Last week Cisco rolled-out its Services Partner Program in EMEAR (Europe, Middle East, Africa and Russia) as part of its strategy to increase Services revenues. The channel is critical for its Services business as it accounts for half of revenues in the region. This new program is about helping partners move beyond the basic product support services to sell more “Smart Services”, which are designed to monitor and predict problems before they occur.
Services revenues currently account for 21% of Cisco’s EMEAR sales, and standard product support is about three-quarters of that. Quite rightly Cisco is looking to perform an increasing amount of services that make life simpler for the IT department, while reducing cost. So as well as Smart Services, its strategy is to move more towards operational management services (e.g. out-tasked remote management) and consulting services. The channel will be able to perform some but not all of these newer services, and Cisco’s challenge will be to work out how it can help each reseller maximise its services sales potential.
Of course, this is also a ‘journey’ for Cisco as its offerings continue to evolve to support a market where mobile data and video usage in the enterprise are still growing, and where demand for Cloud-delivery is increasing. So the steps the company is taking to encourage the channel to move along the services spectrum are crucial. Cisco will not achieve its objectives without the channel, and Smart Services hit the button from an enterprise-demand perspective. That said, our view is that for most channel players, the coming period will be characterised by gradual change, not over-night change.
Cisco doesn’t break out its revenues by country, but Services in EMEA (FY12 reporting refers to EMEA and not EMEAR) are currently at around $2bn. Down at the UK level we estimate that Services revenues account for 20-30% of that.