Cisco is increasing recurring offers as part of its long-term business strategy, partly in response to changing customer requirements. This software-and-services-first focus provides partners with improved flexibility, margins, and, above all else, more stickiness with customers.
Cisco has said it “is on a multi-year journey to transform the way we monetise software,” signalling its intention to focus on growing subscription-based recurring revenue over one-off sales. In fact, the vendor’s networking subscription model is one of the big reasons Cisco is now earning 65% of its software revenue from subscriptions.
In 2017 it launched a recurring software offer on a networking product, an Ethernet switch. Not only was it widely successful, the product that it was launched on, the Cat 9000, became the fastest-ramping product in its history.
It proved that the model works, and Cisco is now adding more pure software solutions and continuing to shift its core business to recurring software and subscriptions.
Changing customer needs
This new focus on recurring revenue and recurring offers is partly in response to changing customer needs. End customers increasingly want to purchase and consume their IT on a subscription basis, which also allows them to build incremental value from their investments.
Partners also need to make the change to a software focus if they want to meet their customers’ needs. Taking a software approach helps them to become more competitive, increase agility, provide instant access to updates, provide better financial planning and share risk with the vendor.
It opens up opportunities and makes partners more sticky with customers. Partners who lead with software can see bigger, longer-term deals. They will also have more access to expansion opportunities as opposed to coming in once in a while to sell more products.
Making renewals a non-event
Cisco’s focus on software and services helps partners to not only gain new customers, but to go deeper with their existing customer base, because it makes renewals – and recurring revenues – that much easier. They allow easier management of customer accounts and they keep out the competition.
Compared with a one-hit deal, Cisco rewards partners throughout the lifecycle of a software subscription. Similarly, when partners include a cloud security solution, Cisco also rewards partners when they drive adoption, expand and, ultimately, renew.
Working in partnership
Cisco is making the software transformation hand in hand with partners. Its commitment to recurring revenues is the future for the vendor, and partners need to make the change to a software focus too if they want to stay aligned with Cisco and meet future customer requirements.
Next up: How Comstor can help you make the most of Cisco’s recurring offers.