Cisco Channel Partners
Essay Preview: Cisco Channel Partners
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Initially, when Cisco started its distribution, they used to sell their technology directly to whosoever applies for it and all the major accounts in US were served directly. In early 1990s, Less than 25% of their sales were via channel partners.
As the market exploded, indirect sales and distribution through resellers grew to almost 90% of their sales by the end of the decade. Cisco realized that they could not add enough sales force to keep pace with the growth so channel partners would help them add unique value and cost efficiency to their customers.
Cisco segregated its channel partners in below categories:
System Houses
Telecommunications
Value Added Reseller
Direct Marketing Resellers
Retailers
Cisco instituted “value-added reseller pyramid” to encourage the most predominant channel partners “Value added Reseller” that constituted 30-35% of the total sales. Pyramid was introduced to grade the resellers on the basis of sales volume, wherein, resellers were awarded with “Gold”, “Silver”, and “Premier” status on meeting the various goals. Main purpose of this pyramid was to push the sales volume because reseller who were able to meet large sales, were getting large discounts.
Further in 2001, Cisco get into the direct web sales wherein, it launched a pilot program to sell its products to the SMB space, SOHO space and end users directly over its website. Online system was a real threat to the resellers as it was bypassing the resellers and directly contacting the users. On seeing this event, Value Added Resellers partners were flabbergasted as they could realize that this system will take bread off their plates.
In the spring of 2001, Cisco had gone through its Channel Reengineering wherein, it had changed its pyramid strategy from Volume to Value “Tiers”. It started rewarding its reseller on the basis of new technology specialization, engineering expertise and customer satisfaction levels with a slight relaxation on Cisco-certified internetworking engineers which previously was one additional CCIE per every $10 million and now changed to per every $40 million in cisco revenue. Gold, Silver and Premier ranking was changed entirely from volume of product sold to the capabilities of adding value to their customers. By this, it has reduced its number of resellers from 6000 to 3000 worldwide.
Cisco collaborated with various service and solution providers to initiate one-stop shop services for its SMB, enterprise and end use customers.
Cisco followed step by step procedure to enhance its channel strategies. Being a startup and low profit margins, it is very