Are Your Cisco Negotiations Becoming Increasingly Challenging?

Are your Cisco negotiations becoming increasingly challenging?

Tony:

Hello, today is Wednesday, April 2nd, 2025.  I’m Tony Mangino from TC2 and this is Staying Connected. 

On today’s podcast I’m joined by Ben Fox, one of TC2’s Managing Directors, for a discussion about one of his favorite vendors – Cisco.

So, Ben – with our collective heritage in networking services and vendors, Cisco of course comes up all the time in discussions with our clients.  And funnily enough, Cisco is always one of the top search topics for our website.

Ben:

That’s absolutely right Tony.  And I think that’s simply a reflection of how complicated and sometimes challenging our clients’ relationships with Cisco can be. 

Tony:

So why do you think that is?  For instance, what makes companies relationships with Cisco so complex?

Ben:

Well a big part of that complexity is simply a reflection of the vast and divergent range of products and services that are included in Cisco’s portfolio these days.  Cisco has expanded massively from its original roots in networking and later IP Telephony and Unified Communications and Collaboration hardware and software.  For instance, Cisco now offers a wide range of security related solutions and products and has multiple infrastructure monitoring and observability propositions powered by acquisitions such as App Dynamics and, just last year, Splunk.

Tony:

It seems difficult just to stay on top of it all.

Ben:

It truly is – and Cisco doesn’t make it easy because it is constantly evolving its branding and product names, not least as it acquires companies and slowly integrates its existing products and solutions with the acquired ones.  It’s a bit of a running joke even within Cisco’s sales teams that its almost impossible to keep up with Cisco’s marketing department!

Tony:

I think one of the challenges is also that as Cisco acquires companies there becomes a lot of overlap between its different products.

Ben:

I agree.  Meraki and Viptela were an early example of that – Meraki was acquired first and a key component of Meraki’s product set is its SD-WAN capabilities.  Viptela was an SD-WAN solution vendor that Cisco acquired a little later and suddenly Cisco had two SD-WAN platforms.  Now there was and is quite a bit more to the Meraki product set than just SD-WAN, and over time Viptela has essentially been subsumed into Cisco’s DNA licensing, but it’s a good example of how Cisco product overlap caused confusion for customers.  And that product overlap continues in areas such as Cisco’s acquisitions of Thousand Eyes, App Dynamics and Splunk, which all have distinct capabilities and use cases, but it’s a Venn diagram with a lot of overlap.

Tony:

Do you find that Cisco does a good job of helping its customers navigate the different products and capabilities and avoid investing in overlapping products?

Ben:

I think yes and no.  Cisco account and sales teams definitely work hard to bring the right product specific SMEs to bear in discussions with customers, but those product specific SMEs are just that – experts in their own specific product towers.  It’s much harder to find Cisco SMEs that span multiple products and can provide in-depth and holistic advice across overlapping products, so Customer’s end up having to work out that piece themselves.

Tony:

I suppose there is also pressure for individual product teams to sell their own products, and so there is little motivation to identify overlap with other existing Cisco products that the Customer may have.

Ben:

Well, I wouldn’t ever be so cynical Tony, but of course as soon as Cisco acquires these companies and solutions, they start working very hard to sell them into existing customers.  And while the idea is that the different products are complementary no-one is pro-actively talking about the overlap with the customer’s existing Cisco products and solutions.

Tony:

So that’s a good overview of how dealing with Cisco is complicated, simply because Cisco sells a wide arrange of complicated IT products and solutions.  But one of the other primary challenges that our clients reach out to us about is pricing.

Ben:

Yes – they certainly do.  Cisco, like pretty much all software companies (and by the way, let’s not forget that Cisco is largely a software company now) expects to increase its prices year over year.  And that can come as a bit of a shock to our customers in a couple of ways. 

Firstly, purchasers of network services are used to the Moore’s Law effect, where effectively you could always get more for your money on a year over year basis – more bandwidth, more computing power, more wireless data usage.  So, any renewal negotiation was almost always targeting price reductions, even though in reality the reductions were generally reinvested in buying more bandwidth/computing power/data allowances etc.

Secondly, inflation was simply very low for many years, and so the effect of inflation on network services was generally completely masked by that Moore’s Law effect.

In network transport services (in particular circuits and other WAN connectivity) any inflation has continued to be more than offset by cost savings from the migration to Internet First and also offset by ongoing bandwidth price erosion more generally. 

But Cisco hasn’t been subject to and isn’t following that pattern.  For instance, it’s been increasing its list pricing for its products and maintenance services.  Sometimes pretty publicly with general website announcements, but also more subtly when the list price of successor products and the associated maintenance list price is simply materially higher than the product that is being superseded.  That successor product inflation, if you will, is far harder to track and monitor, but it’s a definite theme.

 Tony:

In the Cisco world of course, a lot of the negotiation focus is on the discount, and not on the list price.

Ben:

That’s right – and it’s very difficult to protect against list price increases, especially for software subscription and maintenance services that you have to periodically renew.  And it’s not unusual for Cisco to apply a lot of pressure on customers to quickly close on deals and renewals, which may or not be satisfactory, because signing now will avoid the list price increase that is just around the corner and lock in the current list pricing for the term of the renewal.  That can be very tough for customers to deal with.

Tony:

You’re starting to bring up a more general point on some of Cisco’s negotiation tactics.

Ben:

Yes – I think it’s important to recognize that Cisco is a sophisticated negotiator, with teams of career negotiators that are very good at making sure they have the upper hand in any negotiation. 

And there’s a lot of tactics that get used.  The ever-changing products and product names are part of that – making it very difficult to keep on top of what you are negotiating for and always seeming to have to re-learn products and the associated pricing structures and commercial constructs. 

Cisco are also great at delaying until the last moment, so that you’re up against a brick wall and essentially have to renew on unsatisfactory pricing and terms because you’re out of time or because the prices are about to go up, as already mentioned.

Cisco also has a habit of presenting worse pricing/terms for renewals or taking away benefits that your fought hard for in your last negotiation.  So, you’re fighting just to stay still, instead of actually pursing net improvements.

And of course, Cisco is also very astute at dividing and conquering the customer.  One result of the diverse set of products and services that Cisco offers now is that they tend to have tentacles into many of your executives and stakeholders, and they are experts at leveraging those relationships to undermine your negotiation and spread fear and doubt amongst your stakeholders.

Tony:

I know you personally spend a lot of time negotiating with Cisco – so how do you counter all of that?

Ben:

Just like negotiating with any large IT provider, a lot of it is about preparing properly and fastidiously for the negotiation.  So, knowing your entire relationship with Cisco – which in a world where a lot of the spend can be through resellers is often not trivial to get your arms around.  But it’s about having a holistic negotiation that reflects and leverages all of your spend with Cisco, and not letting Cisco negotiate with you piecemeal.  Cisco’s preference of course is to negotiate individual products or renewals on their own when they come up, so that you can’t leverage any wider spend of services.  And when you do that you end up stuck in a perennial cycle of piecemeal Cisco negotiations.  Having a comprehensive negotiation where everything is addressed together is often much more effective.

And starting early is crucial – so that you have as much time as possible for the negotiation and can mitigate any delays from Cisco.  It’s easy to make the mistake of thinking that an EA renewal, or Smart Net renewal, will be straight forward and thus it gets left until close to the renewal date.  But that plays into the hands of Cisco when they present price increases or unexpected and unfavourable changes, which you have no time to negotiate because the support contract is about to end.

And of course, most important of all, maintain competitive threats to Cisco through alternative suppliers and services.  Often Cisco is pretty entrenched in our clients’ infrastructure, so it’s completely unrealistic to move to alternative technology providers in a big way in a short timescale, but Cisco is very sensitive to losing any part of their business with a customer, so simply having some competitive threats and pressure goes a really long way in helping you to have a successful negotiation and should be a core consideration in your negotiation strategy.

Tony:

Thanks Ben it feels like we’ve only scratched the surface of the challenges of dealing with Cisco!

Ben:

You’re right – we haven’t even touched on the complex and ever changing enterprise agreements structures that Cisco uses, the nebulous relationship between Cisco, its value-added resellers and the end customer, or financing arrangements with Cisco Capital that can seem like an inevitable requirement for a lot of Cisco transactions.

Tony:

Well perhaps we can get into such topics on a future podcast.  And if you would like to learn more about strategies for negotiating with Cisco, or if you’d like to discuss other ICT needs with Ben or me, or any of our LB3 and TC2 colleagues, please give us a call or shoot us an email. You can also stay current by subscribing to Staying Connected, checking out our websites, and following us on LinkedIn.