Cisco, IBM mobile office deal could hurt channel

Cisco Systems Inc.'s announcement Monday that it is partnering with IBM Corp. to sell mobile office products could mean channel partners get the squeeze, according to resellers.

"This (the IBM deal) is a direct sales channel, Cisco is fading out the reseller," said Benaron Gleiberman, president of Edmonton, Alberta-based 3D Computer Services Ltd., a Cisco reseller. Gleiberman is visiting the Comdex Fall trade show here.

"It is not unknown that Cisco's sales efforts are chaotic and their stock is down. This is a bold step to gain market share and does take opportunity away from the little guys," said Judy Konigsberg, president of Coreliant Technologies Inc., an Irvine, California-based reseller of Cisco hardware as well as engineering services.

Bypassing the channel for sales is one thing, but some fear that IBM could also try to take the entire IT business away from the local VARs (Value Added Resellers) once it has a contract for Cisco's mobile office products.

"Nobody knows what IBM is going to do once the relationship (with the customer) is in place. Even the biggest resellers don't have the resources IBM has," said Gleiberman. "How does Cisco protect its existing relationship with the channel when it brings in a wildcard like IBM?"

To counter Cisco's announcement, resellers could start boycotting the network hardware maker and concentrate on selling competing brands, said Joseph Bitton, president of Montreal, Quebec-based Bit-On Ordinateurs Inc., a reseller of computers and components.

"I think resellers will boycott Cisco, that happens every time a manufacturer tries to short-circuit the reseller," he said. "Eventually, it will work against Cisco's interest and they will start courting the resellers again."

As a result of the agreement with Cisco, IBM Global Services is offering to install wired and wireless networking gear in offices, hotels, airports and worker's homes to allow professionals to work while on the move. The networking products include wireless LANs, DSL modems and DSL routers, products IBM didn't offer before.

IBM Global Services acknowledged it is stepping into the territory of the local VARs by stating it isn't looking at only serving large multinationals.

"The customer doesn't have to be a Fortune 1000 company. One of the things that appeal to us in this partnership with Cisco is going out to employees' homes," said Robert Egan, managing principal, mobile and wireless services, for IBM Global Services in Salt Lake City, Utah, adding that IBM might subcontract Cisco's channel partners to handle part of its contracts, such as installing a router in a home.

Gleiberman wasn't impressed by the offer.

"They're throwing a little bone to pacify those that would otherwise be quite vocal," he said.

Konigsberg feels VARs do have a lot going for them.

"IBM is a very large company and a lot of clients appreciate the service and support they get from a small company," she said.

Cisco seemed unmoved.

"We see IBM as a reseller to the larger companies, if the smaller resellers can't be more competitive than IBM then that is their problem," said Bill Rossi, a Cisco vice president and general manager of Cisco's wireless networking business unit.

If resellers fear that IBM might start giving away some of the hardware to win a service contract, they have to stay ahead of IBM by moving to services and specializing, said Rossi.

"Resellers can't rely on hardware sales. We're telling them to become specialized in a specific area and do the services, a site survey for example. You have to move on and differentiate," he said.

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