Plugging into the right network

In this first ARN Channel Verdict special, Philip Sim investigates what resellers should look for in networking hardware vendors and, vis-a-vis, what the major vendors can offer resellers.

In the past, networking has always been considered something of a black art. Generally, it was restric-ted to specialist networking integrators or resellers because technically it was the domain of highly skilled and expensive network engineers. For the networking channel it had always been something of a money spinner. Users liked the idea of saving money by sharing file and print resources but because they couldn't afford the in-house technical skills they would generally rely on reseller partners to help recommend, install and maintain their networks.

While arguably networking is more accessible today, resellers are generally still heavily involved in recommending a particular brand or choosing a solution, according to Inform's 1999 ChannelTrends survey. It found that in 55 per cent of cases it was the reseller who chose the LAN/WAN networking hardware vendor and in another 21 per cent of cases, it was a joint decision between the reseller and the user.

Bearing in mind that the network is still as much a money spinner as it ever was, especially considering the emergence of the Internet and how many appli-cations now run across the network, there is now a lot riding on the reseller choosing the right solution and partnering with the right vendor.

Analysing Inform's ChannelTrends '99 results shows that Cisco was clearly the channel's networking vendor of choice. This is not surprising, considering Cisco has been such a dominant market leader in the networking space. However, it should be noted that this is the first year that Cisco has been rated as the number one LAN/WAN hardware vendor.

Perhaps this represents the breakthrough of networking into the mainstream channel; in the past the closest many resellers got to networking was when they installed a network interface card into a PC. It's probably not surprising, then, that 3Com, easily the dominant NIC vendor, had always previously been rated as the number one networking vendor.

However, Cisco trounced its main opponent this year in a result that more accurately reflects market shipment figures.

In fact it was voted as the top vendor by close to double the amount of resellers that opted for 3Com, who came second in front of Intel, Hewlett-Packard, Nortel, D-Link, IBM and Compaq.

Such has been Cisco's success that it has established a somewhat dominant position in the market. Arguably, choosing to buy or choosing to supply Cisco networking equipment is not unlike the decision of yesteryear to go with IBM; that is, nobody ever got fired for doing so.

For Brad Merrick, founder and technical director of mid-sized Sydney network integrator Path Communications, there are two key reasons why his company generally supplies Cisco equipment.

"We're a technical shop, we're all engineers, so we look for what we consider is a technically superior solution," Merrick said.

"However, the other thing is consistency and a long-term vision. It's quite amazing that what Cisco and some of the other large vendors were saying five years ago has actually eventuated. Perhaps as a result of that you have the situation where any Cisco equipment that you bought five years ago still integrates into equipment that you buy today," he said.

Merrick complimented Cisco's service and support although he added that because of the technical merits of Cisco's product Path didn't often have to call on that resource.

While Cisco is clearly dominant in today's market, it is not without its challengers. It is generally accep-ted that the worlds of voice and data communications are converging. As a result, Cisco is heavily bumping heads with the major telecommunication equipment manufacturers like Nortel, Lucent and Alcatel.

"It's going to be a real fight. Can the telcos modify their strategy enough to properly integrate data faster than the data guys can seamlessly link to PABXs?" asked Merrick.

"I'm not going to make a prediction one way or the other, but I'm certainly very interested in what the telco vendors have to offer and I think we're really going to see some stiff competition out there."

Merrick is very bullish about voice and data integration and regardless of which vendors wins out in the end, he believes that it will have to be able to provide a complete end-to-end solution.

Of course, as the industry makes significant shifts like the one towards converged voice and data, it becomes essential for organisations to keep up to date with the latest technical skills.

As such, training is one area where Merrick would like to see his suppliers work a little harder. "Training is always very important and I'd like to see vendors giving away a certain amount of training in order to enlighten resellers on how they should be selling and installing their kit. After all, it really is to the vendor's benefit and one of my only criticisms of Cisco is that most of the training is pay as you go; it is an expensive outlay for resellers."

While for some resellers and integrators it makes sense for them to stick with the big vendors, for others, particularly smaller and niche players, the ability to pitch an alternative vendor who might boast differentiating features and benefits is the edge they are looking for.

Tim Rosser, sales director of Rosser Commu- nications, admits that in many cases it is a case of selling Cisco because "the customer wants a Cisco router". However, often there is more margin and benefit in selling an alternative solution, particularly one with which you have developed a close working relationship.

For example, Rosser Communications has worked very closely with Intel in the past and has earned its stripe as an Intel Authorised Solution Provider.

According to Rosser, partner programs like Intel's IASP are extremely important.

"If every PC dealer can get hold of the equipment at the same price, we often find that we're going to lose the deal on price alone. We invest a lot of money in having the right skills and expertise and so we're not going to be able to compete at that level," he said.

"However, if we can get access to rebates and leads and incentives like that, then that's a reward for our investment in training and that is very attractive.

"If you look at vendors like Cisco it is very difficult to become a Gold Partner and therefore to compete with those bigger partners. However, I don't resent them for that because those resellers are doing huge volumes and have made big investments; they've earned their discount.

"For us, by partnering with a vendor who has similar programs that work for people who are not quite as large as the big guys, we can sign up knowing we're going to get those advantages and that extra margin."

Rosser said that because his company has several skilled engineers, it was important that it opted for a vendor which enabled it to retain its margin.

"We've actually found it difficult to separately sell the product and the services so we need 20 points margin to pay for our engineers," he said.

Of course, it's no good being able to make big margins if the product is impossible to sell.

"The equipment needs to be very saleable, it needs to have features that nobody else has," Rosser said.

"For example, we sell a lot of Shiva equipment which has very good capabilities for remote users and virtual private networks so that is a point of difference that can help us move the equipment."

Rosser also places high importance on the ability of vendors to provide excellent technical support.

"Again, we deal a lot with Shiva because they have a very good engineer on the ground in Sydney and a good technical assistance centre in Singapore. They also have a very good database of technical information that is available both on the Web and in Lotus Notes so we're quite often able to solve our own problems by querying the database.

"We've worked with other big vendors where we had a lot of problems solving an issue because their engineer in Australia wasn't very technical and it really made us look bad in front of our customer."

Availability problems are also a concern: "Lead times are critical and it's especially important that they're consistent. If the lead time is generally two days and that's what you promise the customer and then suddenly it becomes six weeks then that's going to really embarrass you in front of the customer," Rosser said.

For smaller resellers reliability is typically of the utmost importance.

Rob Deal, from Orion Computers in Melbourne, has standardised on selling NetGear products because of their reliability. "We have been selling NetGear for 12 months and we've had only one failure," he said.

That said, he also is a very firm believer that backup and support is critical and so at this end of the market it is important that the vendor has partnered with a reliable and helpful distributor.

"The backup and support through NetGear's distribution network has been sensational. We buy all our products through Teksel and they're great. If ever we have any problems and can't resolve a problem with the 1800 number, they have always taken over and involved themselves."

The other important thing for Deal is that there is a brand name that the customer can recognise. "NetGear is backed by Bay/Nortel Networks and so that gives a very good impression that it has the right technology people behind it," he said.

Deal also said it's important that the products have been designed with the smaller end of the market in mind.

"We deal with companies of up to 100 users and so NetGear has a good range of products in the market - not just hubs and switches but also products like modem routers and storage servers."

Cisco touts networking for the masses

Despite being a clear market leader, Cisco hasn't always been a channel favourite due to its past history of taking deals direct. However, over the past couple of years Cisco has made a concerted effort to mend relations with the channel and, if Inform research is any indication, has done so very effectively.

Cisco offers perhaps the broadest portfolio of products of any vendor, all of which is tied together by IOS, its internetworking operating system. However, according to Liz Lawson, Cisco's SMB regional manager, its most strategic offerings are voice, data and video integration, security and switching products.

"From a strategic point of view what we're focusing on is what we call new world networks that integrate voice, video and data together on an open platform.

"We want to take that new technology so that it's not just the domain of the big corporates, but rather anyone who wants these types of services."

In evangelising networking for the masses, Cisco believes it first needs to convert the channel and as such is trying to build up a very broad base of resellers.

"We believe all resellers have the right to retain their customer relationship and be able to take this technology to the customer. This is within the realm of any reseller from the retailer to the large systems integrator."

To support resellers, Lawson claims Cisco is investing heavily in reseller training. "We're providing free training, not just the type resellers have to go through to earn certification, because we feel that's the best value we can give the channel. We're trying to give them the skills that will help them make more margin because they can on-sell their own services."

Cisco has also invested heavily in its distribution strategy and is now represented by all three network distribution heavyweights - Tech Pacific, Express Data and LAN Systems.

Cisco has three levels of partner certification: Gold, Silver and Premier. Anyone else that sells Cisco equipment should be an authorised partner which requires no commitment to training or sales.

Premier status requires resellers to have some sales support and design qualifications and these partners must deal through distribution. Silver requires resellers to have at least two Cisco Certified Internet- working Engineers (CCIE) and to meet certain sales requirements. They may buy direct from Cisco. Gold partners must meet very stringent qualifications including a heavy support infrastructure, have a minimum of 4 CCIEs and much higher sales requirements. "What we're providing our partners with is a career path and as they move up the ladder they are entitled to more discounts, support, marketing funds and so on."

Cisco has also invested very heavily in its service and support infrastructure, something which has made some resellers nervous as Cisco does sell some service maintenance contracts directly.

However, Lawson claims that the service infrastructure represents an opportunity for resellers to on-sell Cisco's service contracts, either under their own brand or as Cisco's or to use it as a backup to their own service offering.

Nortel brings together voice and data

Nortel has developed a very clear strategy around its concept of unified networks, which claims that it will not so much be a revolutionary "new world" of networking, rather that it is an evolutionary coming together of the two fields of voice and data.

As such, it is focusing right now on skilling up its data networking partners on voice skills and training its voice resellers in data communications. (see page 18).

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