Chambers To Partners: The Digital Age Is Coming And It Will Be Painful

Cisco Systems CEO John Chambers made a clear statement to partners during the 2015 Cisco Partner Summit that they need to start transforming themselves and their customers into "digital" companies as quickly as possible or risk being left behind.

"I truly think this next year will be the inflection point for where every company becomes a digital company," Chambers said during a keynote address in front of a crowd of over 2,000 solution providers Tuesday in Montreal. "What CEOs are realizing is there's downside: If they don't transform themselves, they're going to be left behind."

Chambers said businesses that are founded as or move quickly to become digital companies -- those that are tapping into the Internet of Everything to foster innovation and business model changes tied to technologies such as cloud computing, collaboration and mobility -- will be market disrupters, pointing to companies such as Uber and Airbnb as examples. The Internet of Everything will create $19 trillion in value through productivity gains over the next decade, according to Cisco.

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Solution providers themselves will need to make the transition to become digital companies too, Chambers said.

"You've got to reinvent yourself," Chambers said. "It is so hard to do because you literally are going to have to transform your company, and at a brutal pace that you haven't had to do before, and for many of us who really care about our employee family, … this is going to be hard to do, but it has to be done, not in three to five years through traditional attrition. It's going to be a brutal change of the leadership all through [the company].

Chambers told partners to start designing their company differently, whether that means changing structure, leadership, staff or a creating a new reward system in order to build an organization that's based on speed and how well employees adjust to the market.

Chambers said by 2020, 75 percent of businesses will become fully digital. But he also noted that only 30 percent of those transitions will be successful because they won't incorporate the necessary organizational changes to support the shift and drive innovation.

"We together are right in the sweet spot of making that happen but as this occurs and as the joint need occurs in our customer sets, be it small business, medium business, cities, states [or] countries, are we positioned to deliver outcomes to them or are we selling the way we used to sell, selling routers and switches with some services?" said Chambers. "We have to transform as a company and I'm asking you to transform together with us, to push each other to where this market is going to go, to literally be in a position to drive as every single company regardless of size, every single city, every single country becomes digital, not over the next 20 years but over the next five to 10."

Partners in the audience told CRN this transformation is not going to be an easy task.

"Can the partner community really adapt and change at the rate they need us to and at the rate that [Cisco's] going to? … It's going to be a struggle for us, just like it's a struggle for them," said David Powell, vice president of managed and cloud services at TekLinks, a Cisco partner. "But if we have the support of our [vendor] partners and others, I think as a partner community we can get that done, but again, it's not a small challenge."

Companies that fail to transition in the market correctly at this time will fall by the wayside, Chambers said.

"Think of all the companies … that were great companies before -- Alcatel-Lucent, Nortel, Digital Equipment [Corp.], Dell -- and look at where they are today because they missed one transition," said Chambers.

Cisco believes a key factor in how the channel will succeed is by partnering with one another. Chambers said companies within the Cisco partner ecosystem are going to need to start looking at one another for solutions and start building new partnerships.

"It's not going to be Cisco and just one of our partners, it's going to be Cisco and several of our partners in the ecosystem and how we work together," said Chambers. "You got to reinvent yourself."

One partner CRN spoke to who is already starting to seek out new partnerships is World Wide Technology, a St. Louis-based Cisco gold partner.

"We've done quite a bit with some of our global partners or partners on a global scale, where there may be a Cisco partner that covers a certain theater that we have an entity in but maybe not the reach from an engineering implementation sort of expertise perspective," said Chad Bockert, director of corporate business development and marketing at WWT, No. 12 on CRN's SP500.

Bockert said WWT is also partnering with operational technology companies such as Itron in the energy and utility space. Chambers said having partnerships with OT companies is another important factor partners should be targeting in order to capitalize on the Internet of Everything market.

Powell said his company is starting to have those conversations as well with OT companies, but other partners might not be as well-positioned to start that conversation.

"A lot of your traditional resellers are not positioned with that side of the business. So those conversations around operational efficiencies and things like that are usually occurring outside of IT, so you're really going to have to have somebody who talks that (OT) language and then technology is an enabler of that to bring those two pieces together. You are going to have to have people to fill those gaps," said Powell. "Ultimately, we're going to have to find friendly people in certain spaces to partner with us in order to accomplish all the things Chambers is talking about."

Chambers said the transformation will be difficult and many Cisco rivals will miss it, but if the partner ecosystem works together, no one will be able to compete.

"If you think of the future, I don’t think it will be competitors we've traditionally seen. You can name the big guys such as HP or the smaller guys like Juniper, or some of these small startups. Individual products will be irrelevant; it will be white-label with software on top of it vs. architectures, and then putting architectures together will be the future," said Chambers.

Chambers said Cisco and its partners are poised for joint success.

"Are we ready together to transform the industry? The rewards are huge. Together we're going to lead and I think we can pull away from everyone at a faster pace, together we're unbeatable. We can out-innovate, we can out-compete, and most important for our joint customers, we can out-deliver on the transitions they are going to need in the industry."

PUBLISHED APRIL 28, 2015