Cisco's Sherriff: Cloud, Competition And Who's Making The Calls

Cisco used its 2011 Partner Summit in New Orleans to articulate a strategy for how it wanted Cisco partners to think about the cloud. Nearly a year later, Cisco's cloud solution provider program, which officially went live in August, has been successful and Cisco partners are deep into sorting out their cloud strategies behind the networking titan.

That work is only beginning, said Jim Sherriff, senior vice president, U.S. and Canada partner organization at Cisco. At this year's upcoming Partner Summit -- April 16 to 19 in San Diego -- Cisco expects to light the path for partners that have moved their cloud conversations beyond academic discussions and into revenue-generating opportunities.

Cloud isn't the only topic expected to dominate at the Partner Summit. Cisco has just come off one of the toughest years of its corporate life, having emerged from restructuring more than 13,000 employees -- and many layers of bureaucracy -- lighter. Sherriff said the changes ultimately will be net-positive for the Cisco channel, which thanks to Cisco initiatives like partner-led and a coming Cisco partner marketing blitz, is seeing happy days ahead.

[Related: Cisco Partner Marketing Boss Tips Partners On Coming Cloud Marketing Blitz ]

Sherriff joined CRN Senior Editor Chad Berndtson for a discussion on channel priorities near Cisco's regional offices in Austin, Texas. Excerpts follow:

We're a few months out from Partner Summit but roughly halfway through Cisco's fiscal year, and a lot of partners are planning their next moves for calendar 2012 and beyond. I imagine they're asking you a lot about best opportunities with Cisco, so what are you telling them?

What I think is more important is what they're telling me. One area across the board is that they're getting unbelievable success in the data center. With Cisco products they have a catalyst for relationships with complementary vendors as well, so that's a source of tremendous growth. We're also seeing a tremendous resurgence in the collaboration business -- you saw the latest market-share numbers and, for the first time, Cisco has tipped over 50 percent in enterprise voice. We're seeing growth areas like video as part of that.

I think an area they're still trying to wrestle with is what is their cloud strategy exactly. A year ago, cloud was still more of an academic discussion, and now they're having to make some decisions.

Do you sense a lot of fear about making the wrong decision about cloud? Cisco came out a year ago and explained three ways -- cloud builder, cloud provider, cloud services reseller -- [for partners to participate] in cloud. Have they had an easy time figuring out where they fit?

I think the easiest decision was for partners wanting to be a builder, so for the majority of our partners, the answer is yes. There's a lot of momentum and a lot of people getting their cloud builder badge. Being a cloud provider is certainly a lot more asset-intensive. But I think people are getting clarity on where to make their bets. Even if they decide to be a provider, it doesn't mean they're not going to be a reseller. None of our VARs can stand up every possible offering in every customer they want, so there have to be some reseller relationships. It's the third category that's more dynamic today. They're trying to sort out how do they make [cloud services] work, who do they have to trust to have relationships where they're not going to be mortgaging their future.

How many Cisco partners have been badged cloud builders at this point?

I want to verify that before I give you that number on the record, but it is very mature. And then there are a number of partners in the hopper, going through the training.

NEXT: Cisco And The Mega-VARs

There's a lot of consolidation going on among channel partners with large Cisco practices. We're seeing major moves like Presidio buying INX and Softchoice buying Unis Lumin, and a fewer other big ones. What are your thoughts on this idea of the mega-VAR? Do these partners need to buddy up to get even bigger and cover more ground if they want to compete effectively in the cloud era?

I think you're going to see a natural evolution and segmentation of the VAR community. Right now is a great time to be a Cisco reseller, and a consequence of that is there is a lot of equity coming into the space and valuations are high. That'll create more transactions because of how positive the environment is. So I do think you'll have more mega-players than we have today. But you'll also have more deep specialists that are distinctive around one or two things they do better than anyone else. Some of our partners are very obviously going that way. And there are some partners that, down market, are trying to make big investments and making the viability of surviving in that market far more attractive.

So it's reasonable to think the creation of those mega-VARs is going to continue in the Cisco channel?

I think so. Once that behavior starts, there are others who start to ask the question of, ‘Do I need to be doing that?’ so I think it naturally continues. But the other great thing about the Cisco channel program is that we have a great place for smaller VARs because we reward value over volume. There are economic advantages to being big, but it's not necessarily a volume advantage in our program.

Those smaller partners, the down market partners, they're not the types of VARs that are going to be able to stand up these massive architectural plays, and by their nature, they are more specialized in particular areas than some of their bigger counterparts. What are the decisions they have to make?

I think it starts by figuring out what customer segments they want to focus on. Some of the small Cisco VARs are very successful because they have a very distinctive value proposition. Everybody is bombarding them to try and get them to broaden their portfolio, but they've done well because they figured out early exactly what they wanted. Managed services is part of that -- it's not just using products off the shelf but adding additional value -- and some of them have gotten really good at that.

Does it surprise you at all that there's still reluctance toward managed services? We've been talking about that model for many years now, but there are still plenty of VARs just getting going with that.

Well, first of all, it's a model that's not something people can typically stand up in a year and get success. It's going to take a lot longer to see a lot of revenue there, so there is that reluctance. The companies into year three and year four, however, find they're pretty happy with the model. It takes an incredible amount of discipline to be successful.

Is it incumbent upon Cisco to enable that for them -- give them the types of programs and training to help them get there with managed services? Or is it smarter to say, ‘You figure it out and we'll help as needed?’

I think there is some value we can bring. One of the resources we have that's quite unique is the structure of our services model and where we're going in terms of opening up APIs and putting in smart services and creating an opportunity for partners to do a lot of managed services. You want to be able to show you have differential value vs. everybody else, and our services offering creates that opportunity. That's one of the most positive pieces of feedback we receive.

How much of a competitive advantage will that services approach be going forward?

I think we've evolved to a point where we're doing something our larger competitors aren't. Historically, you had Cisco partners all selling SmartNet, with a limited margin on that. Certainly they could add on life-cycle services or something else, but what we have now is opening up those large services opportunities to create true differential. That's game-changing.

NEXT: Cisco's Partner-Led Strategy

Cisco's been steady in pushing its partner-led strategy and been public about the investment it's made and what the particulars are. Speaking as a sales guy, where it's less about marketing talk and more about numbers, what is the biggest benefit of partner-led to Cisco VARs?

We have Partner Summit coming up, so you can look at a lot of the things we've teed up so far, but expect to have more details coming there on a variety of topics. The meat of it will come out, and right now we're directionally teeing up where we want to go so they can start taking steps to line up with our strategy. What it's about, ultimately, is what allows them to have greater differentiation, better margin opportunities that they can protect, and allows them to better tie in to our lead-generation and marketing efforts.

So there will be announcements specific to partner-led made at the Cisco Partner Summit?

I'm not going to make any comments about specific things to be announced at Partner Summit -- we do like to have the element of surprise. But if you look at our direction, we typically go out and tee things up, get feedback from the partners and listen to them to ensure we make the right choices.

Talk about the growth of the Teaming Incentive Program. It was unveiled two Partner Summits ago as a way to reward partners earlier in the sales cycle, but I understand it got bogged down in procedural and execution issues. Where are we at with TIP now?

We hit the knee of the curve about 90 days ago, and it has really taken off, with our partner community truly understanding it, and how it's different from OIP [Opportunity Incentive Program]. The biggest challenge was getting our own sales force to understand TIP, and we've started to see the change in that direction. The challenge for everyone is that TIP requires a lot more up-front planning by both our team and their team to execute well. That's more work. But I think the value is not only in the differential of the pricing, but the fact that partners are getting paid for early engagement.

So the challenges around TIP on the Cisco sales side have been sorted out?

Well, everybody's had training. There's a difference between having training and actually getting it done, so I'm not declaring victory yet. But I think we hit the knee of that curve about 90 days ago.

Will Cisco be making other adjustments to the Value Incentive Program and OIP and the other incentive programs outside of the usual, twice-a-year updates?

Twice a year is pretty much where we look to make those adjustments. But you know we always try to use VIP to send a message to partners about where we want them to go, and we almost always do make adjustments.

But no specific changes you can mention right now?

Nothing we can talk about today.

Switching gears, one of the things I brought up with Chuck Robbins [senior vice president, the Americas] last fall was this shift in how Cisco is addressing its competition. For a long time, Cisco wasn't apt to talk about competitors so explicitly, but he acknowledged that Cisco is definitely more vocal now about what vendors like HP, Juniper and Huawei are saying about you in the market. Why is that important?

We're in a number of very competitive markets, and part of the challenge is there is a lot of misinformation that gets out in the marketplace. Ultimately, if we want customers to make the best decisions possible, we have to do a much better job of arming our sales force with information to help set the record straight. We win a higher percentage of deals when we do that, and because of that, we've been more aggressive in arming them so they can talk about what is our differential.

Will that effort by Cisco continue to be reactive -- setting the record straight when you need to? Or will you be going out and making sure to get in front of partners what Cisco brings vs. HP, Juniper and the others?

If I were to net out one of the most important things we have with our partners, it's that we create market opportunities instead of commoditize markets. You will see us continue to focus on market transitions and how to get there early. That isn't changing because when you start a discussion focused on competitors, by nature, you're focused in the rearview mirror instead of what's in front of you. But we do need to make sure our partners and customers don't get disinformation when correct information is readily available.

NEXT: Cisco Vs. The Competition

There's a lot of talk in the market about data center architecture. HP has an architecture, Brocade has an architecture, Juniper has an architecture, Avaya has an architecture, Enterasys has an architecture, and so on and so forth. But Cisco was talking conceptually about architecture years ago. How is that that helping you now, from a sales perspective?

The advantage of having been down this path for a longer period of time is that a lot of what's happening now is about cultural change -- it's not just marketing. Systems are going to have to come together for a customer in all of [his] business segments, but what you see out there is a lot of ‘slideware’ that just looks like an interesting architecture. Our engineering around architecture [addresses] a cultural change.

Years ago, we talked about how it would take some time for customers to feel ready to have that architectural discussion because they'd been in a product mind-set for ages, same as the VARs were. So now that they understand the benefits of things like virtualization more, are they more receptive to that conversation?

Yes, and let me do an analogy to what happened in the voice market. One of the biggest catalysts to accelerating VoIP was organizational change. Customers starting recognizing that by separating their data groups from their voice groups, they were making sub-optimized decisions. When they brought those groups together, they were making better decisions. It's happening in the data center now. Traditionally you have very siloed organizational structures, but now you're seeing customers say they have to make better buying decisions by focusing more on the architecture vs. point products.

So that shift has happened??

It has. But it's not something that happens overnight -- it's small steps.

Another thing we hear so much about is the fact that partners are no longer selling IT to IT people, they're having conversations much further up the food chain, especially as architectural buying becomes a line-of-business decision that involves the CEO and CFO. Conceptually this is something we all talk about, but is it actually happening in the sales trenches?

It's hard to say that it's happening across the board. There are always three major pressure points that affect which way the pendulum swings. One is the cost pressure, which is always there but which changes in intensity and sometimes moves decisions up to the C-level. Another is agility. Customers want to move faster and want the IT equation to be one that helps them move faster. SaaS, for example -- a lot of the time, that's an agility decision. The third one is talent. Right now there is incredible pressure to get access to the talent needed for these market transitions, and once customers can't attract the talent they need, they naturally look to the VAR community to help them there.

Cisco's emerged from a long year of restructuring and reorganization. Is your team pretty much in place at this point?

If you ever think you're done with change, you're probably pretty close to extinction. This is a multiple-year journey for Cisco, and we're going to have to constantly evolve -- we're still in early days with the next Cisco. We have done things that some of our competitors are struggling with, including making sure we have costs in line and getting our business strategy articulated.

Are you making more decisions more quickly, as hoped?

We have greater clarity about what our priorities are and who has the power to make what decisions. We've made tremendous progress there.

Does that mean fewer people making the calls and a faster time to decision? Fewer people that need to say 'yes'?

There's a clarity of who owns what decisions. To use Americas as an example, Chuck Robbins can make the call across multiple theaters as well as what we do on the direct side of the business as well as to the partner base. We've made calls in a number of hours or days that in the past would have taken weeks. We've had a lot of people who can say no, but it was not always clear who could say yes. You do want to consult a lot of different perspectives, but ultimately there is one person who makes decisions.

NEXT: Cisco's UCS Story

It sounds like we're going to be seeing even more from Cisco on the cloud question this year. Is it on Cisco to clearly define how it wants various groups of partners to engage with each other on the cloud solutions, such as a reseller partnering with an infrastructure provider?

We are looking at how do we help accelerate those relationships with providers and resellers, and how can we take some of the friction out of the model. That's an area we haven't done a lot with and one where we think we can bring a lot of value.

So you see Cisco as having a key role in sorting that out? There's a lot of challenge right now around rules of engagement between cloud platform providers and the VARs that want to partner with them -- who's going to make money, where. How is it helpful for Cisco to have a role in that discussion?

One unique thing that Cisco brings is that we're highly trusted by multiple partner groups -- they know us to be very partner-centric. So we do have an opportunity to be a great marriage broker for those types of relationships.

The Unified Computing System has been a great story for Cisco. Is the number of Cisco partners certified to sell UCS increasing?

It has been a great story, and our growth there has been on two fronts with partners. One is that it's allowed loyal Cisco partners to expand their portfolios. They've made adjustments to expand their value proposition. But we've also strengthened our value proposition to traditionally non-loyal Cisco partners. We've had tremendous success with people that absolutely love our architecture because they've gotten exposure to it through UCS and find that they love our programs. So we have a newer set of partners as well.

Are you seeing consistent growth and wins in both the FlexPod and Vblock models of packaging UCS?

Absolutely. I think we're seeing the markets segment. We have customers that want a very tightly integrated stack, and those customers generally have a bias toward a Vblock. Other customers put a higher value on a loosely integrated stack, and the FlexPod model is better optimized for that customer. There is a natural segmentation for what partners can offer here.

And there's definitely room for all of those models of UCS selling?

I absolutely think there is.