Do you think the managed services model will ever be pervasive?
AS: I don't think it will be the only model but it's certainly going to be a huge part of our business. MSCP has ramped up to $US300 million pretty fast but that's only a fraction of the managed services business we're doing right now because customers want them.
Will it eventually be an SMB play?
AS: Absolutely. Managed services providers I know well like Bell Canada, AT&T and British Telecom use managed services to scale complex technology into smaller companies. People don't have an appetite to pay for a managed service if we're just talking about a router, but as the network becomes more of a platform and you add security, voice, video and mobility then it becomes more complex and two things happen - the opportunity to make money on it as a service provider is significantly higher, and the appetite to pay for it as a business is also higher because there's more value and you can't do it on your own any more. Those higher value managed services are the key to really seeing this thing take off.
Co-opetition is something we have become used to in the vendor space but is also starting to make more sense in the partner community. Are you seeing broader acceptance of partners working together on projects?
AS: Yes we are. We need to create $US10-15 billion in incremental capacity within our channel during the next three years and we're not going to do that by finding a bunch of new partners; we're going to do it by working with the ones we've got and doing more. As the stuff gets more complex, partners are differentiating by going deeper. Nobody can do it all anymore and that's driving the need to specialise. But customers don't want five partners working on one deal so what ends up happening is that there's a prime partner who has to partner with other partners. Nobody expects them to be able to deliver a whole solution so they have to come back and say 'I don't do contact centre' or 'I don't have digital signage certification' but I'll bring somebody in and make this deal hold for my customer and make that work without the customer having to see it. We surveyed a lot of customers and partners on this and 85 per cent of customers that are experiencing this love it, but only 45 per cent of the partners doing it are fully satisfied with the experience. The message is that it's necessary because customers need it but it's not easy to do. It doesn't make sense for us to get deeply involved in all of these deals but it certainly makes sense for us to start making connections between partners. We have launched Partner Exchange on our partner Web 2.0 platform, which is like speed dating for channel partners. We want to dramatically increase the likelihood that partners develop successful strategic relationships. We're asking partners to provide details about their capabilities, geographical reach and all of these things that will enable them to be found by other partners. We will use connections so a partner can see which other partners a company has worked with before and contact them to see how it worked out. Typically they are looking for greater expertise, vertical experience or geographical reach.
You talked about complexity from a partner point of view but surely even as a large vendor it must be getting more difficult to tell the end-to-end story Cisco has traditionally pitched.
AS: I would disagree with that. We are a $US35 billion company now with thousands of people working in R&D so we have the capacity to deliver that network platform. If we can't deliver it through R&D, we'll deliver it through acquisitions. Our partners are vital in adding components that integrate with the network to add more business value. We've got 500 ISVs that write to the Cisco platform right now and that adds value to the network whether it's a healthcare application or a retail application that integrates with UC. We're never going to get into the business of applications that snap in and will always partner to get those. Ecosystems have always been important to us but the message for partners is that our channel will be the glue that brings everything together and creates customer solutions.
Brian Corrigan travelled to Hawaii as a guest of Cisco.
