue is 43 percent for HBE partners as compared to 38 percent for ABE. Similarly, recurring revenue is 57 percent for HBE as compared to 61 percent for ABE. Naturally, this bodes well for Cisco’s current revenue as the High Brand Equity partners are driving higher revenues from products. However, if Cisco plans to increasingly promote service-centric partners then a lot more work is required to identify partners with higher services revenues and move them into the High Brand Equity segment.

Practicing the Prescription

Techaisle’s brand management work is anchored in the belief that if a vendor’s brand equity is good, then it can compete successfully with vendors with lower brand equity for sales of comparable products or services. Vendors with sound products/services but low brand equity will struggle to maintain parity with competitors that have higher brand equity, even if that vendor’s products/services are (somewhat) inferior. Hence, Brand Equity Score findings help indicate potential areas of expansion or exposure as vendors, like Cisco, assess their potential for expanding the footprint of their brands within the SMB channel partner community. The composition of Cisco’s BES across its channel indicates the core strength of its brand. Techaisle’s analysis indicates that Cisco has both strengths to build on and areas requiring focus as it moves to position its next-generation solutions (especially, cloud solutions) through its channel to the SMB market.

Techaisle’s extensive primary research based study finds that there are quantitative, meaningful and actionable differences between channel partners who are successful in the business of selling Cloud and those that have not developed successful SMB Cloud practices.

The study to understand the winning strategies for selling Cloud to SMBs and to enable channel partners and their vendor suppliers build viable, high-growth SMB cloud businesses uncovered 15 best practices and critical differences between the activities and approaches of successful and unsuccessful SMB Cloud computing channel partners. These 15 keys are grouped into three areas.

Corporate priorities and allocations:

1.   There is no organizational recipe for cloud success
2.   Familiarity breeds success
3.   The “why” behind the cloud initiative often helps explain success
4.   Recurring revenue is not the sole indicator of cloud business success

Technology and offering definition:

5.   Cloud rewards suppliers that focus on providing best-of-breed
6.   Branded solutions are a key element of channel cloud success
7.   Industry expertise is a more important differentiator than technical prowess
8.   Cloud portfolios need to extend beyond basic IaaS, SaaS to also encompass verticals
9.   Data integration linking on-premise and cloud environments is non-optional
10. The future is hybrid, not private

Sales and marketing strategies and tactic:

11. The nature of sales relationship is a critical determinant of cloud success
12. Profit is driven by product/service balance
13. Partner-to-partner relationships are important to cloud business success
14. A distinctive approach to budget and resource allocation creates differentiation
15. Creating a cost-effective, scalable approach to lead generation is imperative

Detailed analysis included in the report highlights key differences between:

• Channel partners that are very successful and are making money selling cloud to SMBs


• Channel partners that have just achieved success and have started making money selling cloud to SMBs


• Channel partners that are not yet successful and are not making money from their SMB cloud business

Working with SMBs, the channel and the vendor community, Techaisle has created research materials that help reduce time-to-success and increase the overall benefit of offering SMB solutions. Channel members looking to build a successful cloud business practice, or a vendor looking to accelerate channel success, can find details of the report here, or send us an email at This email address is being protected from spambots. You need JavaScript enabled to view it.

 

As uncertainty swirls around both the IT infrastructure needs of the SMB market and the channel that supplies these solutions, Dell’s channel team, led by Greg Davis and Bob Skelley, could not be more upbeat. And as Techaisle research shows, channel members of Dell’s PartnerDirect program continue to power on.

In a recent Techaisle study of channel partners selling Cloud, Mobility, Managed Services, Virtualization and Datacenter solutions to SMBs, 58 percent said that Dell is a trusted brand with 48 percent mentioning that Dell is a reputable brand. With today’s announcement on software competencies, Dell is looking to build on that presence with an expanded portfolio addressing essential (and high-growth) infrastructure software products.

Partner Voice

It is clear that Dell considers sales enablement and execution to be the keys to its channel success. The company exhibits very tight focus on issues like deal registrations and training. In qualitative interviews, Dell’s partners say that Dell is easy to work with. They report that Dell’s partner program is straightforward, with a low threshold to enter, reasonable certifications’ requirements and all training materials available online. Dell partner executive Marcus Lindqvist, Country Manager for Sweden’s Dustin AB highlighted the benefit of this approach when he shared with us his reasons for being upbeat on Dell: “deal registration, robust process that protects the partner investment in our engagement with Dell on a deal by deal basis. We register the deal at an early stage in the sales process, most deal registrations are approved, and from that point we are in the lead without any future discussions about other partners or Dell direct sales undercutting our work. Deal registration is done online with quick turnaround times.”

Echoing the sentiments, Daniel Serpico, President of FusionStorm, [partner of Dell] noted, “[there is] very real clarity around deal registration and partnering; there is significant value creation around integration and configuration and Dell has infused software and tools to win with Dell.”

Software Competencies

It was only a matter of time before Dell extended the PartnerDirect program beyond its roots, from enabling and incentivizing hardware sales to rolling out software competencies. Over the past year, with numerous acquisitions and the hiring of John Swainson to helm Dell’s software operation, Dell has launched an aggressive strategy to build scalable enterprise software offerings into its solution portfolio, with emphasis in the areas of datacenter and cloud management, information management, mobile workforce management, and security and data protection.

On September 3, Dell announced four new PartnerDirect software competencies, including:

• Security: Includes identity and access management, as well as network, endpoint and email security


• Systems Management: Includes client management, performance monitoring, Windows Server management, virtualization and cloud


• Data Protection: Includes enterprise backup/recovery, virtual protection, application protection and disaster recovery]


• Information Management: Includes database management, business intelligence/analytics,  applications and data integration, and big data analytics

Dell partners now have the flexibility to decide between reselling hardware only, software only (via resale or a referral fee program) or both hardware and software. As per Techaisle’s Marketview, worldwide SMB (1-999 employees) spend in 2016 for the above four competences will be US$11.1 billion. Combine it with traditional datacenter solutions that includes servers, storage, networking the market spend jumps to over US$40 billion by 2016. This is a huge opportunity indeed for Dell and its channel partners.

Best-of-breed Solutions

The latest Techaisle channel partner study found that 54 percent of channel partners prefer to offer best-of-breed solutions to their SMB customers, with 28 percent preferring single vendor solutions. The key to successfully addressing both preferences is to combine best of breed offerings under a single brand, allowing partners to also take advantage of integration and volume benefits. HP and IBM have been active in staking out this territory; with the September 3 announcement, Dell has signaled its intention to compete aggressively for leadership within the small and mid-market business market segment.



In the cloud infrastructure area, Dell’s partner program rests on three pillars - Cloud Builder, Cloud Provider and Cloud Enabler. For all three pillars, best-of-breed solutions take on an entirely different meaning as shown in another study recently conducted by Techaisle. The study was done to understand the Winning Strategies of Successful and Profitable SMB Channel partners selling cloud.

The study revealed that channel partners that are comfortable and profitable with cloud solutions combine best-of-breed solutions and wrap them tightly under their own offerings & services. These channels have also begun to utilize reference architectures from their vendor partners.

Training as the Lead-in

Channel partners prefer to partner with IT vendors that have quality products and innovative technology solutions that solve SMB pain points. This presents a complex challenge to vendors like Dell: partners need suppliers to both address customer requirements (with innovative, reasonably-priced and easily-deployed technology that addresses SMB pain points) and partner business requirements, such as training, pre-and-post sales support, and lead generation. As the results of Techaisle’s research demonstrate, product training is particularly important in this context. Dell is clearly cognizant of this demand: Marvin Blough, executive director of Worldwide Channels and Alliances for Dell Software is on record as observing that “Trained partners sell four times more than their untrained counterparts,” and Dell is said to be on plan to deliver over 250,000 training sessions this year.

Techaisle has observed, however, that most vendor training focuses on product attributes, and does not address development of the skills (building and advising on infrastructure strategy and workload roadmaps, establishing effective sales tactics and compensation models, developing the services competencies needed by customers) required for VARs to migrate successfully to advising on and deploying hybrid infrastructure. These advanced management-level training offerings will be essential for vendor differentiation, especially for the complex hardware/software solutions that are at the core of Dell’s evolving strategy.

Concluding Remarks

Clearly, building leadership in the SMB infrastructure market is an ongoing challenge: requirements continue to evolve, entrenched vendors have strengths and relationships that have developed over many years, and Techaisle’s research has found that trusted brand figures for Dell are lower than for some of its competitors. Its brand equity score (BES) among channel partners is also lower than its competitors. It seems clear, though, that Dell is aware of market requirements and willing to invest in its SMB market and channel success, rolling out training modules, integrating partners acquired through acquisitions and combining both hardware and software for end-to-end solution delivery.

Michael O’Neil, Consulting Analyst with Techaisle, notes that “Infrastructure delivery has become a very challenging issue for business partners. Hardware-only sellers are at a significant disadvantage in a market where buyers are looking for hybrid solutions involving both on-premise and cloud-based platforms that combine server, storage and networking hardware with system management and security software to build solutions that will seamlessly support application delivery, data protection and backup, and many other key operational objectives. By offering a wide range of product types, and focusing on making the selling motion as clean as possible, Dell is enabling partners to focus on customer requirements rather than product silos.”

Looking at Dell’s approach from a partner’s perspective, Daniel Serpico provided an apt summary: “Dell sales teams cover all markets, which allows us as a partner to be able to have discussions with the Dell account manager on a specific account or deal, giving us a counterpart that understand the end-customers actual requirements and needs. Both teams have a laser sharp focus on the customer and to jointly win the deal [supported by] shorter turnaround and quick responses from Dell.”

 

SMBs are being deluged with IT solutions that aim to address their pain points of reducing costs, improving sales and marketing, penetrating new markets, improving employee and group productivity as well as managing more IT with less. The channel comprising of SIs, VARs, SPs, MSPs and IT Consultants form the essential cogs of an IT vendor’s eco-system that puts products and solutions in the hands of the SMBs.

Today’s SMB channel has numerous vendors to partner with to build and grow its business especially if they are targeting the SMB segment. Each channel partner has usually has multiple vendor partnerships. It is therefore essential to have a positive mindshare of the channel which would potentially translate to wallet share.

Techaisle’s SMB Channel BES-360 provides an actionable path for IT vendors to manage their channels. Techaisle’s BES-360 Model looks at the equity of the brand on six overall independent dimensions:

1. Emotional,

 

1. Likeability,

 

1. Rational,

 

1. Dispositional,

 

1. Visibility, and

 

1. Human Connect

The data is collected by conducting a primary research and thereafter using ANN (Artificial Neural Networks) we model the responses on several variables with action variable using a non-linear model. Action variables are crucial to measuring brand equity, since having a brand equity which does not lead to action is useless. Techaisle’s BES 360 uses ANN for computing the dimensional weights as opposed to assigning arbitrary weights or no weights at all.

Cisco’s Brand Equity Score with SMB Channel Partners = 41

The model reveals that the BES of Cisco is 41 on a scale of 1-100. The question is, is this good or bad? Since the highest BES is 56, 41/56 is “Good”. Two other IT vendors including IBM have a higher BES than Cisco.



 

 

 

 

 

 

 

Breaking down the data for Cisco we find that almost 25 percent of Cisco’s channel partners have a BES of 80+. They form Cisco’s core partners. The customized report can delve deeper into the typical profile of these SMB channel partners of Cisco. The data also shows that almost 35 percent of Cisco’s SMB channel partners have equity of less than 40. These are the partners that Cisco needs to work with to try and raise the brand equity. Further research could also be conducted to check and see what these partners contribute to Cisco’s business and their relative importance.

If we look at Cisco’s equity among its own channel partners and non-partners, the difference in equity is substantial. The BES of Cisco among its partners is 55 and among non-partners the BES is 29. A polarised equity pushes a brand in to a niche status, which may not be desirable for all brands Cisco’s BES is the highest among the channel partners of Avaya and even among the channel partners of SAP too the BES is quite high. These could be potential channel partners for Cisco. 

  

 Techaisle’s BES-360: Why is Brand Equity Score Important?

Companies no longer produce products and services but deliver a brand experience through their products and services. It is widely recognized that the status of a brand in the mental space of the customer is best measured through brand equity. If the brand equity is good then a product or service that is similar to another brand with lower brand equity will sell better. Additionally, a brand with a good product or service but lower brand equity has a lower customer satisfaction compared to a brand with a higher brand equity that offers the same, if not an inferior, product or service. Hence measuring and tracking brand equity score is of critical importance to brand management.

What is the key information that I will get from Techaisle’s BES-360 to manage my brand?

Our customized report answers following nine relevant questions:

1. What is my BES and my competition in the industry?

 

1. What is my BES among my channel partners? Understanding overall equity is fine but this equity should also be good among its own channel partners and the difference between the equity among a vendor’s own channel partners and the non-partners should be significant. Otherwise it indicates a non-exploitation of the market completely.

 

1. What is my Brand Equity profile of my channel partners? The data and analysis provides critical information for assessing the potential for expanding the foot print of the brand to the other channel partners. The composition of the BES among the channel partners of a brand indicates the core strength of the brand. A brand needs to know what proportion of their customers are at, say, half the total BES? If a small portion of the channel partners have high brand equity and a large number have low brand equity then the customer base is shaky.

 

1. What is my BES among the partners of other channels?

 

1. What is the composition of my channel partners at various levels of BES? A brand would like to know the business that their partners generate at different levels of brand equity. For example: what is the number of solutions offered by a channel partner whose equity is twice the average brand equity? Such information can be quite useful to build a complete business strategy by better equity management.

 

1. How is the BES affecting my business among my channel partners?

 

1. What do I do to improve my brand equity? We measure brand equity on nine variables. We can dive and pick up the dimensions on which the brand needs to score. In fact we can even suggest using an optimization scheme the best values of the dimensions that the brand should achieve.

 

1. What business improvement do I expect at 5% increase in my brand equity from my channel partners? We can do a detailed analysis of our data to indicate what will be the impact of an increase of 5, 6, 7 or more points on the business, using the survey data.

 

1. Which brands’ partners should I choose to enlarge my foot print?

For SMBs, channel partners are the trusted advisors. Addressing the channel partners directly contributes to raising the brand equity among SMBs (measured separately by Techaisle). We call it BES-360 because it covers all the dimensions as well as competition.

If more information is needed for developing a comprehensive and successful marketing strategy Techaisle has the capability to provide the necessary information. From the current data itself we can get more information by looking at the scores on each of the nine variables. However, we can also do a dedicated BES 360 Survey for a specific brand and get a comprehensive picture of the brand that can identify and answer strategic questions like “Why my score is low on the VISIBILITY dimension and what should I do about it?”