Cisco CEO Urges Partners To Take Network Business Architecture High Ground

Cisco Chairman and CEO John Chambers Tuesday urged solution providers to take the network business architecture high ground in the battle against competitors attempting to "commoditize" the network.

In a keynote address kicking off Cisco's partner summit in New Orleans, Chambers said it will be partners that sell business architectures that thrive in the future rather than those selling point networking products like routers/switches.

In a brief interview following the keynote, Chambers said partners selling point networking products will "still be able to make money," but not nearly as much as they would by selling architectures "that make a difference in customer's lives."

"What customers are asking is how do you make technology relevant," said Chambers. "How do you future proof as much as possible how it (technology) is going to evolve in the data center with switches, routers, wireless, mobility, video, etc. The more effective we are as a company at going to market through our partners, and not competing with our partners, as many of our peers are, more and more of the growth and more and more of the profits will be tied to architecture and the ability to take technology and apply it to business propositions or challenges.

"What we have always done better than any other company in the world is we go not only through market with our partners, we focus on their growth, their profitability and we transition to new markets together," he said. "These transitions are coming to us at a tremendous speed and scale. What the partner conference is about is to bring that to life. I think you will always see us rated as the top partnering company in the world."

Chambers, however, conceded that Cisco now faces competitors coming "at us in ways they haven't before."

"If you are in a market where you haven’t gotten a lot of big competitors you are probably in the wrong market," he said. That reference to the competition comes with Cisco's core routing and switching business under attack from competitors like HP, whose enterprise switching and routing revenue grew 30 percent in the most recent quarter.

Cisco's switching sales, meanwhile, in the most recent quarter were down four percent compared with the year ago quarter, while routing revenue was up four percent. Cisco is fighting back by urging partners to take the high margin ground with specific Cisco business architectures powered by a new massive Cisco-powered professional services partner enablement effort. This comes as Cisco competitors like HP, which has its own $36 billion services organizations, are investing heavily in their own professional services organizations that often compete with partners.

Next: Chambers' Partner Services Profit Pledge

Chambers, for his part, said Cisco expects its partner services revenue to grow five times to ten times faster than the services revenue that Cisco itself generates. That is no small matter given that technology professional services are growing at twice the rate of information technology products and make up in many cases as much as 80 percent of a solution provider's profits.

To hammer home its business architecture focus, Cisco is urging solution provider sales reps to get trained as business architect specialists with training from Cisco affiliated third party vendors. Cisco is also requiring its Gold partners attain three business architecture specializations choosing from areas like switching & routing, wireless, security, and unified communications.

Besides that, Cisco has reorganized its own internal sales and marketing effort around business technology architectures.

The Cisco drive to increase partners' business architecture solutions selling prowess comes with Cisco competitors waging a war on Cisco's highly profitable network routing/switching business. Chambers, for his part, rallied partners to make sure they continue to lead in core network routing/switching.

HP, weighing in at $126 billion, has waged the most public war on Cisco's core networking products singling out what it has called Cisco's 80 percent networking product margins as out of line. HP is even claiming a 40 percent price advantage over Cisco on core routing/switching products.

When asked if solution providers that partner with HP are putting their business at risk, Chambers replied: "I never put any comments (out there) about specific competitors. What I do believe in is (Cisco's) ability to transform technology into business process change and to do that in a way that allows them (partners) to evolve with very best in class products in each category."

Chambers stressed that Cisco has consistently proven that it sees big market transitions "way ahead of competitors" and has been able to move partners into highly profitable new emerging technology markets like data center and video. "Our customers know that we go to market with our partners in a win-win," he said. "We have done it for 15 years better than anyone else."