Moderated by: Jason Alley
The folks at Spanlink were gracious enough to reach out and offer additional color around questions raised in my previous post, I3 Cuts in on Spanlink/Cisco Dance? I spent some time Wednesday speaking with Spanlink's CEO, Scott Christian, who was both informative and transparent.
Scott was candid about the fact that, like most other companies, Spanlink has been facing financial challenges. He explained that there are several factors that have contributed to this, including:
- The general market decline.
- Modest margins available to Spanlink selling and supporting the Cisco Unified Contact Center Enterprise offering (both products and services).
- Increased channel conflict. Spanlink has seen more cases of Cisco professional services being re-sold through other Cisco channels and Cisco entering into more service contracts directly with customers.
- Spanlink has not been able to expand downstream profitably with the Cisco Unified Contact Center Express offering.
Scott explained that the I3 partnership provides Spanlink with an opportunity to address these challenges by expanding the company's reach and providing "more attractive economics." Scott made it clear that Spanlink values, and is committed to, the Cisco Unified Contact Center Enterprise business and plans to increase their investment in it accordingly. His hope is that a diversified portfolio will bring greater opportunity and profitability to Spanlink.
Let's get to some of the questions raised in my previous blog entry... What was learned from my discussion with Scott?
Why would Spanlink be “excited to diversify” its product portfolio when they have enjoyed a close relationship with Cisco for so long?
> Well, it appears that Spanlink's Cisco business is not as profitable as they would like it to be, especially in the SMB market. Scott explains, "Cisco Unified Contact Center Express doesn't fit our business model in that (SMB) market. It's a crowded market, with many Cisco partners offering the Express product. When we do get involved (in an Express deal), we don't find it profitable for Spanlink. We think we can make money (in the SMB space) with I3."
Is this part of a natural, mutually understood progression following the spin-off of Spanlink’s software product development business in 2007 (under the name Calabrio)?
> Perhaps it is part of a natural progression given Cisco maintains only a minority share in Spanlink. It does not seem this was a Cisco endorsed move, though I have not yet spoken to Cisco.
Are times too tough for exclusive arrangements?
> It appears so for Spanlink. Scott explained that Spanlink has had re-seller arrangements with other companies (e.g., Nice, Nuance, etc.), so this is not a first for them.
Is Spanlink seeing broader, more formidable competition in Cisco contact center deals?
> Yes, but in a form different than one might expect. Scott said that Spanlink doesn’t fear any other Cisco channels when it comes to contact center expertise, and that they are often called in to clean-up messy implementations from others. However, he shared that they now face new competitive pressures from, ironically, Cisco. Scott explained that they are running up against Cisco professional services being resold through other channel partners. They are also seeing Cisco signing more support contracts directly with customers. Much of Spanlink's differentiation and margin are based on their services business, so these new competitive pressures present significant challenges.
Has Spanlink lost (due to layoffs or attrition) Cisco specialists and finding it hard to manage larger, more complex enterprise deployments? Do they believe the I3 product requires less internal resources to sell and support contact center solutions?
> Like the rest of the market, Spanlink's sales and pipeline took a hit through this recession. In response, they did have to reduce headcount. However, Scott shared that, since May, Spanlink has experienced a nice recovery from both a pipeline and bookings perspective. As a result, they are looking to re-hire and re-tool across the business.
Is Spanlink looking to broaden its market reach by more aggressively pursuing the SMB market? Do they see the I3 solution as the best vehicle to address this market?
> Yes, and yes.
Are Cisco and I3 interested in a closer relationship and using this is a mechanism to test the market’s response to a combined offering (I3 for SMB and Cisco UCCE for larger enterprise deals), and could Cisco be conceding the SMB business?
> It does not appear so, though I have not yet spoken with Cisco or I3.
How will the two product sets, Cisco and I3, be rationalized in terms of Spanlink’s go-to-market strategy?
> While Spanlink sees I3 as their lead SMB offering (which they define as 50-400 agents), and Cisco as their lead offering for large, more complex environments (e.g., multi-site with advanced applications and significant integration requirements), they do recognize that there will be additional overlap as the I3 product evolves upstream. When asked how this potential conflict would be managed, Scott explained that it would be lead-based. If Cisco brings a deal to Spanlink, Cisco product will be proposed. If I3 brings a deal to Spanlink, I3 product will be proposed. For deals Spanlink uncovers on their own, they will determine the best fit based on customer requirements. In summary, Spanlink will adopt a lead-based approach rather than a stringent market segmentation approach. Scott made it clear that they will be building and managing two separate sales, engineering and deployment organizations, so Cisco resources will not be diminished in favor of the I3 offering.
So, is re-selling I3 solutions a better answer for Spanlink than investing more heavily in their existing Cisco business? I am still not sure. Only time will tell. Giving up the distinct competitive advantage of being a company completely dedicated to the Cisco contact center business is not trivial. On the other hand, Spanlink has to look out for its own financial health. If a dedicated Cisco relationship isn't as profitable as they need it to be, then who can blame Spanlink for looking to diversify their portfolio? And, if Cisco is dancing with others, then why shouldn't Spanlink? Hmmm. We'll know alot more about how this is all going to shake out for Spanlink, Cisco and I3 once the market re-bounds and deal-flow starts to pick-up. Stay tuned…
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