Cisco Pushes Partners to Drop Rival Brands

Cisco Systems doesn't want to share.

As the battle for the small business market -- and the channel partners who cater to it -- heats up, Cisco is trying to knock rival vendors off of its partners' line cards.

Instead of working with value-priced players such as Hewlett-Packard, 3Com, D-Link and Netgear, Cisco wants its partners to add Linksys, its own lower-cost networking line, to their portfolios.

"If Cisco partners are carrying the Cisco brand and a lower-priced brand, we think they should carry the Linksys brand rather than that other brand," said Charlie Giancarlo, Cisco's chief development officer and president of Cisco-Linksys, last week at Cisco Partner Summit 2007 in Las Vegas.

At the conference, Cisco blurred the lines between it and its Linksys division by rolling out a VoIP system under the Cisco brand name that targets customers with 16 or fewer users. In the past, Cisco has cut itself off at the 20 user mark, leaving the rest of the small business market to Linksys.

Now, the overlap is intentional. "We are creating overlap. At a certain business size, let's say 15 users, you will be able to choose from either a Linksys solution or a Cisco solution," Giancarlo said. "A Cisco solution will represent a product line that will scale with your company to very large sizes and allow you to integrate with advanced technologies ... The Linksys set of capabilities is one that can be managed simply by a non-technically trained individual. It allows service providers and channel partners to go into businesses that don't have a fine appreciation of technology or don't want very complex technology and yet give them sophisticated pre-packaged applications and environments that meet their needs."

Cisco's hopes of unseating solution providers' partnerships with its rivals and replacing them with Linksys could be a challenge, as its competitors are working to boost their profiles in the channel as well.

ProCurve Networking by HP, for example, expects to add 2,000 U.S. partners to its current base of 3,000 over the next two years, many of which will be focusing on small and medium businesses, said Wenceslao Lado, Americas vice president and general manager for ProCurve.

"We worry always about Cisco, but we count on our channel partners to make business decisions based on what's better for their customers and for their business," Lado said, adding that ProCurve provides more flexibility to its solution providers. "A fundamental part of our channel program is to identify how we can work within our partner's business model ... It is not our value proposition to say our partners need to be in this sector or that type of account or work with those value vendors. We're more the contrary."

Another challenge Cisco faces is a battle of perception, as many of its partners view Linksys as a consumer play.

"There's no particular reason we're not working with Linksys. They're probably just not on the radar for us," said Pat Grillo, president of Atrion Communications Resources, a solution provider in Branchburg, N.J., that carries networking products from Cisco and Extreme Networks. "I look at them when I need to set up remote access from my home," Grillo said, noting that about 20 percent of Atrion's sales come from the small business market.

Customers themselves have a similar perception, said Reza Zarafshar, president and CEO of Advanced Computer Concepts, a solution provider in McLean, Va., that does 25 percent to 35 percent of its business in small and medium-sized customers. ACC counts Cisco as the networking vendor it does the most business with but also carries Hewlett-Packard's ProCurve gear and signed on with Netgear three months ago.

"We're not against Linksys, but the impression the market has about Linksys is that they're more of a SOHO provider than for business," Zarafshar said. "They have plenty of products that fit well in the SMB space, but they're not seen that way."

ACC looked at the Linksys portfolio before adding Netgear to its lineup but found an opportunity for a closer partnership with Netgear. "Netgear seemed to demonstrate a lot of interest in working with the channel and doing out-of-the-box thinking to create opportunities for us," Zarafshar said. He signed on under Netgear's recently revamped PowerShift Partner Program, which added new partner levels, financial incentives and sales/marketing support.

"They would have to be willing to work with us a lot more than they are," Zarafshar said on what it would take for ACC to begin carrying Linksys products. "It appears that the attitude is that they are part of Cisco and Cisco sells itself, so they don't need to work very hard to sell Linksys, like Linksys is in the same boat, which they're not."

Other solution providers said they want to see more clarity from Cisco on how it's positioning Linksys and how Cisco partners should work with Linksys products.

"I think Cisco's pretty confused about Linksys," said one Cisco partner in a recent interview, who asked not to be identified. While Linksys is trying to promote its own business-class portfolio, Cisco executives and field sales reps are steering Cisco partners away from the product line, the partner said. "If you're aligned with the [Cisco] field, you had better not sell Linksys because they're not compensated on it," the partner said.

NEXT: Cisco's plans to win partners for Linksys

Cisco is reevaluating its compensation strategy to consider whether Cisco sales reps should be eligible for compensation on Linksys business, said Nigel Williams, vice president of worldwide channels at Linksys. Any potential changes would not take effect until the start of Cisco's next fiscal year in August, he said.

Further confusion could also be cleared after Cisco decides how much longer the Linksys moniker will even survive. Cisco Chairman and CEO John Chambers confirmed at the conference that the vendor plans to move all branding under the Cisco name.

"We've announced that we are going to migrate all branding toward Cisco, but each of the different [geographic] areas has a different consideration for how fast that will happen," Giancarlo said. While the Linksys brand is expected to disappear on the consumer side, there is still a chance it will endure for small business products, he said.

In the meantime, Linksys is preparing a new small business-focused channel program that's set to launch in May. The forthcoming program will put more emphasis on value instead of volume, rewarding partners for increasing their investment in Linksys, Williams said. Linksys will also be rolling out partner specializations and increased marketing support in the form of lead generation activities and market development funds, he said.

At the same time, Linksys will increase partner recruitment efforts, where it is eyeing a huge trove of untapped Cisco solution providers, Williams said.

The company believes there is only 5 percent to 7 percent overlap between Linksys' base of 12,000 registered partners and Cisco's 34,000, Williams said. "There's a base of approximately 44,000 partners for us jointly to go after, but historically we haven't," he said.

That's why Cisco and Linksys now are working to unify their sales and distribution strategies with a single group of partners. "We will have one single registered partner community between Cisco and Linksys," Williams said. "If you register with Cisco, you're automatically registered with Linksys, and vice versa. We can start to send unified marketing and positioning messages to the community."

Williams said the timing is right for Linksys to launch an aggressive push into small and medium-sized businesses as the company's new leadership is driving considerable change. "This is the first time we've had a worldwide channel organization, a dedicated organization of people governing the channel," Williams said. Linksys has also been making internal investments, including product development and the addition of 200 new employees company-wide over the past eight months.

"We're ready to really go after this market with a vengeance," he said.