Understanding How Cisco Negotiates
Negotiating with Cisco can be a complicated ordeal. They have been around for a long time, really. Cisco takes credit for inventing the router. Whether that's true or not, think about that from a technical standpoint. Cisco has been on the frontier of selling technology since its inception.
With decades of practice, they have developed a sales process that looks chaotic... by design. With a company of that size and experience, taking on Cisco in a negotiation can feel like trying to cut through the Amazon with a butter knife. The purpose of this article is to give you the appropriate mapping of Cisco's sales processes so that they can be navigated correctly.
How To Work With Your Sales Rep
Believe it or not, your sales rep may not have any more visibility into pricing and discounts than you do! This is intentional by Cisco, and important to keep in mind. Again, that cannot be overstated; your Cisco rep may have less insight on pricing and discounts than you do.
The way this works for Cisco is that the rep can position themselves as advocates for your business in a way that they genuinely believe they are getting the best deal possible for you, the customer. They may say things like "this is the best rate I've ever seen." While not realizing 30% has been left on the table. If your rep knows how heavily Cisco has discounted for customers of your size under another rep, they may feel guilty about only giving you 20% when another customer got 60%. Cisco wants its reps and its customers to feel like every negotiation is a new battleground.
Sales reps at big corporations like Cisco have very high stress jobs. They have to meet specific deadlines on specific products with specific growth goals quarter after quarter, regardless of relationship or account size, and they're not given full knowledge on discounts and premiums within their own organization.
It is important to understand your reps motivations. Typically speaking, they want to get the sale, especially if a new product is involved. However, you will find the odd rep that does not intend to give you the best deal.
As you may have guessed at this point in the article, they are not the ones calling the shots on what discounted rates could or should be, and Cisco wants it this way. They report to someone above them who is the GateKeeper on our financial targets for the Cisco’s product. Our objective in any deal with Cisco is to get to that person.
So how do we get to that person? We use the rep. The rep is the only bridge to our discount gatekeeper. We often have to train the sales rep on how to get the GateKeeper motivated to get us competitive rates. After all, the rep wants the sale no matter the cost, and the GateKeeper is mostly concerned with target figures that only they have access to.
Working With The GateKeeper
There is no way to get a deep discount from Cisco without getting the gatekeeper involved. This can be tricky, as the gatekeeper does not want to be highly visible. The goal of the Gatekeeper is to stay behind the scenes, and ensure Cisco is as profitable as possible while still getting the sale. The interesting part of this engagement is that we must give the rep ammunition for the Gatekeeper to move. This involves sending targeted and timed messaging which allows the rep to provide organic communications to the GateKeeper to improve the deal.
This reinforces our earlier point you must educate your sales rep on how to communicate with their own organization! Again, most reps just want to get the deal in to boost their quarterly figures. The best Cisco reps are advocating for the client, but we have to give them the ammunition.
If you do not feel that your rep wants the best for your firm, do not request a new rep unless absolutely necessary. Cisco has moved reps by request before but they are highly resistant to do so. Cisco knows that a customer who moves a rep has a low chance of closing, and will likely require a lot of work. In most cases, the rep will not be moved and you will now have a very unhappy rep who is unlikely to work with you in the same capacity as before, even if they seem fine on the surface.
Cisco moves reps around all the time internally in a scheduled fashion. This is to provide fresh faces to accounts, allowing new reps to take a crack at selling you new or additional products while putting water under the bridge. If the previous relationship was positive, you likely have a positive opinion on Cisco in general. If the previous relationship was negative, the new rep may be able to smooth the waters.
This is absolutely essential to know in negotiations. If your rep is new, they are highly incentivized to make a sale before the new rotation. If a sale goes through after your rep has been cycled out, regardless of how much work they did on a product/project, they do not get credit. This gives incredible leverage if acted upon with appropriate timing, and can be a horrible blunder if a project slips through a rep rotation. A new rep has all the patience in the world to sit on a project and account that is new to them, time is on their side.
Partnering with your rep
We strongly recommend partnering with your rep. This means keeping the emotional part of the relationship positive. Remember, they are in a highly stressful position with little to no information, and the good reps are motivated to sell not necessarily to withhold discounts.
This should sound familiar "I've done everything I can to get this deal for you, but I can't go any lower. There's nothing I can do."
Remember, the rep does NOT have deep insight into discounts beyond their own accounts. They may believe they cannot go lower because they have never gone lower before... You must remember that they are probably not lying to you, but they have run out of tools to use on their own to get a better deal. If your rep is getting emotional, Cisco wins. The sales system is designed to cause some division without losing the deal. Most customers will at this point either 1) Accept the rate. The rep seems genuine, the customer thinks the rep has all the information, and the project has a start deadline or 2) Protest a bit longer, delay the project, and eventually accept a minor concession from Cisco, which they were willing to give all along.
Both scenarios have a similar result. They know your projects have timelines, they know their products and their competitors, and they know that if the rep is getting frustrated, that they're actually winning the negotiation.
There are some exceptions in emerging markets within Cisco's product portfolio, but in their core products, this process is standard.
Fracturing is a tactic used by any organization that sells high value goods, and Cisco is certainly no exception.
Fracturing is the method of approaching as many layers of the customer corporation as possible. The process goes something like this:
- CXO invited to non-technical event full of salespeople
- Calls to your IT directors to discuss technology goals over the next few years
- Calls and meetings with your user leadership to show off features that may or may not be useful or even executable in your environment
- Demos to your technical staff without your knowledge
So what's the result? All personnel have differing technology goals, all of which conflict with one another, but revolve around one vendor. This keeps the discussion about how the Cisco product will be used, and not about whether or not it will be used. The goal of Cisco in this instance is to gather as much information as possible so that their recommendations are paramount, even over your own internal decision making resources. Cisco now owns your network.
The only remedy for fracturing is preemptive planning. Stakeholders and users within the organization must agree on objectives and initiatives to align exactly to how products will be used over the next several years, not just the next 12-24 months!
This is a rare and unusual feat for companies of any size. We have seen fracturing work just as effectively in a 5 person company as it does a multinational conglomerate. A common and more feasible remedy to this is to use a VAR or Managed Service Provider who works with Cisco. This then allows the VAR/MSP to be the in-between for the customer and Cisco. Cisco has a much harder time manipulating the sales, processes and objectives through a largely unbiased partner whose entire existence is predicated on knowing these processes.
Think of a VAR/MSP like your doctor. A good doctor will treat your ailments and is not interested in taking you to baseball games to get you to buy full body scans. In a similar fashion, a good VAR or MSP will assist with solving your problems and aligning your vision. They will see your success as their success with a long-term vision, and they have unbiased experience with similar accounts and similar products from Cisco with visibility on discounts and rates that your Cisco sales rep does not have.
Differences between products and new/existing customers
This is the most complicated part of the whole process, and again it's by design. Lets discuss the differences between what Cisco views as core products, services, licenses, add-ons, and emerging technologies for new and existing customers. All of which require different negotiation tactics.
What you must understand about Cisco is that they have turned into an acquisition company in recent years, which means the complexity of negotiation is extraordinary. We often take on new customers who think they're starting a new relationship with Cisco, only to find they've been using one of their acquired technologies for years. In fact, your rep in one Cisco product probably has no clue at all if you're using another Cisco product. Again, lots of fracturing.
Core Products - Core products have processes in place with more or less defined price ranges. Most of the negotiation that actually moves the needle here is volume, timing, and competitive quotes. To keep a clear conscience, you should never share a quote from one vendor with another, but you can certainly imply that prices are not reflected appropriately from Cisco based on competitor quotes.
Services - Services fall into the SAAS department for negotiation purposes, and they revolve heavily around renewals and ongoing revenue. The services negotiation changes dramatically depending on whether you are a new or existing customer.
Licenses - Licensing execution and sales processes are highly inconsistent from one product to the next within Cisco. Across the board however, they're tacked on (by requirement) with your physical or virtual hardware. This allows licenses to be mixed and matched with blending discounts. Margins here can vary wildly for large technology vendors. Which leads us to...
Add ons - Licenses or software are very typical add-ons for nearly every Cisco deal. What they do is add a high margin item with a low margin item. You will often see this in the form of a core product with an emerging market technology that you are not sure you want or need, but Cisco will not budge on the core product. Therefore, you bite on the add-on to get a small discount on the core product that you are really after. It is the oldest trick in the book, but for good reason, it works.
Emerging technologies - These are the products that often are used for fracturing. It's far more common for stakeholders to have differing visions on an emerging technology that your organization may or may not need, than a core product. These technologies have dedicated, highly incentivized and specialized teams that work hard to make sure that you hear all about this new tech, whether you need it. Here's the kicker for the negotiation process, your Cisco rep may not even get sales credit on the emerging technology. That's right; your go to contact at Cisco may get no credit whatsoever depending on the technology. This can create opportunities for your organization, and should not be wasted.
New and existing customers - Be very, very wary of the dollar amount you sign up for as a new customer. If you sign up for X dollars over 3 years, the rep already has a targeted sales increase, regardless of how much you may or may not have overpaid. Your rep will be reprimanded internally if they don't hit those targets when it comes to renewal time. This can cause serious problems. This means if the goal is 10% growth, and you overpaid, Cisco will still target a 10% increase.
If the rep cannot hit their numbers, the relationship can become toxic between themselves and the customer. It's not what you want. You want to be in lock step with your rep, making a solid case for discounts.
Product variety from Cisco is a double-edged sword. On one hand, everyone down to the rep is highly incentivized to get product variety into your environment. Why? Because it's nearly impossible to migrate off. Once your staff gets used to the single vendor for all of their processes and support, it's extremely difficult and expensive to train and hire for the new products. Outsourced IT can help with this as they can cycle in and out experts in several fields, but it's nearly impossible to have an internal team migrate from an all Cisco shop to a new vendor. Cisco knows this when they introduce variety.
Now for the positives. Your rep and the GateKeeper will do everything they can to increase that variety within your environment and that includes top-notch support. The problem is once you're in, you're in. They know how expensive a migration is for a customer, even a technical customer, which allows them to stick their heels in the ground in future negotiations. Be sure that if this is the best path for your organization, this leverage is not wasted.
Protecting Against Feature Creeps
Tell me if this sounds familiar, you sign on for an emerging technology. It's a great price, it has nearly all the functions you need, it aligns with business objectives, and you're pleased as punch with the purchase. You sign up for a 3-year pact, and before you know it the product has doubled, tripled or quadrupled in price! You approach your rep, steam coming out of your ears asking for an explanation.
What they tell you is "We've added new features and capabilities with ongoing development, so we had to raise the price." This causes a big problem for the organization.
Say for example when the emerging technology purchase was made, 80% of the features were used in your live environment. Perfectly appropriate for a purchase. However as the years passed by, an insane quantity of features were added at an intentionally high rate. What's the probability that your organization was able to keep up with every single feature and implement it correctly? 0%. It's extremely difficult to keep up with added features on emerging technologies while also supporting the business. This likely reduces your feature usage from 80% to 60%. You're now being forced to choose between an expensive and time-consuming migration, or to accept paying three times as much while not likely using many of these new features you're paying for, if any. This again reaffirms our point, do not waste leverage when you have it, as it will come back to bite you later.
The goal of this article has been to empower you and your organization on the sales processes of Cisco and vendor negotiations at large.
Current Customers: It has been an absolute pleasure to work with you, and we would love your feedback on this article.
To New and Prospective customers: We hope this article has helped you understand negotiations with Cisco and other large tech vendors. Our goal as a VAR and MSP is to unequivocally advocate for our customers. We believe articles like this one are game changers for everyone who relies on technology for their business.
Want more information on how we can help you reduce your Cisco or tech vendor expenses? Contact us at https://www.maxnetflow.com/contact.html or via email to myself William@maxnetflow.com OR firstname.lastname@example.org.
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