This is the first of a series of blogs that I plan to publish to start a dialog with our partner community. In these blogs, I’ll discuss the huge industry disruption now taking place, how Cisco Services is transforming itself to respond to that disruption, and how current and prospective partners can profit from the lucrative opportunities this disruption is creating.
In our industry, we see major disruptions every 20-25 years. Inflection points occur, platforms shift, and customer needs change dramatically. Today, we find ourselves well into the next major market evolution, one of unprecedented scale. To learn more, click here to view an online seminar where I discuss these trends with Chris Barnard, IDC AVP EMEA Network Life Cycle Services, and Leslie Rosenberg, IDC Research Manager, Worldwide Network Life Cycle Services.
Together, we are addressing the challenges — and tremendous opportunities – related to cloud, virtualization, big data, programmable networks, new consumption models, and changing buying centers. Some of our existing partners are executing on these opportunities and evolving their practices to compete, win, and ultimately enable innovative business solutions for all our customers. At the same time, we are attracting new partners into our ecosystem: ISVs, industry vertical players, and consulting firms, to name a few.
At Partner Summit 2013, we shared how all of this will come together to enable us to deliver the Internet of Everything (IoE) and the immense opportunity this holds for all of us. We talked about how we are expanding our portfolio with platforms and analytics, industry solutions, and consulting services. All of these offer really rich service opportunities for all of you – including a $70B total addressable market (TAM) for professional services and a $120 billion TAM for vertical industry solutions.
This shift fundamentally changes how IT vendors and their partners engage with the market. Product margins are declining* (*Service Source -- Services Leadership Index © 2013). And while the ability to offer X-as-a-Service (XaaS), cloud, and industry/vertical expertise is important to setting vendors and partners apart from their competition, the ability to build customer solutions and intimacy using services will define the most successful businesses in the next decade.
I’ve seen forecasts predicting that (1) by 2015 low-cost cloud services will cannibalize up to 15 percent of top outsourcing players’ revenue; (2) that more than 20 percent of large IT outsourcers will not invest enough in industrialization and value-added services, and (3) that many of today’s outsourcers will disappear through merger and acquisition.
As a partner, one of your best moves is to develop a professional services practice. These offerings enable you to guide your customers through market shifts and help them innovate and leverage new technologies. You already know that services and service margins increase your business valuation. Chances are, you’re already providing basic professional services such as network implementation or managed services. You can amplify your services portfolio by providing more comprehensive and innovative solutions that bring your customers greater business value, increasing customer loyalty and intimacy. You’ll benefit even further through increased selling opportunities and recurring revenue streams. Professional services give you more opportunities to meet each customer’s long-term, strategic needs and build trusted adviser relationships with greater profit potential. This is what this blog series looks to explore, starting today with the basics.
Outcomes-Based Support Offers
Your path to bigger, higher-value deals starts with a focus on outcomes-based support offers that help you increase your yield from your installed base. Cisco Smart Services portfolio enables you to harness the power of the install base. Including basic professional services in your portfolio that help you deliver availability and performance is essential to being able to deliver these outcomes. If you don’t have a basic professional services practice, the good news is that you don’t have to build all your services opportunities from scratch. Cisco can help. We’ve anticipated this perfect storm for a while and have been building the IT industry’s most partner-friendly services model to help you get the expertise you need to expand your practice and deliver valuable business outcomes.
We’ve already seen proof that when partners leverage our professional services, they are able to gain significant pull through and yield to build more profitability and influence the bottom line. According to a Cisco internal study, a typical service gross margin for a Cisco partner running a successful services business is 18 to 25 percent. And with some partners, the catalyst effect was 12 to 1! We’ve also seen that services can now account for up to 50 percent of partner revenue and up to 70 percent of partner profits.
Cisco professional services can bring you a number of features to help you build an architecture practice, enrich your existing offerings, and give your customers the technology innovation they demand. We share our 28+ years of industry experience, the depth of our industry knowledge, and our track record of innovation with partners to sell and deliver both products and services that help you increase relevancy with customers and continue to drive success in a quickly changing market.
We want to help you sell and deliver products and services that help you increase your relevance with customers and drive your success in a quickly changing market. Innovation is at the heart of Cisco Smart Services, which provide the visibility and analytics that make our Collaborative Professional Services powerful. You can resell Cisco-branded professional services or offer professional services collaboratively with Cisco. These value-added services, packaged by Cisco, can bolster your services practice and provide differentiation that will enhance your customers’ experience and create new business opportunities for you.
Consider Datametrix, a leading systems integrator and long-time Cisco partner that delivers secure, IP-based solutions to enterprise and public sector customers throughout Norway. When Chief Technology Officer Brede Bjørnstad wanted to expand his company’s professional services portfolio to attract and retain customers, he turned to Cisco Collaborative Professional Services. The result? “Two-thirds of our total revenue now comes from services,” says Bjørnstad, “so our growth strategy is all about incorporating additional Cisco Services into our market offerings.”
Cisco Services is transforming, and we want you on board with us. The opportunity is there for the taking. Are you ready?
Next steps you can take today:
- Assess your services portfolio and determine where you would like to invest
- Visit http://www.cisco.com/web/partners/services/index.html to explore our services portfolio and programs
- Contact your Partner Services Development Manager to explore further