Cisco Cranks Up Margins For VIP Resellers

Cisco is adjusting its Value Incentive Program (VIP) to help partners wring more profits out of advanced technologies and encourage them to build more comprehensive practices around the solutions, the company announced Monday.

Starting with the six-month period that began on Aug. 1, VIP security partners will now be able to get 14 percent profit margins through rebates on advanced security technologies such intrusion-prevention and Cisco Security Agent (CSA), and 7 percent margins on more commoditized technologies such as VPNs. Prior to this, partners' margins were at about 10 percent for all security technologies. VIP partners also will get 10 percent margins on services attachments.

To qualify, VIP partners must sell at least $150,000 in net bookings of qualifying security SKUs during a given six-month period, maintain valid VPN/Security or VPN/Security-services specializations and achieve a customer satisfaction rating of 4.28 or higher (up from 4.2).

VIP voice-only partners will now get a base IP Communications (IPC) rebate of 16 percent. If they have an applications attach rate of 15 percent to 30 percent, they get an additional 4 margin points, with 2 more points on top of that if their application attach rates exceed 30 percent.

The changes are designed to encourage partners to establish more targeted practices and add more services around next-generation technologies.

"VIP participants get about 22 percent higher margins than those who aren't in the program, about 50 percent higher for services, and they can improve their overall margins even more by selling advanced technologies," says Edison Peres, Cisco's vice president of core and advanced technologies for worldwide channels. "Customers are no longer looking at security as just an add-on; they're looking for it as a core expectation. So we want partners to think about security in every network sale and add advanced capabilities to their practice."

Cisco partners say the new rebates will help them make more of a commitment to create more advanced businesses around the vendor's technologies.

"Security and IP communications aren't the type of areas where you just decide to open up shop one day; they're a substantial time and money commitment," says Jon Jensen, CEO of NexusIS, an enterprise-focused VoIP and security reseller in Valencia, Calif. "Cisco has enhanced the profitability and provided incentives to build core practices around key technologies."

Jensen says one of the benefits of the enhanced VIP will be a more comprehensive and anticipatory overview of which technologies Cisco has in the pipeline.

"There are so many new applications coming out, it's important to focus on 'mapping out' a customer's technology infrastructure, but this will help make rolling new applications into the infrastructures more fluid," Jensen says.

Other partners say the new program will encourage them to ramp up their services capabilities, and that the more stringent program requirements will benefit resellers who want to build more high-end practices.

"The traditional VAR typically wouldn't hit the performance thresholds; this model forces you to focus more on selling particular applications, and it will help us change our business model to be in a more long-term consultative position around which we can develop and integrate our own software," says Brett Shockley, CEO of Spanlink, an IP communications solution provider in Minneapolis. "We already do things like call-center and rich-media applications, and this will provide additional margins for us to be able to reinvest into the business."