Case 8 - Cisco Systems: Managing the Go-to-Market Evolution
Cisco’s IP telephony solutions were generally targeted at the $750 billion
telecommunications and equipment market. More specifically, Cisco was targeting the Internet
phone systems market, which was expected to grow form $3.5 billion to $10.5 billion by 2008.
While most people at Cisco were agreed that voice VARs needed to be added to the mix
of Cisco’s already existing data VARs, there was hardly any agreement on the channel margins.
On the one hand it would make sense to stay with Cisco’s margin structure because the new
VoIP technology delivered huge cost advantages for the end user, who would pull in and
generate the demand anyway. However voice VARs were entrenched with incumbent PBX firms,
and to ask them to take on new product that would cannibalize their existing line, and at a
lower margins, which did not make sense to the senior management at Cisco. Some minority
argued the need to keep the product exclusively with Cisco’s existing data VARs. They think that
the maturing nature of the networking market and is going to provide them opportunity to
expand their business. Also, VoIP technology would inevitably attract demand for networking
equipment, which these VARs had currently carried and already knew how to handle.
The current issue being faced by the top executives of Cisco Sidhu, Rick Justice, and
Mountford is to decide which distribution channel to choose when launching their new VoIP
program. This is a very critical step because the project was very important in increasing the
derived demand for their existing lines. The more inherent issue is how to correct their
hierarchy of interface levels as stated in Figure A.
Telecommunication providers dumping routers in the market
Cross channel raiding: one channel distributor sabotaging another channels sales Conflicting self distribution strategies
Alternative 1 – Data VAR’s
Using traditional data VAR’s