Cisco To Acquire MaintenanceNet: Will Repurpose The Tech For Cisco's Channel

Cisco's pending acquisition of MaintenanceNet, a developer of cloud-based solutions for handling renewals via channel partners, is raising the possibility that Cisco may be looking for a bigger piece of the renewals business while cutting off its competitors from the technology.

Debbie Dunnam, Cisco's senior vice president for global customer success, wrote in a Tuesday blog post that Cisco plans to acquire Carlsbad, Calif.-based MaintenanceNet for $139 million in cash and retention-based incentives. The deal is slated to close in the first quarter of Cisco's fiscal year 2016, according to the post.

MaintenanceNet, founded in 2004, was a pioneer in developing technology for automating renewal contracts for the channel. Dunnam wrote that Cisco started working with MaintenanceNet in 2009 to offer its distribution and reseller partners "a simple and automated way to improve service renewals and identify uncovered product opportunities."

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MaintenanceNet’s software finds customers with service contracts that are coming up for renewal or overdue, as well as products not yet covered by a service contract, Dunnam wrote.

"Their low-touch solution enables automated quoting, notifications, and, in some cases, ordering online. This helps Cisco partners capture high-volume and low-dollar sales opportunities that may risk being overlooked. This streamlined process enables services contract opportunities to be pursued quickly and efficiently," she wrote.

Tech Data, for instance, used MaintenanceNet as the base of SMARTattach Opportunity Portal for managing Cisco's SMARTnet ordering solution. Other distributors, including Comstor and Ingram Micro, have similar relationships with SMARTnet and MaintenanceNet.

While Dunnam referred to helping "Cisco partners" capture overlooked opportunities, the company lists several other vendors, including competitors such as Lenovo and IBM, as clients. Also included in the list are several distributors, including Ingram Micro, Tech Data, Weston and Scan Source, as well as a number of solution providers.

However, as Dunnam suggested in her blog post, this is likely to be a Cisco-centered offering going forward.

A Cisco spokesperson told CRN via email that Cisco represents a major share of MaintenanceNet’s business.

"But as MaintenanceNet began growing and adding new customers, it became clear that the needs of Cisco, our customers, and our channel partners may not remain aligned with the needs of a broader, more distributed MaintenanceNet customer base. The MaintenanceNet capability is increasingly strategic for Cisco, so securing that capability directly became a priority," the spokesperson wrote.

The move by the IT industry toward a focus on recurring revenue is also a strategic trend for Cisco and its ability to serve customers and partners, the spokesperson wrote.

"We felt that it was time to align MaintenanceNet’s capabilities with Cisco’s directly to innovate together and grow our business and continue to enable our partners," the spokesperson wrote.

When asked what the acquisition might mean for other vendors currently working with MaintenanceNet, the spokesperson responded that MaintenanceNet will be used primarily for its own and its partners' use.

"Although there is no immediate change to MaintenanceNet’s customer contracts, we anticipate that the announcement of Cisco’s acquisition may cause MaintenanceNet’s customers to consider alternative options. We will work with customers to minimize disruption to their business and ease the transition," the spokesperson wrote.

The acquisition also should not impact Cisco's channel relationships, the spokesperson wrote.

"This acquisition is an example of Cisco’s commitment to continuously simplify our business processes; aggressively seek operational efficiencies, and make it easier to do business with Cisco. Cisco partners will be able to reach and sustain more customer engagements, grow services revenue more efficiently, and increase the operational efficiency of managing transactions at scale," the spokesperson wrote.

Dunnam wrote that MaintenanceNet will be part of Cisco’s Global Customer Success (GCS) organization, and will be a "critical component" of the organization's strategy for simplifying and digitizing its business processes.

"Just as MaintenanceNet’s business was built with and through partners, this acquisition demonstrates Cisco’s focus on serving the partner go-to-market strategy and its significant role in our customers’ success," she wrote.

How significant a role it will take, especially in terms of Cisco's distribution and channel partners' renewals business, remains to be seen.

Tech Data, Avnet and Ingram Micro did not respond or were unable to make spokespeople available by publication time to discuss the impact of the acquisition.

Furthermore, two solution providers told CRN that, despite being listed on MaintenanceNet's website as customers, they have not done business with the company for many years.

An owner of one solution provider, who asked to remain anonymous, told CRN that the firm has not worked with MaintenanceNet for years, and that it's likely that Cisco likes the MaintenanceNet application.

"Cisco's huge on SMARTnet," the executive said. "Maybe the acquisition is some angle for Cisco to sell more renewals. Or it may be a defensive move. And remember, Cisco has stupid amounts of money."

Rich Baldwin, chief information officer and chief strategy officer at Nth Generation Computing, a San Diego-based solution provider, told CRN his company also worked with MaintenanceNet early in that vendor's life but found Nth's own automated system for handling renewals to be better just because it was tied into its own ordering and customer management systems.

"MaintenanceNet is a quality company," Baldwin said. "It was unique, and early to the game."

MaintenanceNet's advantage for solution providers who have not invested in their own system for automating renewals is its customer-facing Web interface, Baldwin said. "But our customers prefer we do the work," he said. "We look at assets and put together proposals."

For most solution providers, maintenance contracts are a relatively small part of the business, but for Nth it is a large business with relatively high margins, Baldwin said.

"I'm sure manufacturers look at offerings like MaintenanceNet and think having a good automated system is the right move," he said. "They can automate the process, send out invoices, and see money in the bank."

While MaintenanceNet executives were not available to comment on the news, MaintenanceNet CEO Scott Herron wrote in a blog post that customers in the coming few weeks should see little change, but over time, its operations will "shift into overdrive."

"While we plan to fully embrace the Cisco culture, we remain committed to keeping MaintenanceNet’s passion for innovation alive. Our focus will continue to be on bringing you the technology and services you need to drive success with your services business. The difference is, that with Cisco’s investment in our future, we gain the capability to scale more rapidly, to serve you more comprehensively and to advance our team and our technology to meet your needs -- with greater resources behind us," Herron wrote.

PUBLISHED JULY 7, 2015