Cisco's CFO Kelly Kramer has said the vendor has made a lot of progress on its move into a subscription model and this represents a big opportunity for its partners.
Last summer the founder of Cisco Gold partner Managed 24/7 John Pepper told CRN he wanted to see more of Cisco's business come in the form of recurring revenue. And speaking in front of 2,200 resellers at this year's Cisco Partner Summit, Kramer said this is a huge focus for Cisco's strategy.
"We are deliberately shifting our business into software subscription, services and recurring revenue, and we have made a lot of progress," she said. "We have been growing our software business over double digits over the past few quarters. It gives the customers technology protection, gives them a spending profile and helps them navigate their budget constraints. We have been very active internally as well as acquiring SaaS-based companies. OpenDNS, that's a SaaS business; Jasper, that's a SaaS business.
"Customers like it because it will bring in an area that will position us well for future growth," she said. "You [partners] guys should like it because of the high value we are selling to our customers. And our investors like it because it is high-value, quality revenue growth. It's very sticky to the customers and they love the margins that come with that and they love the revenue predictability and stickability."
She gave the example of a £10m-revenue reseller which has 90 per cent recurring sales. Having nine tenths of revenue "already in the bag" allows the sales teams to concentrate on securing more sales and growing the business, Kramer said.
Cisco sees 28 per cent of its revenue from products and services as recurring, but Kramer said it is looking to increase that number.
"We are going to continue to accelerate that transformation, but again for partners there is a lot more opportunity to package and sell these offers and get more profitability."
Wendy Bahr, Cisco's senior vice president for the channel, also emphasised the need for partners to move over to a subscription-based model.
"Our partners have been doing monthly recurring revenue in various forms for quite some time," she said. "What we are starting to see – and are really excited about – is we are putting more of Cisco's offerings into a capability to consume in a recurring revenue business model. A lot of what we are developing are SaaS offerings that are consumed as monthly recurring revenue. We obviously want to encourage all our partners to do that; it's good for them and it's good for us."
She also said that with the evolution of Cisco's partner programme, the move into a software-based subscription model will be key to how they are shaped.
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