BANGKOK--Cisco Systems is calling for its channel partners to start thinking about adapting their business models to capitalize on the growth momentum toward services.
"If we move and position from products to services, allowing monetization of our customers and driving profitability, we're going to be extremely successful," said Jaime Valles, its president for Asia-Pacific, Japan and Greater China, during his keynote address at the Cisco Systems Partner Led Network conference here.
He added Cisco was evolving its partner strategy in anticipation of "multiple market transitions happening simultaneously", which each could change a vertical. Valles pointed out the total addressable market for the Asia-Pacific region was worth around US$40 billion, of which Cisco only captured 20 percent.
The region also presented the fastest growing opportunity which would be led by small and midsize businesses (SMBs), or what Cisco categorizes as commercial, he noted. Cisco relies mainly on its channel partners to reach out to this segment.
Agreeing, Bo Kwang Suh, vice-president for Cisco Services Asia, added in his keynote address, partners would need to aggressively change their business models to adopt a services–led sales approach. He warned business models that worked today may not survive in the next three to five years, adding it was the "perfect time" to review current models.
Key IT trends such as mobility and cloud will see the shift in the market to services, Suh pointed out. "If you're a tech company, the most dramatic effect of megatrends like cloud computing, managed services, and the rise of consumer technology, won't be felt in your company's product line. The true disruption will be to your business model," he noted.
Taking on a services-led model is also "win-win" for both partners and Cisco as it typically offers higher margin, Suh said. For example, up to 40 percent of the vendor's partner revenue came from services but contributed up to 60 percent of their overall profit, he shared.
Doubling investments in enabling partners
Over the past few years, Cisco had been tweaking its partner programs to enable its partners toward this framework, said Stanimera Koleva, Cisco's vice-president for partner business group for Asia-Pacific, Japan and Greater China. Most recently, the company consolidated its fragmented schemes for rebates under one platform, the Cisco Services Partner Program (CSPP), Koleva told ZDNet Asia in an interview Thursday. Cisco also tweaked rebates to be backend-loaded and performance-related to help preserve profit margins, she added.
Another key move under the program was opening up access to Cisco's "smart services" which include analytics and monitoring capabilities.
Koleva said the company would also be doubling its investments in partner training, which would allow them to upgrade their skills and sell more robust packages. Such training includes free and subsidized workshops, of which Cisco had spent US$4.5 million and trained some 6,700 people in the last financial year.
She added the wider sum spent on Asia-Pacific partner initiatives, which includes money on rebates and grants for startups, totaled over US$300 million in the last financial year and was expected to grow by 10 percent every year.
The company also has a program, called "big bet", which awards grants to startups to upgrade their skill capabilities, Koleva pointed out. "Last year, we had 210 companies taking part in the program, we are looking to scale this up both in the reach and sum of grants," she added.
Ryan Huang of ZDNet Asia reported from Cisco APJC Partner Led Network conference in Bangkok, Thailand, on the invitation of Cisco.