Cisco’s ready, but is the channel?

How capable is Cisco of ensuring that it has the channel bandwidth to meet its lofty growth expectations?
Cisco’s ready, but is the channel?
By Andrew Seymour
Thu 24 Jan 2008 04:57 PM

A visit to the Middle East from affable Cisco CEO John Chambers often brings with it a fairly significant announcement or two, usually with a sprinkle of million-dollar figures and bold promises thrown in for good measure. This week's trip to the UAE - where Chambers met with senior government personnel and business executives - didn't disappoint.

In a repeat of his 2006 jaunt to Saudi Arabia, when he unveiled an ambitious US$265m five-year strategy to ramp up Cisco's efforts in the Kingdom, Chambers' arrival in the UAE was accompanied by details of more audacious GCC investment plans than before.

The networking behemoth has pledged to spend a colossal US$1.6 billion in the UAE ICT market over the next five years, which will include the launch of a state-of-the-art customer briefing centre and yet more local networking academies to augment the 39 already in place. If that's still not enough, Cisco expects to create a staggering 650 new jobs over the course of the next two years - the equivalent of almost one new employee joining the company every one and a half days from now until 2010. It's little wonder that an Abu Dhabi office is scheduled to open in June this year.

Although such objectives represent the sort of headline-grabbing announcement precisely reserved for important CEO visits, Cisco's buoyant vision gives major encouragement to the wider UAE market. Looking at the vendor's burgeoning cash pile and already dominant position in the Middle East, I'm sure that it is supremely confident that it can live up to the titanic task it has set itself.

But for me, there is one crucial question that could slow down the juggernaut before it has even moved into second gear. How capable is Cisco of ensuring that it has the channel bandwidth to meet its lofty growth expectations?

Cisco is renowned as a channel-focused organisation, one that derives more than 90% of its revenues from partners that sell its rapidly-growing portfolio of products and services. To recoup the outlay on a US$1.6 billion investment, I'd imagine Cisco will need to expand even faster than it has done in previous years. And that is only going to happen if its channel partners are capable of developing their own operations at a similar speed.

Remember, we are only talking about the UAE here, not even the entire Gulf.

A search on Cisco's partner portal brings up about 260 authorised partners in the UAE, although only a handful sport the vendor's top-ranking Gold certification and one of those is HP. To say that these resellers have a massive role to play in making sure that Cisco meets its targets is the biggest understatement since the captain of Apollo 13 contacted ground control with the message, ‘Houston, we have a problem.'

From speaking to various resellers in the UAE, and not just those with Cisco backgrounds, it is clear that a number of ongoing challenges continue to present obstacles. Two of the most pressing, without doubt, are capacity and skills.

The capacity issue is the trickiest because it is largely the outcome of a vibrant market and a resource shortage. Supply and demand, if you like. Resellers and integrators are staring into healthy project pipelines, but privately some of them admit that they are really stretching themselves to meet the demand. This is compounded by the persistent and expensive struggle to find new staff, especially when it comes to hiring individuals with industry sales knowledge and technical expertise.

Some Cisco partners impacted by such challenges will invariably have some big decisions to make because if Cisco seriously intends to ramp up its headcount by 100%, then they have got be thinking about considering expanding the size of their business by at least 30% just to keep pace.

It's not clear how many partners represent the bulk of Cisco's revenues in the Middle East, but a figure of between 10% and 20% is probably not unlikely when you look at other vendors of similar stature in the region. If so, the cost and operational pressure on those resellers to scale up at the same aggressive rate as Cisco is going to be enormous.

Let's not forget either that staff from Cisco's partners may well be updating their resumes after learning of the vendor's plans to recruit 650 people. What price on some resellers having to find replacements for Cisco-bound employees before even getting round to the real job of scaling their business!

There's a much wider point here though, and it's one that is not just isolated to Cisco. The challenge of capacity and channel bandwidth is equally applicable to all other fast-growing vendors that possess an equally bright view of their prospects.

Like Cisco, they will be well-advised to keep a constant eye on the development of their channel partners in the region and monitor the proximity of their expectations to the channel's ability to fulfil them. If they don't then the assertions borne out of CEOs flying in to outline bold new initiatives will simply be laughed off.

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