Cisco Managed Services An ‘All Channel’ Opportunity With A $161B TAM

‘We actually predict that 46 percent of our [total addressable market] is going to be sold as a managed service by 2027, which is huge. If you look at that market — and we have an estimate of how much of that is actual addressable for Cisco — that’s about $161 billion,’ Alexandra Zagury, VP of partner managed services and as-a-Service sales for Cisco, tells CRN.

Alexandra Zagur

Businesses of all sizes are finding themselves up against a lot of IT-related obstacles, such as increasing cyber threats from bad actors and the global talent shortage, which is causing many companies to do more with less, with less of the relevant IT skills that they need. The silver lining? These challenges are opening the doors even wider for managed services delivered by partners.

Managed services and the channel partners that are bringing them to the table are helping to fulfill their customers’ rapidly changing IT requirements, while also filling the gaps and blind spots and doing it in such a way that is cost effective. Businesses using managed IT services are able to offload management of some of their most important IT assets, including security, networking, and collaboration, freeing up the team they do have to focus on more strategic projects. These customers can also more easily identify measurable business impacts from their IT investments, according to Alexandra Zagury, vice president of partner managed services and as-a-service sales for Cisco.

In a sit-down with CRN, Zagury shared how Cisco’s own managed services businesses has grown and will continue to grow as the opportunity becomes more and more compelling to partners, the “huge” opportunity that managed security brings for MSPs, and the resources and partner incentives that Cisco has and is working on to enable more partners to develop their own managed services practices.

What follows are excerpts from the conversation.

How big is the opportunity around managed services for Cisco partners?

The managed services opportunity is all channel opportunity. It basically means technology sold as a managed service through a partner. We actually predict that 46 percent of our [total addressable market] TAM is going to be sold as a managed service by 2027, which is huge. If you look at that market — and we have an estimate of how much of that is actual addressable for Cisco — that’s about $161 billion.

About 18-20 percent of Cisco’s business is estimated to be managed. But if the opportunity is nearly 50 percent, we’re still under indexed. So, the opportunity is huge. We have to support that shift, because we have to be there for our VARs as they’re reinventing themselves as managed service providers, [while] engaging with MSPs across the board to really support and drive the Cisco business.

Is it fair to say that managed security is one of the biggest areas of opportunity right now in the managed services arena?

Yes, it’s definitely a key opportunity across what I would call secure networking — the intersection of both networking and security. We have a partner managed-ready library of offers that we codified, that have a reference architecture, that have go to market assets, that have commercial models. And we just launched the managed firewall or managed firepower offer. we’re also onboarding, managed partners on to Managed XDR and you’ll see some announcements at Partner Summit. Of course, we have Managed SASE and looking forward to launching Managed Secure Service Edge… or Secure Access, as we’re calling it.

The other thing that we’re very keen on that we also are developing is around Hybrid Work and the hybrid work one is really interesting. In fact, we have very close partnerships with the SPs on these offers. Think of it as an office in a box with everything in it. It comes with your collaboration tools, from a device to your headphones. It comes with the Meraki Wi-Fi ready for you to set up, then it comes with all the software, be it on the security side, [Cisco] Duo for single sign on and everything. And our partners can set up a full-on hybrid worker and they’ve seen huge opportunity in the insurance market. Lately, when you try to buy insurance, [many of those] people are no longer in an office, so with our voice cancellation and headphones and everything, they could be working at Starbucks, and you wouldn’t know it. We really enable these types of offers, and we call them high velocity offers. In fact, we just won an award with the [Technology & Services Industry Association] TSIA for these high velocity offers that we do with the SPs for best managed services offers. We’re very, very focused across the board, not just on the single architectures at Cisco, but how we bring these things all together to deliver outcomes and experiences for our customers with our partners.

How is Cisco’s focus on platforms, rather than point products, helping to encourage the adoption of managed services?

It’s a great question. We have five platforms. We have the collaboration platform, WebEx. We have the Cisco Networking Cloud, we have Security Cloud, we have the Observability Cloud, and we have the PX and CX Cloud. So, Cisco is really figuring out this pivot to the platform and looking at how we become much more of a platform-based company with APIs and telemetry data and automation to enable our partners. That’s where the opportunity is huge for us. We have two internal projects … one that is around how we look at our technology and make sure that it’s managed-ready. So, we’re in very, very close collaboration with Cisco Networking and Security to ensure that these platforms are built with managed-ready features from the get-go. As they build the platform, they think about multi-tenancy, they think about what the [user interface] UI looks like if I’m a managed service provider and I might have to show a different environment for a health sector company versus a financial services company. So, these are things that we constantly work with the business units directly on in terms of defining requirements. And then for the first time ever, we actually have roadmaps that map out the evolution of these platforms and the products within those platforms to ensure that they’re managed-ready.

How can managed services go hand in hand with Cisco’s XaaS commitment?

I think there’s a lot of confusion and the industry has been storming around some of these definitions. Managed service, in its most simplistic definition, is really when a customer turns to a third-party partner and asks them to manage an aspect of their IT. It might be delivered as a service or not. And when we say as a service, we mean that it has to have some sort of a commercial model that is fully subscription-based; you’re not committing to something upfront. It also denotes a certain experience. I think the other thing, and this is where the managed service and XaaS collide, is some aspects of that service that you are getting is digitized. That’s where these two start really meeting together, because a managed services is that services stack of things that the partner is going to do for you instead of you having that IT departments inside your company. But some of that might already be abstracted to the platform. It might be a service that’s delivered digitally and it’s not necessarily people, or so forth. So that’s what needs to start combining. And I think they’ll start combining more and more. Because at the end of the day, not every service can be completely digitized and so you’ll always have an aspect of a third party to help you with that optimization of the service, or the deployment. Is it figuring out when something goes wrong. That that extended detection and remediation — can that be completely automated? Probably not. You always need a person on the other side when the alarm bell goes red, or when it goes green, or whatever is the outcome that you’re tracking. So, I think that’s where they both come together — both denotes that the customer is actually buying the services stack. Now that can have a commercial model that is fully consumption-based or subscription-based, or not.

What resources are available to partners to help them go after the managed services opportunity?

This is the work we’ve been doing for three years. When you look at our strategy and how we articulate that strategy to our partners, we talk about the three P’s. So, [the first is] platform, which is all about how we’re getting our platforms and products managed-ready. Preference, which is all about that operating model and then partner incentives, which is all about how we’re moving our incentives to ensure that we’re investing in the things that [partners] care about. When we look at what we’re doing differently, I think we’re really at the cutting edge of the evolution of Cisco’s partner model. By that I mean if you think about [how] Cisco really invented the channel model and how we go to market, it was always based on the coverage of an account. So, you have a partner account manager, you may have a partner operations manager, and then you have a [subject expert] SE$$$ also associated with that account? What we found out is that actually, you need those roles, but what those roles do, depending on the lifecycle of managed services, is very different. We found out that we need dedicated people that look at service creation. So, we’ve invested a lot in service creation resources. It will still be a business development person and a technical person, and then sales acceleration and sales execution. We’ve really deployed a different operating model of how work covering the partners.

The other thing that’s really interesting about that we have a big surface area that we need to cover because there’s lots of different types of MSPs. You might have your big MSPs like AT&T that actually play across all segments from enterprise all the way down to SMB, then you might have the long tail MSPs that go through distributors. And so, we’ve been really refining our strategy of what that resourcing looks like for an AT&T versus what that resourcing looks like through a disty to a smaller MSP and there’s lots of great things that we’ve been doing. In fact, looking at SMB right now and the distys, we’re making huge investments in coverage and also in terms of enablement and helping the distys setup their MSP practices for Cisco. This is a huge new thing that I think you’ll hear us talk more and more at Partner Summit about in how we’re collaborating with [Luxy Thuraisingam, Cisco’s vice president of global SMB and head of global partner marketing and Andrew Sage, vice president of global distribution and SMB sales] in really changing our operating model in SMB through the distys.

[For] partner incentives; our Provider Program has evolved so much since the beginning. Not only have we invested more funds into a vehicle we call Partner Investment Funds, which has really helped us align goals and sales acceleration and drive growth with particular MSPs. But the other thing that we’ve done, which is very unique and took a while to get it going but is now a tremendous success is our payout uplift. So, we pay 2x to our sales teams for selling with a partner managed provider. And it doesn’t matter if it’s if it’s a premier provider in the SMB space, or if it’s a Gold provider. In fact, we’ve seen that upwards of 20 percent of the payouts right now are in the SMB space, so with this payout uplift, we’re really addressing the whole market. And then we also launched a payout uplift where we pay 3x for selling Webex wholesale with the provider partners. So, we’ve been adding so much goodness to the Provider Program. Other things that we’ve added is the Cisco-powered service. That’s starting to become a certification that is really differentiating our partners out in the market. They have to go through the audit and we really, really figure out whether they do have a managed service — it’s not just tech support, so they have to go through that extensive audit. But because of this payout uplift we saw a 2x increase in the amount of partners wanting to build a Cisco-powered service. So that’s been also very, very successful tied to the Provider Program.