Cisco Puffs Up Reseller Deals

While Cisco Systems Inc. (Nasdaq: CSCO) is bragging that it has launched a new and "innovative" go-to-market strategy for its storage networking products, industry observers say theres really nothing new or innovative about it (see Cisco Gears Up Storage Channel).

As part of what it's calling the Original Storage Manufacturers (OSM) Active program, Cisco has signed deals with EMC Corp. (NYSE: EMC), Hewlett-Packard Co. (NYSE: HPQ), Hitachi Data Systems (HDS), and IBM Corp. (NYSE: IBM) to resell its MDS 9000 family of multilayer directors and fabric switches (see EMC, Cisco Do the Deed).

While Cisco’s direct sales force will spread the word about the switches at both the end-user and channel levels, the four so-called OSMs have agreed to be the primary distributors of the Cisco switches.

But analysts say the company is basically going about selling SAN switches the same way SAN switches have traditionally been sold: through channel partners. Cisco's calling its channel partners "OSMs" doesn’t change the fact that these are still channel partnerships, they say.

One analyst, who asked to remain unnamed, points out that storage networking products are generally sold through established vendors and not directly to end users. "This is nothing but a PR announcement from a marketing machine," says the analyst. [Ed. note: Wait -- that's a good thing or a bad thing?]Cisco, meanwhile, insists that its OSM relationships are not your typical OEM deal. "Other people in this particular business sell on an OEM basis and are much more passive in their relationship to the end user," says Edison Peres, VP of advanced technologies at Cisco. "We’re going to be very active."

Competitors, predictably, say Cisco is laying it on thick. "We do exactly the same thing," says Dave Stevens, director of business development and strategic alliances for Brocade Communications Systems Inc. (Nasdaq: BRCD). "The only difference is that we never take the deal direct. Cisco has a long history of doing that."

Unlike most SAN switch vendors that push their products through channels, Cisco has an army of salespeople on the street to make sure the deals get done. Cisco says it is also in the process of creating a specialty sales force just for the storage side of its business. The company says it has already hired hundreds of qualified people, mainly from the storage industry.

Cisco's going to need those extra warm bodies, industry observers note, given that its pricing isn't exactly competitive (see Cisco Gets Set).

While Peres acknowledges that some of Cisco's switches carry a 25 percent to 30 percent premium over those of competitors such as Brocade and McData Corp. (Nasdaq: MCDTA), he contends that the Cisco brand and next-generation features make the higher prices justifiable. Besides which, they're going through the "OSM Active" channel, and that's bound to add another couple of bucks to the price.— Eugénie Larson, Reporter, Byte and Switch