QandA: Paul Mountford, Cisco's New Channel Chief

A five-year Cisco veteran, Mountford previously served as Cisco's vice president of carrier business for Europe, the Middle East and Africa, and was based in London. Prior to Cisco, Mountford ran a consulting business that helped U.S. companies establish channel strategies to enter international markets. On his first day on the job in San Jose, Calif., Thursday, Mountford sat down with CRN Infrastructure Editor Larry Hooper to talk about his new role.

CRN: You are coming in as Cisco's vice president of worldwide channels at a critical time. Your new channel program is kicking in amid an economic slowdown. What is your philosophy in regard to Cisco's approach to the channel?

Mountford: It's about having an integrated approach to the market. From my point of view, it's about creating a value supply chain, where different elements of the channel deliver different styles of value to the business--no matter which part of the business that it is--yet, with the ability to get the right kind of focus from us and the ability to make money in that value supply chain based on what they deliver to the market. It's one chain, but it's all based around different values.

CRN: Are you suggesting a hierarchy of channel partners?

Mountford: Distribution is a logistical-oriented price-and-delivery value route to market and it covers huge amounts of market space in a very quick and efficient manner for the customer, the VAR and also for us in terms of having service in the marketplace. If you go to the other end of the spectrum, you have the relatively small local VAR, which will be about development of capabilities in certain technology areas. That's about very high-value, still very much early technology in the market where they need to invest in a totally different type of model in that business to make them profitable. They don't want to be competing against anyone who can just supply that technology and just give it away. So, there are two different views of the market: one high volume, low margin and the other smaller volume, very high margin.

CRN: That sounds like you're talking about Cisco's partner specializations.

Mountford: Yes, it's a value chain. They all supply into the market for different reasons and different areas.

CRN: This is an economically challenging time for Cisco and other networking vendors as well as their channel partners. How will you address these challenges?

Mountford: The big thing is that we've had a massive change in our industry and to keep doing the same things that you were doing before would be a mistake. In times of downturns in markets it's very important to analyze what you're doing and how you're doing it and improve upon it where you can. The big target for most businesses in our industry today is about profitability. So for me it's very important to look at all of those elements and categories we're talking about to ensure there is a business program that enables profitability for our partners, for us and for the inevitable customer. You can't take any one of these in isolation. You can't just take the channel to one side and just look at that. You have to look at what the customer wants, how the channel can deliver that and how that fits in with what Cisco's objectives are as well.

Imagine it like a clock with three cogs of the clock turning at one time. That's what it is. If one is working faster than the other or slower than the other, then the others don't operate properly. So it's about building that clock to enable everybody to be successful. But it's a very complex but fascinating and stimulating area to work in. That's what interested me in the job.

CRN: Cisco's new partner program was announced in March but is just rolling out now as partners' contracts renew. The program aims to change the focus of reward from volume to value and pushes partners to specialize. What do you think of the changes in the program?

Mountford: That will continue without any question. That will always be an issue that's very high on our list. It's always been very high on our list. Having a very broad spectrum of technology and creating the value for new technologies that come into the market is very important to us. All that we'll be doing is looking at the business models to ensure that there is profitability in that as well, so that as [partners invest in that and invest in the capability to deliver complex technologies to the market, they also can make money doing it.

CRN: Is there anything about the new program that you'd like to change?

Mountford: I'm day one in the job, so do I know all the changes I want to make? Of course not. I have reviewed everything to get a very balanced view of how we are globally. My job is obviously very heavily North American focused because North America is such a large percentage of our business. But it's also a global program, so I guess the reason I was brought across was to also bring in the more international perspective of the business. But of course the U.S. will be a very big focus area for me, especially in the early days because I want to understand it as quickly as possible.

CRN: There has been talk in the market that Cisco's specializations have come about because there is either a perception or reality out there that a lot of partners don't have the skills to handle some more complicated projects, especially IP telephony projects. Is the specialization requirement in the new channel program a result of that perception, whether it's real or not?

Mountford: I don't know that. I don't have that feedback. If we met again in three months I might have the answer to that question.

The specialization is for validating that partners are qualified to do a job, of course. The whole idea is that you get market changes and you want to take partners with you. Everybody is learning. To get good programs that educate and train partners so that they are able to deploy those new technologies in a way that we get high customer satisfaction ratings is what our main drive was, as far as I understand it.

Everything is driven by customer satisfaction. [John Chambers lives and eats customer satisfaction. So the way to get our customer satisfaction rating up is to make our customers happy and to give them some success. That's what [the specializations came from in my point of view.

CRN: Larger partners are saying they would like to see Cisco implement clearly defined rules of engagement. What do you think?

Mountford: I don't know what you mean. In any channel strategy, you want to reduce conflict as much as you can, but at the same time you don't want to prevent competition on value, because that's a positive thing for the customer. All of our channels are in a competitive environment. If it's a situation where we have too many partners competing for a very small piece of business, then obviously we would try and fix that. Certainly that would be something that I would want to try and sort out.

I'm not sure yet in North America how we delineate who we work with and who we don't. The way it's always worked where I've come from is that channels have competed in our large enterprises and there hasn't been that much conflict. Channels have very much been recognized for what they're good at.

CRN: The partners here are looking for distinction based on how things happen between Cisco's direct arm and its channel partners.

Mountford: I come from somewhere where we don't have any direct business other than service provider infrastructure.

I wouldn't be in favor of saying these set customers are yours or ours. That would be an arrogant approach to the market. I don't think that's realistic. At the end of the day the customer chooses based on the value. The question is, how many channels do you have operating trying to win that same customer? Do we have too many people trying to compete for the same piece of bread? I don't know whether that's an issue in North America or not.

The important thing is to support our value partners to ensure their profitability and viability and sustainability in the marketplace. That's one thing we will be looking at. I will be looking hard at that.

CRN: You asked the question about overdistribution. Some in the channel would say that Cisco is overdistributed in North America. What do you say? Are there too many Cisco partners now? Will you have fewer partners when all is said and done?

Mountford: Yes, I think the market will make it fewer partners anyway, just as there are fewer technology vendors. Yes, some people won't make it. All we want to do is try to make them profitable in the marketplace. If you haven't got a value model and you haven't got a volume model, it's going to happen. If you're neither niche nor a large volume player in a downturn, then you're in a difficult place.

CRN: Midsize partners are saying that in this economy they are losing large deals to the large volume discounters and smaller deals to the smaller, less-invested solution providers. Their contention is that their investment in specialization and training is hurting them right now. What can be done about this?

Mountford: I would want to review that. If the strategy is about creating and investing in specializing and the cost of doing that is high, then we want to be sure that those partners don't become eliminated from the market by someone who isn't adding any value and is just providing boxes, although that's unlikely if it's a complex or new technology. Somebody isn't going to buy a box. They want to buy capability.

For me it would be very important to make sure that I analyze every one of our categories of channel, where their margin has been and where it's looking like it's going based on trend analysis. So if margin were going down in a specialized area, then I would want to address that.

If you're supplying technology that's pretty well accepted in the market and it's been around for some time, then there is always a cost element to that sale. Every customer out there is looking to make as much money and reduce spending as much as possible. So in down times there will always be price pressure.

I think the question you're asking is on value. How would you address the smaller people being crushed by the bigger people who have volume and strength? We tried to address that in the [new channel program we kicked off this year. And we will be beautifying that at our partner conference in Orlando. I don't have any set ideas about that yet but I really want to look at it.

CRN: So what can we expect at the next partner conference in Orlando?

Mountford: There will be the next stage on from the initial strategy. What we're going to do then is talk about how we progress the channel based on changes in the market--technology changes and also the massive turbulence that has happened over the last 12 months. We recognize that people have different focuses whereas before 12 months ago the channel was still very much oriented to market share. This year I'll guarantee that the CEOs will be looking at how they get return on investment and cash flow.