"Deal with the world the way it is, not the way it was," John Chambers, chief executive at Cisco Systems, told resellers at the company's partner summit in Las Vegas last week.
Against a depressing backdrop of economic slowdown, a depleted share price and job cuts, Chambers outlined a positive but realistic survival strategy to a congregation of 4000 of its reseller partners.
Although he predicted that the slowdown would extend past the previously estimated two-quarter period, Chambers remained bullish and said that he was "optimistic" about the future.
But in order to survive the current downturn, Chambers urged resellers to reassess their business models to meet the rapidly changing needs of their customers. Although he conceded that change will not occur overnight, Chambers warned that those not quick enough to adapt to the new economic drivers would perish.
In short, Chambers's strategy for survival focused predominantly on getting out of the price sensitive, product orientated and fulfilment led "middle market" in order to focus on specialist "tornado" markets such as IP telephony, wireless and content delivery.
Cisco hopes that these new markets, so called because of their quarter-on-quarter growth potential, will offer it good future growth.
In addition, Chambers and other executives at the company said that resellers would have to concentrate on more service provision and on selling "business benefits" rather than just technology solutions.
This means resellers focusing on customer profitability, reducing cost of ownership and building applications that increase productivity. "Productivity equals survival in the internet economy," Chambers said.
Tom Mitchell, senior vice president of worldwide channels at Cisco, said that because of the rapidly changing market and different customer needs, the company's new channel programme will reflect the need for partner specialisation and will focus on value, rather than volume.
Keith Humphries, a consultant at analyst EuroLan Research, said: "There is no margin today in products which are commoditised. Networking used to be a bit of a black art, but now it is more plug-and-play. So to get margin around these products, resellers have to sell more services."
"Resellers will have to sell in a new way: push the cost savings for solutions and sell the business benefits not the technology," he added, pointing out that this new "sell" will centre firmly around service provision.
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