By Khali Henderson

MCI and Cisco Systems Inc. announced in late February they have joined forces to enable channel partners to sell IP-based services to small and medium businesses.

The partnership leverages Cisco’s VAR network and MCI’s sales channels to deliver either MCI’s hosted VoIP service, MCI Advantage, or Cisco’s premise-based Call Manager with connectivity and managed services delivered over MCI’s Private IP MPLS-based network. A managed firewall service also is available as part of the initial offer.

The announcement is the culmination of two years of collaboration between the companies that includes milestones, such as the February 2004 buildout of MCI’s MPLS network and the companies’ May 2004 joint demo of the first 40gig optical transport network. The MCI Advantage service, built on proprietary servers, also is being advanced using Cisco servers and routers as well as its IP phones.

Together, the two companies now will begin to leverage that infrastructure by recruiting select Cisco VARs with specialization in IP communications, security or vertical markets. A trial of the program was conducted with two Washington D.C.-based VARs to ensure that the MCI and Cisco resource were aligned.

“One of the strengths of the partnership is we have built compensation models and incentive models to ensure that the MCI sales organization, which is geographically deployed around the country, is in lockstep with the local VARs,” says Phil Meeks, senior vice president of MCI Strategic Ventures and Alliances. “Our branch sales organizations have an incentive-based system that rewards them for reaching out to the Cisco VAR, so that we are not in a competitive mode with them in the marketplace.”

Meeks declined to reveal details of the compensation plan, but said VARs have the opportunity to earn money on the CPE, installation and managed or hosted services.

“This is not just an upfront payment as it would be selling CPE,” says Nigel Williams, vice president, Worldwide Service Provider Partners, Cisco Systems. “They can actually start to build a comfortable revenue stream based on the total contract value of the service.”

“What Cisco is very focused on is partner profitability. From a channel perspective, we believe it improves the value our partners bring. It improves the available wallet-share they can go after and improves their profitability.” The program also offers customers the option of using MCI-owned equipment as part of a service contract rather than buying CPE outright. “We think it’s important to give that choice to the customer in the marketplace,” says Meeks. “There are some customers [that] from a budgeting perspective would prefer to have the capital outlay of purchasing the equipment; there are some that wouldn’t. We want to have flexibility in how the Cisco VARs are positioning it in the marketplace.”

MCI and Cisco also are engaged in joint development of additional offerings into the SMB market, says Williams, hinting at the promotion of Cisco’s advanced technology initiatives around security, wireless and storage.

“Over 90 percent of the revenue we do in the U.S. is through channel partners. So we are going to continue to invest in channel partners to enhance their capabilities to deliver our advanced technologies,” he says.