Networking giant Cisco Systems has cut Tech Pacific from its distribution list, following a rationalisation of its local distribution channel. Its two remaining distributors are Express Data and LAN Systems.
Kip Cole, director of channel operations at Cisco Systems, told CRN on Wednesday that the company had been reviewing its three distributors for up to 12 months. Drops in network hardware spend over the period had put all three distributors under increasing pressure.
'Market forces alone wouldn't create an outcome in distribution, so we [Cisco] decided to intercede,' he said.
Cisco asked its former band of three to tender for the business over a month ago, Cole said. He said the company assessed each distributor's logistics capabilities, top line growth, ability to service the commercial market (top 250 organisations) and focus on advanced technologies, such as IP telephony, storage networking, wireless, security and SOHO networking.
With Tech Pacific gone, Cole said he was confident that the remaining two distributors would pick up the slack.
He said it was not easy to separate the three distributors during the decision process and their product 'volume differences' were not enough to sway the outcome. 'There have been at least as many Cisco-focused people at Tech Pacific as the two other businesses,' he said.
Nick Verykios, managing director at LAN Systems admitted he was 'nervous' during the process. 'The only thing you can rely on is what you're good at,' he said.
The distributor's focus on emerging technologies was its whole pitch, Verykios said, adding that LAN Systems has an 'alternative customer base' in areas where the other distributors don't play such as the traditional telephony and security channels. He cited LAN Systems' finance, cost and profit and loss management services as areas where the distributor had strengths.
LAN does about $70 million per annum or half of its turnover in Cisco product sales. Verykios expected to pickup a chunk of additional Cisco business as a result of the changes and was already fielding calls from resellers. 'We don't run a price-based model and resellers are telling us that they're prepared to pay for the value [LAN provides],' he said.
He boasted that LAN's 'floors are flat out and the phones are going stupid', adding that LAN had already established credit lines with resellers.
Verykios said that there's 'nothing commodity' about advanced technologies and strategically the distributor 'fits in that space perfectly'. 'I was confident that we were a good match and was hopefully relying on that being the decision making criteria,' he said. Tech Pacific boss Kerry Baillie was not available for comment at press time.