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Cisco Systems : Managing the Go-to-market evolution

Markets & Competitors

Core Corporate Networking Gear
Market leader Over 70% share in Enterprise Account Segment & 40% in the SMB segment Competitors - Extreme, Foundry, HP, Nortel, 3Com, Huawei

Telecommunications Service Providers

5% overall share 25% share of the top-end of the market Competitors- Nortel, Juniper, Siemens, Alcatel and Lucent

Consumer Market
Market Leader with 40% share Sales of $800 million Competitors Netgear, Dlink

Existing Route to Market

Direct Sales Marketing Retaiers, 5% Direct, 10% Retailers, 5%

Direct Value Added Resellers, 30% Systems Houses, 25% Systems Houses Telecommunications Value Added Resellers Direct Marketing Retailers Retaiers Telecommunicat ions, 25%

Channel Conflicts
Cross-Channel Raiding Router Dumping Introduction of Internet Channels

Existing Incentive Structure for VAR s

Prior to 2001 Sales Volume Post 2001 Technology Specialization Engineering Expertise Customer Satisfaction

Discount 42%

Discount 40%

Discount 38%

Problem Identification
Should CISCO adopt the same channel (Data VAR s) or introduce a new channel (Voice VAR s) for VOIP telephony? Decide a suitable incentive and margin structure for chosen channel.

Alternative1- Continue with existing channels (Data VAR s)

-Synergy between VOIP Technology and Networking Equipment - Leverage Existing Network of 1000 partners -Acceptance of lower margins (12 20%)

-Lack of focus/expertise in VOIP equipments by Data VAR s -Difficulty in reaching the target customer

Alternative2- Adopt new channels (Voice VAR s)

-Specialized Focus on the new product category -Better customer Reach and Access

-Demand for higher margins >20% -Preference for existing voice channels

Incorporate VOIP solutions in the existing Service Bundle through Data VAR s Introduce New certifications for technical expertise/specialization in communications Introduction of Certified Voice Telephony services as a criteria to qualify for Gold/Silver status Continue with existing margin/incentive schemes applicable to Data VAR s.