Cisco Predictive Services seems likely to mark the end of the reseller channel as we know it.
Cisco’s announcement of Predictive Service is wrapped up in an unusual level of bombast and hyperbole. Glossy videos, fancy graphics, and unusually bloviated text make it hard to understand what Cisco wants to tell us.
Cisco’s Enterprise business continues to shrink (nine consecutive quarters so far), and partnerships disappear (Dell & HPE actively deprecating Cisco products), so the only way to maintain margins and account control is to get rid of the resellers and go direct to customers. Cloud-based software is the first step:
Enter Cisco’s suite of predictive services, announced today as two new Cisco Services portfolios: Business Critical Services, and High-value Services. With these new offerings, Cisco harnesses the power and intelligence of AI and machine learning to help CIOs address their most pressing challenges.
I think that the words “Cisco Services” is important. Cisco is getting back into professional services by building cloud software and getting direct contact with customers. Think about how much data Cisco will have about your network. Not just simple asset management of how many boxes and how old they are. Cisco will also know how much utilization and what features are used. The network can be analyzed for misconfiguration, bad practices and other operational issues.
Change For Resellers
These things are good for customers who are looking to get a return on high priced products from a branded vendor. If you are a reseller, you are watching your professional services business being attacked by your vendor.
With the state of machine learning and data analysis it is not a big step to start analyzing whether the onsite engineers are using Cisco products to their full potential. In other words, Cisco wants to know if the onsite engineers are unskilled or incompetent, or the IT leadership its dysfunctional (much more likely).
This also applies to reseller engineers who may have poor skills or knowledge and deliver poor quality advice or solutions. It’s gonna show up and Cisco may decide to cut you off from the account. Cisco has attempt for years to change the “shopping mall” mentality of many partners where the best deal is to drop boxes and take a quick, clean profit margin.
Running a professional services business is difficult. So difficult that most IT resellers last a few years, perhaps even as long as a decade, before they mess up the cash flow and go out of business because of supporting the engineering team.
Managing a sales team is simple and cheap compared to managing revenue for services, doubly so when the primary goal is to shift box to generate quarterly bonuses.
Think what happens when Cisco is watching over your shoulder. Sure, you are making some margin on the sales of “Business Critical Services” but now Cisco can see every mistake, poor decision, and misdiagnosis.
Internet Removes Middlemen
The Internet has destroyed companies that extract value between vendor and customer. A high-profile example is Tesla, which sells direct and maintains the relationship directly with customers. Car dealerships are no longer required. Or look at Amazon and the damage to retail shopping; heck even rumours of Amazon entering a market cause middlemen to take damage:
Resellers should not be surprised when their business models go boom. It’s long overdue.
In particular, nothing is going to destroy resellers faster than hyperconverged systems, if customers haven’t migrated to SaaS platforms.
The So-Called Skills Gap
A Cisco blog announcing the new services plays up fears of an IT skills gap within the enterprise:
And that could be a problem. Because at the same time as demands on IT are increasing, CIOs are challenged by a large and growing technical skills gap. Without the skills they need in their organizations, CIOs will not only miss the growth opportunities, but could put existing systems and business continuity at risk.
I continue to maintain that “skills gap” has been created by sub-standard products that are overly complex with features, functions, and dizzying complexity in software licensing. Instead of focusing on using products to solve customer problem, most Cisco engineers spend their lives working out how to buy them.
The EtherealMind View
The cloud is shrinking the traditional Enterprise IT market. Cisco (and HPE and Dell) are going to get rid of resellers and start to work with customers using cloud-based services that will orchestrate, automate, operate, and monitor the infrastructure.
Where do resellers fit in this model?