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Why you shouldn't care that Cisco is more expensive than competitors

Asked multiple times at the Cisco Partner Summit last week what the channel and users should do about the fact that Cisco switches are more expensive than the competition, Cisco execs basically said: Live with it. After all, Cisco products are better than the competition, are part of a big-picture architecture, and they shouldn’t be commoditized. So there.

“Ninety percent of our products are the best in the industry,” said Cisco CEO John Chambers during a press question-and-answer session last week, adding that this was the case across all technology segments from routing and switching to data center, video and collaboration.

Now it’s up to partners to avoid selling standalone products and instead show “how these products work together” and “how they will future proof the architecture,” Chambers said.

“If you’re a partner and you’re selling a commodity product that is not a good [strategy],” said Chambers.

Competitors that are asking partners to sell commodity products are “asking them to commoditize their businesses,” said Rob Lloyd, Cisco executive vice president of worldwide operations.

That said, journalists reminded Cisco execs of the company’s slipping share of the switching market (Cisco’s switching revenue has declined while Hewlett-Packard Networking’s has risen), executives agreed the message around the role of switching in an overall architectural play may need to be better communicated.

“We have more work to do both internally and with our partners to accentuate architectural differences,” said Lloyd. “John made the point that our portfolio has never been stronger … our 2960 switches and 3750s have never been better … we need to do a better job in emphasizing the role that Medianet plays and that TrustSec plays and that new applications will play.”

Cisco has introduced a major refresh of every part of its switching line in the past couple of years – and analysts have said the transition was poorly managed. Cisco execs admitted that the company introduced more product at once than it was prepared to handle on the marketing or business side.

“Rob and I never had the chance to add more than one switching product per year,” said Chambers. “When you suddenly transition everything from the 7000 to the 5000 all the way down to the Nexus line, and you look at what we’re doing with the 3000, and the ramp-up speed of how quickly they were accepted … When you bring out new product it always takes four or five years to catch up with margins … It’s just that we’ve never had so much innovation [at once].”

Chambers continued, “Make no mistake about this, we will control the market transition … We’re very well positioned from the data center all the way down.”