Cisco Layoffs, Chance for Channel Births

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Analysts and market observers expect Cisco to shed 4,000 jobs to trim expenses. The result may be an influx of new talent and business models in the channel. And those vendor-born VARs will have certain advantages.

Wall Street continues to give Cisco hell for its declining margins and bloated expenses. The networking giant has already shut down its Flip video camera, re-organized its management structure and refocused on core products. Now come reports that Cisco is planning to shed 4,000 jobs – slightly more than 5 percent of its global workforce.

Already, scores of Cisco employees are wondering their fates. Already several high-profile executives and managers have migrated to new homes. Many more are looking to find their next job or opportunity. Where will they all go?

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Some will find new jobs at Cisco rivals. Juniper, Brocade and HP are hiring out of Cisco left and right.

Some may find a new home in Texas, as Dell is expanding its networking capabilities.

Some will go to startups and entrepreneurial ventures.

And some will simply go out on their own and become VARs, or specifically Cisco partners.

There’s an old joke in the channel:

Q: How is a VAR born?
A: He either escapes his parent’s basement or gets laid off from IBM (or insert appropriate vendor name here).

Mass layoffs by vendors are often like a supernova, a star blowing up, jettisoning the building blocks of the next generation of technology innovation and go-to-market relationships. Even a 5 percent reduction in the Cisco workforce is likely to release engineers, salespeople, marketers and researchers with the right idea to setup shop as their own business.

Here’s the thing about vendor-born partners – they’re typically more successful. Unlike natural-born VARs, partners coming out of the ranks of vendors have inside knowledge of processes, connections to key decision makers, and the ability to navigate through vendor bureaucracy.

Vendor-born VARs typically set up their businesses to mirror their experience while working at the vendor. They come prepackaged with the same language, accounting and processes as their vendors. That means they have an easier time communicating ideas, plugging into the vendor organization and developing joint programs.

Another advantage that vendor-born VARs have is customer connections. They’re able to immediately work a Rolodex of customers, prospects and market outlets. They can more easily spin up revenue producing customers to start a business than many natural-born VARs. Moreover, their vendor connections and ability to corral resources means they can often build larger deals out of the gate.

With every major vendor layoff, the channel has seen a flurry of former employees venture into the channel. The Department of Labor reports that the IT industry has added more than 550,000 jobs since the recession – most of them independent contractors, consultants and professional services. In other words, the channel is creating the jobs that vendors are shedding.

Should Cisco layoffs come to pass, the channel can expect an influx of new professionals. Just how many is hard to say, but solution providers should be surprised if the person they’re doing business with at a vendor suddenly becomes their latest rival.

* * *

Lawrence M. Walsh is CEO and president of The 2112 Group, a technology business advisory service that specializes in optimizing indirect channels and partner relationships. He’s also the executive director of the Channel Vanguard Council. He is the former publisher of Channel Insider and editor of VARBusiness Magazine. You can reach him at lmwalsh@the2112group.com.

On Twitter:
Larry Walsh:@lmwalsh2112| Channelnomics: @channelnomics

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