Cisco's Collision Course

The terra cotta facade boasts the name Cisco Systems Consumer Wireless Division. But once inside, the messages are decidedly mixed. The reception area and wall art--even the reading material in the visitors' lounge--bear the name of the parent company. If there was any doubt that Cisco runs the show at Linksys, it evaporates quickly when visitors are escorted to a conference area replete with VoIP phones branded Cisco, not Linksys.

A Linksys partner could be excused for feeling somewhat dwarfed by the presence of the biggest name in networking and one of the most powerful brands on the planet. VARs that resell Linksys gear have, for the past three-plus years, alternately salivated and trembled as Cisco prepped the acquired company to transcend its consumer/SOHO roots and enter the lucrative small-and-midsize business space even as the vendor made its own move downmarket. For all of Cisco's talk about supporting the Linksys brand and its partners, resellers have long feared a time when the irresistible force that is Cisco would meet the eminently movable object that is Linksys.

By Linksys' own accounting, the company has more than 50 business-grade networking products, including wireless, storage, routers, VPN equipment, VoIP phones and switches. All are sold exclusively through the channel. Linksys executives say the division earns some 40 percent of its overall revenue from its Business Series products.

"Linksys focuses on the SOHO and small-business VAR, while Cisco focuses on SMBs and enterprises," says Nigel Williams, the former Cisco exec who now serves as vice president of worldwide channels at Linksys. "While there is some overlap in our switching and wireless offerings, they're not necessarily directed to the same kind of customer or business requirement. Linksys is mostly focused on small businesses that don't have IT staffs or big budgets. Think pet stores, hair salons, local restaurants."

That diverges from the view Cisco held when it acquired Linksys in March 2003. In a corporate statement posted at the time, Cisco execs said Linksys products "are targeted to the consumer/SOHO market. As a result, there is little overlap between the Linksys product line and Cisco's product line, which is targeted at commercial, enterprise, public-sector and service-provider customers.

"The requirements for customers of Linksys are well-served through existing Linksys channel programs. Linksys will have a separate go-to-market strategy and Cisco's certification and specialization requirements will not apply," the statement continued. "There is very little overlap between Linksys channels and Cisco channels. Linksys predominantly sells through retailers such as CompUSA, Best Buy, Wal-Mart and Dixon's. Cisco's partner-program requirements are not appropriate for this consumer/SOHO end-user channel. Additionally, Cisco's existing programs, and contractual and/or promotional discounts that Cisco partners receive today, would not apply to the Linksys family of products."

That's hardly a ringing endorsement for channel-driven SMB sales at Linksys.

NEXT: Linksys One stalls.

And even today, the "Home and Home Office" link on the Cisco Web site features Linksys' and Cisco's other consumer brand, Scientific Atlanta. But the SMB online area is a showcase purely for Cisco networking, applications, security and unified communications--solutions available only to certified Cisco resellers.

Analysts point out that Cisco can hardly be faulted for wanting as many players in the SMB game as it can muster. According to a recent AMR Research poll of 1,000 IT buyers, SMBs will increase IT budgets by some 6 percent in the coming year, double the growth rate expected for enterprises. That same study also found that the smallest businesses forecasted the highest growth rates.

Just over a year ago, Cisco made its boldest statement to date that it was supporting Linksys. Partners had to be feeling pretty good in November 2005, when the parent company said it would put its formidable weight and breadth behind the smaller wireless division and come to bear on the superheated SMB VoIP space. Linksys, with a little help from the mothership, was moving upmarket.

Dubbed Linksys One, the plan called for a move beyond the vendor's traditional consumer/SOHO focus with a new small-business division. Linksys One was built primarily to offer a self-titled IP communications platform in concert with hosted VoIP offerings from service providers. The plan, according to company execs, was for VARs to sell the bundled VoIP services in exchange for monthly commissions.

But if Linksys One was a way for Linksys partners to get traction in the SMB space, the journey has slowed to a crawl. What was to be a nationwide rollout in the summer of 2006 has now become a bit of a mystery. Linksys' primary service provider, MCI, was acquired by Verizon, and while officials there say the program is still alive, there's little in the way of details or deadlines for Linksys One now.

"We're waiting for Linksys One [and] Cisco to send us their next release, and then we'll review it," Verizon spokeswoman Ellen Yu says. "At this time, we don't have too much to say about this product."

Atlanta-based network integrator Digitel invested early to offer hosted VoIP services through Linksys One channel partners via its NeoNova Network Services division. Jerry Bailey, president and COO of Digitel, says, "We're pretty anxious to start seeing some revenue."

Bailey says his firm has been working hard, hosting road shows and Webinars and generally evangelizing about Linksys One to generate customer demand and recruit qualified resellers into the program.

"We have to build a VAR channel to sell complex technology to businesses," Bailey says. "That requires an understanding of the applications, the delivery model. A lot of that is very different than providing wireless routers."

Bailey acknowledges some help from Cisco in selling the idea to partners would be helpful, but for now he's content to do the missionary work for Linksys One himself. In fact, Bailey notes, while Linksys resellers are trying to move up the food chain in the 50-to-100-seat sweet spot for Linksys One, the best qualified VAR candidates are often the Cisco SMB specialists with experience in hosted networks and business apps. Adding to the conflict may be the increased recognition of the Cisco brand among the target customer base, Bailey says.

"There's going to be some overlap--let's just put it that way," Bailey says. "I think ultimately the combined Cisco-Linksys will build a brand around this."

For its part, Cisco claims the Linksys One program is still a top priority for the division, even if the progress has been slowed by unexpected support delays.

"Launching hosted services took a lot more involvement in setting up programs and getting the hosted-service providers onboard than we thought," says Karen Sohl, director of worldwide communications for Linksys. "It's been taking us a while to get them. We'll have more news on this in May, along with about 30 service providers worldwide.

"Our focus in May will be heavy, heavy, heavy VAR recruiting," Sohl says. "We can't sell the solution without certified and authorized VARs. The road shows are going on."

NEXT: Empty promises?

Such assurances haven't kept some partners from questioning the carrier's and the vendor's commitment to the program. Several partners that saw early versions of the Linksys One products last year told VARBusiness that the underlying technology left much to be desired, lacking common VoIP features, such as four-digit dialing, auto-attendant, multiple-site linking and the ability to route calls to offices, homes or cellphones.

For more of a macro view of the Cisco-Linksys paradox in the channel, one only has to take a look at how partners rate the two in VARBusiness surveys. Both have scored 5-star ratings in the VARBusiness Partner Programs Guide for the past several years. In the Annual Report Card (ARC), Cisco is a perennial favorite of solution providers.

In Partner Loyalty, one of the more telling ARC divisions, Cisco cleaned up last year, taking the top spot in four technology categories: data networking, VoIP/voice networking, security software and business-class WLANs. Cisco finished second in security appliances. That's an impressive showing, considering that the vendor's support scores hovered in the 60s and 70s.

But for a company so beloved in the ARC, Cisco takes more infamous top honors in the 2007 VARBusiness Alternatives Study, leading the list of companies partners fear most when they consider adding new technologies to their bills of fare.

Wireless-networking resellers, in particular, are wary of angering the vendor, and some will even take a pass on considering a new partner to stay in Cisco's good graces. While most prefer to remain anonymous with their fears, for obvious reasons, responses to the VARBusiness Alternatives Study include the following: "Cisco does not like their partners selling competing products," "Cisco has given some of our customers to other dealers," and "Cisco reps can be nasty when competing."

That could explain the trepidation some VARs, including longtime Linksys resellers, feel when they sense overlap between Cisco and Linksys along the SMB front. Others say they prefer to fly below Cisco's radar.

"We're much too small to worry about retribution from Cisco," says Darrell Gentry of The Computer Generation, Independence, Kan. "They barely know we exist.

"We'll use what the customers ask for and what our in-house experience has shown to work," Gentry adds. "That includes a fair mix of Linksys and D-Link, with a little NetGear thrown in here and there."

Linksys' Williams maintains that "Linksys has a very strong niche of small-business partners. Our overlap with Cisco in the reseller community is very small. That's good because we're both working with the right kind of resellers that offer our products. But we also have some work to do in getting more of our VARs educated and comfortable with moving up our product line and into Cisco products.

"We would love nothing more than to grow with our VARs so they can grow and offer Cisco products," Williams adds. "And it would be great for Cisco VARs that run into small-business opportunities to think of the Linksys offerings that would be better-served in the small-business markets."