John Soper (Moderator, New Paradigms):

I think we have an exciting program tonight. I think it's timely and I think it's a very interesting look at the dynamics of small and large companies. We at ASAP are nothing but if not research oriented before we come to one of these. So, we have the authoritative book, Life: The Odds, and it's actually researched the odds of dating a Supermodel – male or female. They come out with 88,000 to 1 are your odds, but they tell you all the ways that you can improve your odds. 

So, when we're done with this panel I'm sure that we will know whether they're similar to the odds of getting a date with SAP, or Cisco or any one of their counterparts, and how to improve those odds. 

So, let me first start by introducing our panel. I'm actually going to let them talk for a couple of minutes about themselves and their roles in Alliance Management for their companies and what they're doing. So, let me start with that and then we'll dive in with some questions, then open it up to Q&A.

First, I'd like to introduce Rick Tywoniak from Cisco Systems. He's the Senior Marketing Manager for the IP Communications Business Unit. Rick, I wonder if you'd talk a little bit about your background and what you do at Cisco.

Rick Tywoniak (Cisco):

Sure. I've worked for Cisco now for five or six years, all of it being managing Partner Programs, first starting, always IP communications. So, Cisco is broken up into various business units. The IP Communications Business Unit has the largest Partner Program inside Cisco. So, we have about 500 total partners inside Cisco and I manage about 300 of them, so I have a small team that manages those partnerships. 

Like I said, I've been doing it for five or six years now, kind of a dual role here because I came into Cisco, through acquisition, as a partner. So, I came from a very small start-up company of 70 people. I was the Vice President of Business Development, and had to partner with Cisco and eventually got acquired by Cisco. So that's how I came in. So, I sort of know it from both sides coming from a small company as well as now managing the program that deals with partners. 

I look forward to talking with all of you and sharing my insights. 

John Soper (Moderator, New Paradigms):

Just a quick comment. You've spurred a comment that the panel is nicely divided into two Supermodels, then two people who are have or are pursuing them and all of them have worked on the other side of the aisle. So, they've been pursued, they've been pursuers, so everybody can speak to all the issue. But, I think it's great that we have some people here representing roles right now that are on other sides of the aisle, and the next person is…

Rick Tywoniak (Cisco):

That's my date. (Laughter.)

John Soper (Moderator, New Paradigms):

Your date, yes. Well, not only your date… No, I understand. You got married, didn't you?

Manoj Fernando (LiteScape):

You got me.

John Soper (Moderator, New Paradigms): 

But we didn't hear about the courtship; on how that worked. 

Manoj Fernando (LiteScape): 

That's right. (Laughter).

John Soper (Moderator, New Paradigms):

Manoj Fernando is co-founder and EVP of Business Development at LiteScape Technologies, and a partner of Cisco. I'm going to let him talk a little bit about his background and company.

Manoj Fernando (LiteScape):

Thank you. It's an honor to be here and share my views on how we ended up dating Cisco. When the topic first came out, I said I thought I was the Supermodel. (Laughter.)

I understand it's either that or Rick, so okay. I can tell you some stories about him. I'll be happy to share some of those experiences.

I've been in the industry pretty much in Silicon Valley for about 20 years right now, working a variety of positions. Worked at several different companies, Mosaix, Lucent – have been acquired by Lucent. Then ventured out on my own, probably late during the dot-com days, in the early part of the days. Had an offshore development company of my own. Switched to, got greedy, pays a bit of money, did the dot-com thing, went bust, the usual story. About, I think, towards the early part of 2000 was when I found a start-up company called Circle24 and that's when I first got introduced to Rick and Cisco. Circle24 eventually became LiteScape. Today I kind of manage this development and continue to chase Cisco at every given opportunity, plus some of the other large companies around the world as well. 

John Soper (Moderator, New Paradigms):

Okay. Next we have another Supermodel, Kevin Ichhpurani from SAP. He's the Global Vice President for Business Development. Kevin, if you would talk a little bit about what your role is and maybe highlight us a little bit on what the NetWeaver Equity Fund is and how that plays into your role.

Kevin Ichhpurani (SAP):

Sure. So, I head up the business development efforts for our software Partner Program globally. That includes all of the go-to-market relationships we have with ISVs. I have been at SAP about 3 ½ years. I lead a team in the US and as well as Asia Pacific. We also have the NetWeaver Fund, which is $125 million fund that we put together about a year ago where we're taking active equity investments in strategic software partners. We saw the need that particularly when we invest in small companies, our discussion topic of today, is that we needed to be able to help companies scale their operations, build out the appropriate sales and distribution channels, as well as show customers that SAP is truly behind the relationship. As such, that was the genesis of the NetWeaver Fund where we actively make equity investments in companies that we partner with to help build up the operation and show that credibility with customers.

Prior to SAP I've been in the technology sector for about 15 years in mergers and acquisitions, venture capital and business development. Also, in my venture capital days, I was responsible for forging relationships for my small portfolio companies with big companies like SAP, Microsoft and IBM, so I've been on the other side as well. It's definitely challenging on both sides of the house.

John Soper (Moderator, New Paradigms):

Thank you. Finally, but not least, Gamiel Gran, who's the Vice President of Channel and Sales Operations at Cassatt Corporation. 

Gamiel Gran (Cassatt):

Thanks, John. I, like everyone else on the panel, have been at this for a number of years, almost 25 years it's looking like now. I feel very strongly about this space so it's an honor to be here to talk about this. 

I'm at Cassatt Corporation. We're the data center automation space, utility, computing and green data center effectiveness. We are a Supermodel wannabe. So, we'd love some of your funds and …. (Laughter.) 

But I also have a long history of actually being on the larger business side. I actually started with IBM for a number of years, was head of Business Development role there for various divisions. A number of years at Oracle, brand channels there for a number of years, then BEA and a couple of little start-ups in the middle of all of that as well.  So, I've seen both sides and many different sides, I think, of the effort of partnering. So, throw your challenging questions our way. 

John Soper (Moderator, New Paradigms):

Oh, we will. Here they come. Thank you very much. What a great panel.

Okay. Let's all start with the date. So, my first question is: When you're trying to figure out who you want to date, just as any other situation, you've got to kind of source your dates. I think that from a small company perspective to a large company perspective, you have different processes and criteria that you use. Usually a small company has maybe a few focus people they want to go at, a large company has a huge array that most of whom they don't even know. So, in trying to source who your target is, what's the process that you go through? I'll ask, Rick, if you'll start. But please, anybody, just jump in at any point during this conversation, with your comments. 

Rick Tywoniak (Cisco):

Well, interesting, for sourcing, it's somewhat easier on a large side because being Cisco, most people come to us. So, it's somewhat a challenge just keeping up with all the companies that approach you. So, part of those dealings is dealing with that but when we are sourcing, and some various obvious ones, we look at our competitors, we look at who their partners are and try to see what technologies are there and see if there's anything interesting. Then there's the typical tradeshows, we spend a lot of time on floors just walking around visiting tradeshows. I would say the tradeshow, it's fairly important because we're also out there now trying to build out not only our partner network but our developer network, which is a little bit different. I'm involved in both those areas. 

So, we actually go after development communities that exist. We look at an SAP Partner Program or a Microsoft Visual Studio Developer Network (MSDN), kind of look at those communities and see how we can outreach to them, let them know what we're doing with our Partner Program to hopefully attract them to come into our program.

So, I guess it's a lot of different ways. Probably the newest way is not focusing on yourself, focusing on other communities that have built up big programs and seeing if we can get some of those companies to think about developing for Cisco also. 

John Soper (Moderator, New Paradigms):

Okay. Manoj, do you want to say a few words about how you sourced Cisco.

Manoj Fernando (LiteScape):

That's a long story.

John Soper (Moderator, New Paradigms):

Not what you did. Not how you got them to date you, but just why you picked them. I think in your case being that you're an IP company. 

Manoj Fernando (LiteScape):

Yes. One of the things I've mentioned is when the dot-com went bust, basically, one of the last projects that we took on was a development program for a company that was doing some work on Cisco when Cisco started introducing IP telephony into the market.

So, when I first looked at that Cisco phone there was something there saying, and Cisco was just entering the market at that point. When you started doing more research, you started seeing this phone giant going after the industry saying IP telephony is the wave of the future, that these are all the great things they can do with it.

So, when we looked at that device, which was the original IP phone that they had, there looked like there was an opportunity to provide a variety of applications to run on that device. So, as a result of doing that, that's when we went out and said, who is the market leader? Who is heading the industry? There were traditional PBX vendors where they saw Cisco pretty much making the charge and our bet at that point was, okay, let's take a look at this, let's see what Cisco is doing and then go from there because typically at that point was like you can't go wrong. Cisco is betting their future on this particular technology, then there might be an opportunity there. That's how we started the whole engagement process of going after Cisco, and I'm sure that's going to come in the next couple of questions.

John Soper (Moderator, New Paradigms):

Yes.

Kevin Ichhpurani (SAP):

So, we go to market by industry at SAP. When we look at partner types, we take a very structured approach. Across all of our 28 different industries, we formed what we call an industry value network where we bring together our best customers and partners to collaboratively innovate. So, within each of our industries, what we've done is we've brought in our best customers to look at where is the industry spend taking place.

So, as an example, whether that may be compliance in banking or HIPAA and healthcare, we take a look at where is the industry spend taking place, then we compare that. So, we take an outside-in view of the world, we then look at what processes we support and where are there gaps or white spaces, if you will, within our solution stack.

Once we've identified those white spaces based on our customer feedback, we'd prioritize a market opportunity, where there's the biggest opportunity from our field sales perspective, as well we've done it with out product teams, our field teams, the customer, and bring together the appropriate partners to piece together and then solutions to solve these specific industry problems. 

So, in order to really do this you have to have transparencies. So, one of the things SAP has done is made a big shift from the monolithic we-do-it-all approach of taking the platform of underlying applications, extending it to partners so they can build on it and have their interoperability, but secondly we're sharing our roadmaps. So, we become very transparent, as I talked about earlier, these different industries. You go to our website today and partners can see where those white spaces within our solutions. They can actually apply to be one of the partners that fills into one of those white spaces. So, really that transparency of looking at from the roadmaps with the partners combined to looking at your own solution stack in the industry spend identifying those partners, we can proactively go out and find those partners. 

Secondly, we have a whole influx, much like at Cisco, of partners coming to us that we can prioritize based on those white spaces and the market opportunity in those white spaces. So, it's very much an industry driven approach, very much looking at the gaps within our portfolio.

John Soper (Moderator, New Paradigms):

Thank you. Gamiel, do you want to add something to that?

Gamiel Gran (Cassatt):

As a small company, sourcing a partner is a lot of decisions about who not to have a partnership with versus who to have a partnership with. I tend to turn down partnerships more than I pursue with the idea that if you spread yourself too thin, you never really achieve the results you need with any one partner, and that's what you need.

But the sourcing strategy for me starts with a very selfish agenda. I take a very sales or revenue based objective from a metric standpoint, less to do with the marketing or perception of the partnership and more to do with the outcome and the results. With a very selfish, narrow point of view, we need to generate revenue. We need to generate revenue more rapidly than we could on our own. 

Then, to Kevin's point, kind of the market map or the spend strategy that plays into it. So, what are the key components, let's say, from a bill of materials kind of standpoint that the customer is actually looking for to complete the solution and where are the weak spots in what we deliver and how do we go about delivering that, they can be supported by some other play. To the other point that was made, which is then you go look at who are the largest players in that list who can actually play a biggest role for you. 

So, I take a very inward kind of what is our objective, very well defined, in the first 12 months, I want to generate a million dollars of revenue in the following segment; what are the key players that can help me get there and build the model from there. So, before getting to a joint value proposition or anything, you really know what your own core metric is.

Rick Tywoniak (Cisco): 

I want to do a quick add-on in what Kevin said; it reminded me that the industry vertical thing is extremely important. So, when you're looking to partner with Cisco, one of the ways we kind of stratify in tiers is, those partners in an industry vertical that's a critical focus vertical for us that fill a gap. Same thing, and provide value in that industry vertical, typically get to the higher tiers on our Partner Program. 

We just launched a whole industry vertical Partner Program, which is one of the reasons why Manoj and LiteScape have done so successfully, because they took a lot of their technologies and they focused it on particular verticals, filled some gaps and really helped increase our sales in those verticals. When you've got 300 companies that you're working with or 500 or whatever, that was one of the key ways they were able to separate themselves from other people, so we noticed them. Now, we have a focus on verticals very similar to SAP.

John Soper (Moderator, New Paradigms):

Thank you. Okay, so now you know who you want to source, who you want to date, and the next question that I have for you is – and this is more directed to the small companies, but I'll be interested in any of your comments. Gamiel and Manoj, how do you get that date? How do you make the kind of noise, how do you get the attention so that they will start to look at whether at least they want to take the next step with you?

Gamiel Gran (Cassatt):

I think Richard's comments speaks volumes to the key thing, which is what are the strategic initiatives going on in the large companies that they are paying attention to and how do you become an enabling function to that. So that's one strategy.

To me though, it always comes down to one key thing – are there deals? Is there a top-line revenue opportunity that creates new momentum for the larger companies to say, "Wow! This is a changer for us." Some sort of game changer strategy for our business that we couldn't otherwise get to, so can we accelerate revenue faster than, for instance, Cisco could on their own. If you can find it, the ones who punch if it's a strategic initiative, and you can generate faster than they can on their own, then you're likely to get pushed to the top of the list. 

But for me, it's always come down to one simple thing and it's you build a pretty close relationship with a coach inside a large company, who befriends you with enough insights to what it is the key strategic things are going on for that business that you really get close to, you really focus on and then turn that into a real customer opportunity.

John Soper (Moderator, New Paradigms):

So, what I'm hearing is a value proposition that you both see value in but in the end you need the inside coach, the inside sales to make it happen.

Gamiel Gran (Cassatt): .

You've got to build a personal relationship. It's like selling to an individual customer in the same way, and I think you're taken on with that kind of mentality. It's about closing the deal

John Soper (Moderator, New Paradigms):

Manoj, do you want to comment?

Manoj Fernando (LiteScape):

From a LiteScape or my perspective, a lot of that was primarily based on here is an opportunity that you're looking to start a company or start on something new. At that point, you decide who is the horse sitting on the right, in this case you pick Cisco. We started going after Cisco in so many different ways, I mean, just to get engaged to them. One is through the formal partnership program which they have, and the other one is how do you engage with Cisco and how do you differentiate the solution that you're trying to offer, to Cisco, to make them one of your key partners or have them take you to weigh this opportunity. That became probably the biggest distinguishing factor for us, because what we ended up doing was you looked at what Cisco was doing, Cisco was coming out with this whole technology with voice over IP. What we did at that point was saying, hey, Cisco is doing this thing to the industry, here's the value-add that we can bring to Cisco or what is the differentiator. 

So, even when Cisco was going out and competing with some of the other vendors, established companies in the PBX industry, LiteScape, at that point, was able to come back with Cisco and say, here's the added benefit of what you're trying to do. So, in so many ways, as much as we were going after Cisco and saying, "Look at what we've got! Look at what we've got!" we started taking a more vertical approach. So, from education to legal, that's where we got our first break and it so happens that the person I chased after legal is in the audience as well here today. Hi, Brian.

So, it was one of those approaches that we started to take saying let's take a vertical approach that allows Cisco to go in and say, hey, I have a complete solution in a vertical industry whether it be education, legal or retail. That allowed us to kind of differentiate ourselves, even with the Cisco teams, to say here's a solution that now we can say it's tied into all the backends in the various verticals. So that helped us to differentiate ourselves, actually go after Cisco in so many ways and standout compared to the 300 other partners that they had in the program as well. 

Rick Tywoniak (Cisco):

I can't emphasize enough how important that is in what you just mentioned, and that is the integrated solution. Many companies come to partner with us and they talk about the value to our customers, which is a good start, but it is so critical to build the joint value proposition that's based on the integrated solution. How does 1 + 1 = 3. So, we're very much focused in on that.

Secondly, looking at the sphere of influence. I think one of the challenges that small companies have when partnering with big companies is they have a great solution that's valuable to the customer base, but is the large company, is it something that they sell. Is it something that they even talk to the right buyer in the account? Is it within their sphere of influence? We deal with this quite a bit. As an applications company, we talk to a certain buyer or certain business users within an account, and often times we get companies, let's say it's a security company. It's not that our customers don't need security, they absolutely need security, but it is outside of our sphere of influence, it's not the conversation that our account executives are having with the customer.

So, really making sure that you focus in on the integrated joint value proposition and also the sphere of influence; understanding that go-to-market model of the big company that you're trying to partner with is critical.

Manoj Fernando (LiteScape):

If I can just add one more thing to that. When you first came up with the idea of doing solutions with Cisco on this, we had no idea what an educational vertical would look like, or what a legal vertical would look like. But by engaging Cisco at all levels, right from the partnership level to the sales, to the system engineers, you just kept going to them and say, hey, what is it that you need? What is it that you need? We have this great idea or this concept, and little by little, then you eventually got to the customer.

I remember one of the first customers that we actually met was Wilson Sonsini. They never bought the product but at least they gave us the idea. They said, "This is what we need." So that allowed us to really go in and say, "Okay, here's the first product that is coming out, that is a requirement on this particular front for this particular application." That's how we basically got started with the first vertical app that will be legal. I never thought I'd deal with lawyers first but it happened.

Rick Tywoniak (Cisco):

I would add to this, it's something pretty basic, because I get hit by partners all the time is, you'd be amazed on how many people hit me up that really have no clue to what Cisco is looking for. You just wonder, have they researched us, have they even gone to our website?

A classic example, if you actually took the time to understand Cisco, you'd know that they're a leader in routers and we own a fairly large market share, we also have new technologies. So, when I have companies that come in to me and say, "We're going to help you sell more routers." I'm kind of going, do you know that our company has a pretty good market share on routers and that pretty much anybody who does anything on the internet is going to help sell us more routers, that's great, but it's the advanced technology. So, Manoj coming in to me and saying, "This new business that you're starting up where you don't have market share, I can help you grow that market share. Here's the vertical and here's what I can do for your customer." That somebody has more of a clue on how to deal with us.

I would say there's very few people that come to me with the kind of the way LiteScape came to us. I get more of the, "We're going to help you sell more routers." So, really studying your company and finding out what's important to them is probably pretty critical. Very basic but people miss it all the time.

Kevin Ichhpurani (SAP):

To add to that, I think it's very important that you tailor your message on who you're talking to within an organization. So, if you're talking to product teams or you're talking to alliance teams, they'll often focus in on purely what's best for the customer. But you're also going to have to integrate with the field sales organization of the large company and much like any account executive at any company, they're driven by the quarter. They have to make their quota and they're focused in how does it generate new routers or new licenses, and you really have to help them understand how does it drive incremental revenue for them.

So, depending on who you're talking to in the organization, very, very critical that you tailor your message. When you're dealing with the field sales organization, it's imperative to tie it to incremental revenue.

Gamiel Gran (Cassatt): .

Maybe we've beat this horse really well here but there's a tactical point, which is you show up for the presentation – I think Richard and Kevin have both said this – be very tailored. Have a presentation that is quite tailored. The actual PowerPoint that you use is not a PowerPoint about your company, about your product, but it's about the integrated solution. It's about the integrated offering, about how the integrated offering benefits the joint customer

When I was at BEA running alliances there, like, Richard's point, a lot of ISVs would come in and would sell their story about the benefit of their technology in the generic Java environment. Well, BEA had a very specific agenda relative to the Java class applications and if it wasn't tailored, I really didn't know what to do with it, which is another key point. I think as I've dealt with large companies, they haven't had the time to get as granular to understand our value proposition as we might expect them they would be, or even be interested in. So, we have to really take them a lot further in educating the value proposition of bringing it all together in a coordinated and cohesive way.

So, maybe we beat the horse here, but I think it's a tactic of showing up with a very tailored message.

John Soper (Moderator, New Paradigms):

Okay, good comment. So assuming that you've discovered of value proposition that makes sense to both of you, if you found the prospective partner who would be aggressive enough and understand your business operations and plan -- that gets you to the point, it seems to me, where you can start to put together a potential relationship, at least with some short term hooks and alignments. The question is a small company and a large company will often have different strategic focuses. A young company may be just looking further for a big OEM and some fast revenue. The larger company may be looking for an acquisition. There are all kinds of examples where short term you may be lined up, long term there may be alignments that are going to cause problems down the road. Are those things you look for as you put together deals in terms of what the long term red flags are?

Rick Tywoniak (Cisco):

Yes. So, part of the problem is everybody who comes to us wants to either get an OEM or get acquired, right? So, you have to…

John Soper (Moderator, New Paradigms): 

Do they start with that? 

Rick Tywoniak (Cisco):

No, but you can tell they're going that route. You have to set expectations real early and just explain to them that the actual number, the percentage of our partners that get to an OEM deal or get represented on our price list or get acquired are very small. LiteScape, it took you five or six years to get to our price list, right? They didn't give up but it takes a while. The important thing I typically have to do is set expectations early on and you continually set expectations to that. It's important to do that at the beginning, so I try to do that.

Kevin Ichhpurani (SAP):

So, we find cultural alignment very important. As an example, we covet our customers. We get a significant portion of our recurring revenue from the customers that we've had for decades. So, it's very important that when we partner with small companies that those companies have a long term focus. Now that's a challenge because many times as a start-up, you're struggling to make just the number for the quarter to keep the lights on.

So, when we look at companies, we look very much to make sure that they're taking a long term focus. That they're not going to burn our customers by making rash you've-got-to-buy-by-the-quarter-otherwise-the-pricing-goes-away type comments and ultimately that there's going to be cultural alignment there.

What I've found, one consistent theme with all of the small companies that have made it with SAP is patience – being very patient, working all of the different product teams, working the field teams, taking your time. Any of the companies, whether it's they've gone through and they've made it to our price list or we've bought them, one common theme again is patience.

So, looking at that cultural alignment is something we definitely do very closely in the evaluation process.

John Soper (Moderator, New Paradigms):

Any other comments? Okay, so you've dated, you've gotten their attention, you're going steady and decided to form a relationship. I'm actually very interested in what happens, because I've seen a lot of this in the work that I've done, in fact I do a lot of alliance work -- the power imbalance between – in trying to come into your first deal -- your pre-nup between a large and a small company – so the question is for small companies, how do you keep from getting stepped on or getting into a deal? Just kind of saying, "Okay, I'll get into it." But it's a deal that long term, you're not going to be happy with. How do you work around that given that you're in a less of a powerful situation? 

On the other side, for a larger company, you have more power but don't usually want to end up on a win-lose kind of situation and start up with a partner that just feels like you've been trampled all over. 

Anyone free to jump in. How do you deal with that?

Kevin Ichhpurani (SAP):

Sure. From a large company perspective, certainly, we do have a lot of negotiation ability with small companies. However, to you're point, John, we've looked very closely to make sure that the partnership is going to be successful, otherwise, we're not going to get beyond the press release. So, it's very important to make sure that it's profitable for the small company.

Perfect example is if there's a revenue split between the two companies, if you strangle the company too much, they're not going to be profitable. You'll have made a big investment, you'll be out of business in three-six months. So, really structuring it so that it is a win-win, the company can grow and the company can continue to service your customer is critical, because when we look at doing this strategic partnership, we want to make sure that we mitigate the customer risk. 

So, despite that, the ability to have the power to aggressively negotiate, being fair, making sure that the economics work for the partner and modeling it to show them that it works for the partner are pretty critical from our standpoint. That was also the reason, again, that we founded the NetWeaver Fund, which was very much focused on doing equity investments in companies as well, to make sure that they could scale. 

Gamiel Gran (Cassatt): .

From my perspective, the large companies do indeed step on you. The five-year cycle to make the first transaction, the be patient notion, hear that time and time again. Sometimes, a small venture-backed company doesn't have the patience, doesn't have the time, doesn't have wherewithal to afford that, and nor should they. They need action now. But the truth is, the large companies work more slowly. That's the bottom line, so you have to somehow accept that. Going back to the earlier point about having some selfish set of goals, I think if you're clear on what those are, then you work toward those.

The tactics that I've used to keep things accelerated is to set around timelines, to set around compelling events and the best and most effective way of doing that is bringing actual customer transactional business to the table where there is a demand that's more pertinent than the timeline that the large company tries to impose. 

If for instance, you want to partner with Cisco, is there a large Cisco customer who indeed wants your product, but also wants your combined product. You've already pre-sold a possibility of a design point of this joint solution to this proposed customer. Then you bring that to your Cisco advocate, who in theory, you've been working with on the side to get some coaching about how to accelerate things. Then, what you bring to the table is the customer needs, a response to this proposal by the 15^th of November, or whatever, and all of a sudden the momentum is set, not by the large entity, which is going to move at it's own pace, but by the customer. You're not the problem; you're actually trying to enable something. 

So, it's a tactic that I've used to keep things accelerated. Unless you're extremely patient, that's the only way around it. 

Manoj Fernando (LiteScape):

One of the first deals that we did with Cisco when they were looking at software, was that we got a call from one of the Cisco product managers saying, "Here's a law firm that wants this application but one thing I wanted to do is this is your deal, you do it. We have nothing to do with it. Leave us out of it." So that was the risk. 

So, we had no idea how to price the product and things like that. Talked to the law firm, law firm said, "We're going to send you the contracts." So, they sent us the license agreement and there was a penalty that if our software didn't work, we had to pay them $500 a day. So, I called this product person back and said, "What should I do?" He said, "Well, you're on your own. That's the risk you take, right?"

So, with that I said, "Okay. I'm just going to sign the contract. Worst case, we'll declare bankruptcy and go away." (Laugher.)

John Soper (Moderator, New Paradigms):

So that's the kind of power you have that they don't have!

Manoj Fernando (LiteScape):

So, we did the deal and it actually turned out to our benefit because they became one of our best customers. But that's the risk. I mean, it was great to get the introduction, it was great to get the validation from Cisco and go after it but you're on your own. That's the risk we took and, of course, the rest is history. 

John Soper (Moderator, New Paradigms):

Well, for Rick, if you ever said it was a marriage, we can play the marriage game here and how did it look to you?

Rick Tywoniak (Cisco):

Well, I didn't give you that reference, but I heard the question, I kind of struggle with the guy. So to your point, good companies step on the small partners and I don't think...they do it without even noticing it.

Gamiel Gran (Cassatt): .

Generally not malicious, so I wasn't implying…

Rick Tywoniak (Cisco):

Generally not malicious…

Gamiel Gran (Cassatt):

Just who you are.

Rick Tywoniak (Cisco):

…just who we are. But the salespeople, as an example, they'll do something, which I'm sure Manoj has had examples of this, where they'll bring you into the deal, they'll help you get the sale and as soon as I get my sale, the salesperson's gone. The partner is going, "What happened here? I helped you get the deal based on my advance application but now, where do we go from here?"

So, one of the things I try to do to help LiteScape out is compensate our salespeople now for every time they sell. So now, maybe the salesperson will hang around a few minutes after he's sold his main deal. So, we try to do things like that. 

We're trying to get better but I think generally, we're not great. It's all about us, it's not about the partner, but I think the biggest thing we can do and we're trying to change this – I'm looking at ways to change this – is to try to give our partners better links and routes to market. Connections to our channels, connections to deal, and try to find various ways where we can incent or compensate our field of channels to work closer with our partners because it benefits us in the long run if they do. But it's a constant challenge for us, that's definitely a challenge.

John Soper (Moderator, New Paradigms):

Anybody else?

Manoj Fernando (LiteScape):

One thing, just to add to what Rick said, was that I've worked in the industry for a while but one of the most aggressive companies to go after a customer or an opportunity is the Cisco sales team. I mean they will do anything to win the deal, which is incredible because you learn a lot from that. 

I remember one particular deal, one of the Cisco account managers called me and said, "We have one of the largest presentations to one of the biggest healthcare of one of the biggest hospitals and I really need to get this thing done." So, we threw this whole application together and I had to send him my personal laptop in order to get it out. So, manage to get it out there, they got it on time, I never heard back from him again. It took me about a week to get my laptop back, too. But that's the type of risk that you will run into. But the second time around you get a little smart and say, "If you want us to do this again, now you've got to pay us some money to build this for you." But it ended up, gradually becoming successful to start getting money from the various groups at Cisco to kind of help you stay alive or keep the lights on at that point.

John Soper (Moderator, New Paradigms):

Okay. So, we've moved on, you've got the pre-nup signed and you've got a deal going. What I'm interested in now is how you look at managing the relationship. Mostly I'm looking at governance, metrics, things like that. I think that that's a key part of moving forward and one of the things I'm wondering about is how you structure this with a small and large company where perhaps a small company, in such a guerilla marketing mode that they're not interested in any kind of formal governance. They're just moving a thousand miles an hour. How important is it and how do you work a governance alliance relationship out of that?

Rick Tywoniak (Cisco):

I think it's very important to start off with a very clear business plan with the partner. So, when we partner with companies, we identify what are the key objectives...there's obviously the financial objectives, the hard objectives that we want to meet on a quarterly basis, on an annual basis, bur also the qualitative metrics. So, really putting in the qualitative metrics of the software business in particular, when is your product going to be built, when is it going to be integrated, making sure that all of those milestones are met and having clear escalation paths

So, to your point, when things are not being done, when there's a conflict, having a clear escalation path and then a pre-agreed upon resolution; path to resolution and really making sure that the commitment is not taking place between the deal makers but rather you've got to get deep within the organization on both sides.

So, not just having alliance to alliance but making sure the salespeople on both sides, the product people on both sides are fully bought into this plan and that's where most of the relationships go wrong because they're done merely on an alliance to alliance level. You could have on both sides, the sales organizations don't see any value in this where they've had very conflicting views. Where the product teams on both sides, one sees it as a priority – the other does not.

So, from a governance standpoint, making sure that you have this clearly laid out with a plan. You're monitoring it on a quarterly basis and you have the extended set of stakeholders coming together on both sides and agreeing to this is very key. If you don't get deep and wide on both sides, it simply doesn't come together. 

John Soper (Moderator, New Paradigms):

You find, as a practical matter, that you can get your smaller companies to put their effort behind that kind of governance structure because it is some bureaucracy, it is some work.

Gamiel Gran (Cassatt): .

I don't see the governance essentially as structure as much as a guide post for success and without it you may not be chasing anything more than a Barney Agreement, which of course, all of us cringe when we hear that term, right?

So, I think, what you just said is exactly right. You've got to get beyond just the alliance level and down to kind of this key stakeholders so that there's an operational plan that actually looks like a business plan looks like. Is that an administrative burden? I think it's a must-have. 

I think one of the other must-haves is some level of remediation. So, if something is the brainchild of two really brilliant alliance people and they do all the due diligence and bring the stakeholders together but two quarters into it, we're not seeing the kind of results, do we let the alliance kind of falter until it dies? What do you do to remediate that, put that back in order and actually take action to reset a set of expectations that are more realistic and actually change some of the goal, guidelines and even how you operate as an organization actually take that into it. 

So, that's one of the other things that I've had trouble with is the remediation and bringing things back on track. It tends to be let to go until it actually dies and then you're exiting a relationship that you spent a lot of time on.

Rick Tywoniak (Cisco):

So, this is pretty important. It happens differently at different tiers on the Partner Program. If you take our top tier of the program, which is the industry verticals, mostly the top tier of the program, there you have alliance managers who do the typical things: set up a business plan, it's revenue base. The partner's revenue is important but at Cisco, revenue is key. Then, that's managed and monitored. You have alliance managers that have four or five partners, maybe more – maximum 10 – but they're closely developing business plans with the partners and there's metrics along the way, and revenue becomes a key indicator for both companies. That really is the driving force on how much revenue, how much value is coming out of this program.

So, that's somewhat the easy way and that's the traditional way. The bigger challenge for us is how do you manage the other 200 or 300 partners where maybe they're not at the top tier. You don't have as many alliance managers to work with them. We have governance models there. A lot of it is focused around certification. So, a lot of my program is a certification program where you're making sure that their product works with your product, so that when it does get out to a customer's environment, it works.

So, that becomes a key thing but we're also looking at revenue metrics there so that things like deal registration, even for your partners who don't have dedicated alliance managers. Creating a web based system where the smaller partners can do deal registration so that you can recognize revenue that their driving and that's how you get them from maybe the lower tiers, up into the top tiers.

But I think at the end of the day, for us, revenue and deals is the key indicator for success of the partners, about how much we like each other. You know we do like each other. Very nice job. But revenue is very important and if LiteScape wasn't driving deals for us, he wouldn't be at the level he's at.

John Soper (Moderator, New Paradigms):

So that leads to my next question. I actually got a number of questions but I think I ought to end it with one more and open up to Q&A. But I think you're touching on what is one of the most important pieces of the whole alliance life cycle and how to make things live so you don't end up with a Barney Agreement. That is how do you go out and make some money, because that's what gets attention.

So, particularly from a smaller company standpoint, trying to get some traction inside of a large company, get some deals and get some deal flow going so that their sales force will recognize the value. How do you get that cranked up? Maybe, Manoj, you want to jump into that first and then Gamiel.

Manoj Fernando (LiteScape):

That is probably the most interesting part of any start-up in terms of actually trying to get traction with a big company because one process that you follow is that you have the entire Partner Program. You get the support, you get the certification and things like that but then the other side to it is how do you make some money. At the end of the day, even if you went and you're looking for venture funding or venture back for companies with money, when you even go to Cisco and ask for money, the first question is, how much revenue do you have? How much customers do you have, right? So that's the typical question that you get.

So, for us, given the stage that we were in, in the early days, it was a matter of going after…I mean I can't tell you how many times I used to come down to Cisco. Pretty much begging at the door to get a meeting with somebody…

John Soper (Moderator, New Paradigms):

…and giving them your laptop.

Manoj Fernando (LiteScape):

Giving them my laptop. I mean I bug Brian so many times like just to get the attention and take me to the customer. Oh, let's figure out how to make some money. Then, the perseverance eventually paid off in terms of being able to get it. In certain instances, one of the interesting things was when you start seeing that Cisco is going after a Fortune 100 deal, and they know that that customer is critical for them, it is a big win from a competitor standpoint, if you're able to jump on that bandwagon, which we did in one particular instance, then we managed to get Cisco that they asked money to go out and build the application for them.

So, there are so many different ways that you have to great creative, and trust me, you get creative in so many different ways in order to get their attention. The only thing I didn't do was dance in front of the buildings but besides that, I probably tried everything else.

Rick Tywoniak (Cisco):

So, I like your strategy, Manoj, because what I find is that the partners that do very well live at your large partner site. Literally, eat in the cafeteria, spend as much time as you can with the account executives and it's so critical that you share your customer references that you have had the customers that you can refer to when you have a success, when you're working with a sales rep from the partner company, very important, document your success. I've seen partners create brochures, literally, like one page slicks where they use that to now sell to other account executives. I've worked with one of your colleagues, we had a successful engagement, we closed a deal that was this big, had such and such customer and put a quote from that person. Those tools become incredibly effective. There's no better reference to a sales person than having one of his other colleagues or her other colleagues that had a success story. So, making sure that the success story is there and you evangelize the success stories, that's really where you hit the tipping point. 

Also, making sure that those customer implementations are successful. The bad news travels much faster unfortunately than good news. So, making sure that when you get those initial two or three success stories that those customers are happy and referenceable is critical because, literally, you can lose all of the traction, all of the work that you may have spent one year doing unforging a relationship with one bad customer implementation. 

Some other things that are very important when getting your traction and you're out working with a field sales organization of your partner company is making your value proposition and your message very simple. The account executives of most large companies are selling a broad portfolio of products and you have to be able to keep it very, very simple. What are the three things that this does to address this specific customer paying? How does it help the account executive drive additional revenue for their products and what are the three prospecting questions. Simple three prospecting questions that the account executive would need to ask in order to generate demand for your product. If it's anything more complex than that, you're probably not going to get off the ground. So, these type of things and having your elevator pitch really clean is critical.

Gamiel Gran (Cassatt): .

For me it's first win – identify the first win strategy and the first win strategy has a couple key components. It comes from a position of strength for that customer opportunity. So, know more about that customer that even your partner might, so that what you bring to the table is knowledge and insight about the transaction itself and that opportunity. Also work very regionally. So, it might be a large company, global execution, etc. But literally, perhaps thousands or hundreds of sales people that you can work with and while at some point, you want to get to have an elevator pitch that's usable or consumable across the organization, you first have to create that win in that first region with that first salesperson who can demonstrate a value proposition to his peers. So, perhaps selecting an important region, an important sponsor in that region to help advocate the partnership as well beyond the alliance level but actually at the field level. 

I think that speaks volumes to the point of actually understanding the partner. Living there, to me, is living maybe not at headquarters but living at a field level and understanding kind of the operational components of the sales process. How do the salespeople actually get motivated? What's interesting to them? What are they spending their time on? There was an announcement two weeks ago and that's captivating all of their attention. So it doesn't matter how much time you spend time with them, they're focused here right now, so you need to focus somewhere else then. That's not the right organization. 

So, I think spreading too thin and all of that is a question. So, really very narrowly focus on that first win and then you move to the next level of evolution.

Kevin Ichhpurani (SAP):

One thing I'd like to add to Gamiel's point of the first win is that we've seen very successful strategies of companies priming the pump, if you will, and that is you need to get those initial success that you can use to evangelize to the rest of the sales force. Often times you simply need to bring the deal to the table. Maybe it's something that the large company didn't help you with. It's an investment of taking a first deal or two, bringing it to them, using that as your showcase. Often times, some of the smaller companies have difficulty with that because there's margin pressures and so forth. But it is an investment that generally pays off.

Gamiel Gran (Cassatt): .

It absolutely does not work to go under a region and say, "Will you please introduce me to your accounts." It's a non-starter. I mean it's a complete non-starter, don't go there, which speaks to my position of strength. If you come to the table and say, "I have an opportunity, it looks like this…" "Here's the timeline. I've been with the customer. I think these are the kinds of use cases that are effective features that they're looking for that I think we can bring together, and I need to hold a meeting." To actually get down to the weeds of putting together a joint sales strategy and a joint account plan, that's much more captivating

John Soper (Moderator, New Paradigms):.

Show me the money

Gamiel Gran (Cassatt): .

Well, it's quite specific. It's, "I have money to show you" and "I have an opportunity and it's real" and "I've done the due diligence." I think coming to the table begging for attention is, to my point, a non-starter. There's too much of that everyday of the week and just as we get spam e-mail, it feels like spam, I'm sure. It's like, "Sorry, I just don't have time for that. I'm trying to close my own things, if you need help and if you're that desperate for help, what else is wrong? What else is wrong about your business?" 

I think the position of strength is a real critical litmus test for a small company to garner that attention.

John Soper (Moderator, New Paradigms):

Excellent point. Anything else? Okay, let's open it up to Q&A. If we can ask for a couple of the microphones to pass out and maybe you can share the two we have with me. 

Audience (Q&A):

Don't look too far, Rick, because this question is for you. I was interested in your comment about comping your account execs for sales of a third party product, but then you extended it to comping your downstream channel partners for the same thing. So, I'm wondering how you fund that and what that kind of mechanism looks like.

Rick Tywoniak (Cisco):

So, there is a solutions incentive program that we just launched here in the last few months. It's basically, for approved solutions like the LiteScape solution, you'd typically tied to a vertical, okay? So, it's back to this vertical message, obviously, it's just important. Isn't that right? So, if a channel partner incorporates, for instance an LiteScape solution into a deal and then they register that deal, because they're reselling Cisco equipment, they would get a better margin, better discount, whatever, on the equipment that they're selling. So, they make more money off of Cisco equipment than they would if they didn't have a LiteScape solution in there.

So, why do we do that? The reason why we do it is corporate, who puts these programs in place, believes that we'll have a better shot at winning the deal if you bring a solution partner in because you're being more strategic in how you're approaching the sale. Cisco has a particular issue that we're trying to solve is…our history is routers box sales, so we don't have the issue…SAP doesn't have that issue. They understand this thing, right? We've got box salespeople and we're trying to get them to be SAP salespeople.

So, companies like LiteScape help us do that and so we want incent our channels and incent our salespeople to get more strategic in their self. Does that answer your question?

Audience (Q&A):

Yes. But the revenue didn't go through a channel partner for the LiteScape solution...

Rick Tywoniak (Cisco):

No, unless they have a particular deal set up with LiteScape. But it is real money to them because it comes in the revenue flow from Cisco, which is how many points they get on the Cisco stuff.

John Soper (Moderator, New Paradigms):

Another question.

Audience (Q&A):

Yes. My question is about some large company, let's say their name rhymes with IBM, or something like that, and they've got a program where you pay for perhaps a hundred, a hundred and fifty thousand dollars per subject matter expert within the organization. You get like a 10-city road show and you've got this internal coach – actually, he's buying an internal coach. Can any of you comment on the efficacy of those kind of programs. I know Sun has an iForce program. Are you familiar with these kinds of things?

Rick Tywoniak (Cisco):

I'm sorry I missed that…you're buying an internal coach?

Audience (Q&A):

They actually give you three resumes to look at. The person has qualifications, like they've been with the firm more than five years. You get to interview them and you get to choose a person. You're actually buying a head.

Rick Tywoniak (Cisco):

Like within Cisco?

Audience (Q&A):

Like within IBM.

Rick Tywoniak(Cisco):

Within IBM.

Gamiel Gran (Cassatt):

Microsoft does it also.

Audience (Q&A):

It's expensive. You're paying for a person's salary, the way it sounds.

Rick Tywoniak (Cisco):

The third party company is paying, the person that wants to do the alliance. I don't know, but I want to put myself up for hire. That's pretty good added revenue I would think.

But no, we don't have anything like that, it sounds interesting. I don't if turned around, Norma, is that successful?

Audience (Q&A):

I don't know. You are on that side of it too, Tom, with Microsoft. We actually paid someone's salary to be our internal partner managers, whatever it amounted to.

Audience (Q&A):

Unique.

Audience (Q&A):

Is this actually aimed for a partner manager or a road show host?

Audience (Q&A):

Well, essentially, it was for them to fund a body to be your partner manager.

Audience (Q&A):

Actually, we had a partner manager who was separate at the time. This was a person who…there were a lot of quotes around it, "Don't worry, they're not a business development person. We wouldn't charge you for something like that." But in fact, what the person did was gave you the ins and outs of Microsoft, pitched you internally. The fact of the matter is, pitched the Microsoft new programs to you and try to keep you in line. 

Audience (Q&A):

Keep you in line, yes.

Audience (Q&A):

You know, with the Microsoft way, we did purchase one of those partner managers and in the end, it did pay. I do have some questions also about the efficacy of the, "Don't worry, I'm not a Bizdev guy that is paid." But then again, we bought one.

John Soper (Moderator, New Paradigms):

Rick?

Rick Tywoniak (Cisco):

Yes, John, I want to come back and zero down a little bit more about cultural differences. There's just got to be a huge difference of company like Cisco or SAP, with all the bureaucracy. All the different people, maybe they're coming to the table at meeting and you've got maybe one or two people from the partner. Everything, dress code, the way decisions are made and the speed of which business transacts between the big company and the date.

I think cultural differences of different companies are important and you got to kind of get to know…Manoj I talked about this the other night, you kind of got to know the company you're dealing with. I mean, the Cisco culture is extremely decentralized. In different companies, you're dealing with a decentralized company. Don't be shooting for vice presidents to go get you anything because there aren't a lot of vice presidents. Director, manager level or field sales rep, they're going to make it happen for you because that's who works with Cisco. It's like one of the cultural things.

The second thing, it's not about bureaucracy in Cisco. If Manoj waited to just work with Rick and the Partner Program, follow some kind of… I tell my partner people, "Get out of the Partner Program. The decision makers are all around you, you need to get out and hit the various areas." So, understanding that culture I think is extremely important.

The other cultural thing with Cisco is we are a boring lot. They pay us a lot but they work us very hard. Typically, the Cisco people are always blowing you off because they have too much on their plate. It's just the way that's how they get to stock up, they call it productivity.

[Laughter.]

You got to get used to that, too. But if you understand that, then you just know that and know that people aren't trying to think you're rude, they're just too busy. Manoj and the team are persistent. So, they keep at it and they understand what they're dealing with. 

So, understanding that culture I think is important. I think every company has a culture and they're all different.

John Soper (Moderator, New Paradigms):

I think we have a question back there.

Manoj Fernando (LiteScape):

Yes. Just one thing on the cultural difference. I came from Lucent. So, in the first meeting that we had with Cisco, I was all excited and stuff like that. So, I had a suit on, a red tie and things like that. I walked in to this meeting and there were three Cisco guys, all were wearing shorts. It was Friday and it was the middle of summer. You look, stand so out of place and then you find out Cisco is going to be a new revolution, clothing. T-shirt and shorts, this is in front of a customer. 

That is a huge eye opener in terms of this is the cultural difference, this is a big difference coming from like Lucent. The second aspect to this, I think at the end of the day, if you look at from a customer standpoint, yes you have to deal with so many levels of bureaucracy, people and things like that. But the other things also is that if you look at one thing, is that that account manager that you're looking for, he needs to make his quota. So, at the end of the day, his difference is that, "I got to make my number."

So, if you can help breach that in some shape or form, you become their best friend. So, at the end of the day for us to rather than go look at the VPs and that level, is go and look at the guys who need to make their money. That ended up being one of the biggest things that made us successful in that standpoint. Getting guidance from Rick and say, "What do we do here? How do we get there?" That made a big difference and then helped figuring out some of those as well.

:Audience (Q&A)

Just to add to what Manoj was saying, I'm Brian McDonald at Cisco and Manoj has referred to me a couple of times. So, I wanted to share just some color from the Cisco side working with, at the time, Circle24 and then LiteScape. Using your dating analogy here with the event, in a dating scenario, you really need to both bring something to the table and that has been mentioned often.

So, Circle24 later, LiteScape, Manoj have done a lot of due diligence around IP telephony. I was managing legal vertical at the time and we identified, as what has pointed out, really to kind of a key paying points. We identified that the killer application within legal is time and billing. The key paying points are reducing the cost. So, certainly, converged voice video, data network, help law firms and then productivity benefits. Squarely and underneath that was time and billing.

So, together with Manoj, we looked at this. I had some understanding, Manoj had a lot of understanding. As it has been pointed out, I had…I'm not going to say a quota…but we had to bring in revenue for that legal vertical. So, I was highly motivated and we put an architecture together, showed the integrated solution. There was the logo with LiteScape. Then we went through very methodically, "Here's the top 100 law firms in the US," called on them. If the value proposition was such that we needed to have Manoj go there, he's on the next plane to Louisiana, things like that, and Chicago.

Somebody on his team that rolled up his sleeve, Manoj, that would go do the in stock. So, because of that, legal became one of the top three voice verticals for Cisco early on; it was a beach head. We're able to then replicate that success and understanding at some of the other verticals. This was kind of pre finding and things like that. But, the quid pro quo is that I think we're able to help LiteScape get some deals. Then clearly, it helps Cisco get traction and be able to replicate success across other verticals. So, I just wanted to add that color.

Kevin Ichhpurani (SAP):

On the topic of cultural, it's very important to understand the unique aspects of a company's culture and how they make decisions. So, as an example SAP, we have very much a German culture which is not the classic American top down autocratic decision making. It's very much consensus driven. So, much like Rick mentioned, not working with the alliance teams but really making sure that you get all of the different decision makers onboard because we very much operate in a consensus driven environment where you need to get the product teams. They could be the industry product teams, the horizontal product teams, the field teams. 

All around the globe, getting everybody on your side, it's a complex web of relationships and making sure that you get all of these various stakeholders on board. This takes time. Oftentimes, you may need to veer of the revenue track in the short term and that is finding out what other priorities a company has. So, as an example, one of the priorities that's important to us is our emerging technologies and getting companies to adopt that. 

So, you may see an immediate opportunity of wanting to work with our field sales organization, but in order to be able to build a relationship, leveraging the latest technology, becoming a showcase for us, getting visibility, being on stage, that will then get you visibility with all the key decision makers and you can get things to the next level. So, often times, it's very important to not only look at what you core objective is, but understanding what are other things I can do to start to build a relationship with the company that may not help you with your short term goal but will help with you in the long term, goal.

Audience (Q&A):

 [inaudible] and everyone's talked about [inaudible] they're a big company or a small company is [inaudible] board member act [inaudible] SAP as far as the revenue solves all problems. It's not that you're a start-up, it's just critical. You get the customers, the customer [inaudible] and get the revenue off. The question I have is, $1 million for LiteScape is probably a lot of money. I don't know if you're $10 million is a lot of money for other start-ups. But for Cisco or SAP, [inaudible] a whole lot. So, kind of my question is for Cisco and SAP, when you're looking at a alliance partnerships, what type of revenue is [inaudible] or talk to your partners that you're in lower tier and you guys [inaudible] by revenue member and also to keep things offstage. I mean, you wouldn't [inaudible]. 

It's kind of an open-ended [inaudible]

Kevin Ichhpurani (SAP):

So, interestingly enough, we don't view it as just the largest companies with the largest revenue, because we very much have an industry specific model across our 28 different industries, if you would have talked to the leaders of those industries, everyone would have a very different on opinion on who those partners are. So, from our perspective, it's about providing end to end solutions to customers sot that we can win a deal versus a competition.

So, it may be, in some cases, a small company with a very small average selling price in some cases but it helps us round out our solution and win a much bigger deal. So, it's not only the specific solution that you may be bringing to the table, but it's really helping it tying it together and helping us win a much, much bigger deal for the SAP products. So, very important to map…

Audience (Q&A):

 [inaudible] 

Kevin Ichhpurani (SAP):

Exactly. So, when you're positioning to a large company, it's very important to understand who are their competitors and how do you help the competition. How does your solution plus the big partner solution come together to create a killer process that allows us to beat the competition. So, that's equally important as the deal.

Now, there's always things when you deal with account executives, you're average selling price has to be reasonable for them to care about. SAP account executives have $5 million quotas, if you're product is $50,000, you're not going to get their attention. So, you've got to take those dynamics into account. But really looking at the big picture is important.

Rick Tywoniak (Cisco):

So, who [inaudible] the same way? I don't have your tier one, if he sells X million in tier two. We're not doing that much. It is more how much value you bring, deals represent the value. Are you filling a gap, is your product innovative and then is it leading to deals? But I don't sit there and have published…here's how much revenue gets this tier. 

I will say that there is one thing that we are looking at and I'm looking to solve it and that is how do you… So, the way I'm trying to get us to approach this is if you take a company like LiteScape, how can I cross my entire partner community, make a determination if LiteScape sells a million, how much Cisco revenue does that lead to? That's a very important number because it really tells you what the value of your partner base is.

So, we're trying to go through an exercise now to see if we can figure out…Manoj knows, he's been doing interviews and stuff. There's a reason why we send consultants out to go interview them is we do want to find out, when Manoj sells a million, what does it mean in Cisco business? Then if I could translate that to the rest of my partner (business), then what I want to them to do is log their deals with us. But I'm more interested in how much their making. "How much did you sell last year of your product?" Then if I have good algorithms and good metrics, I can translate that into what's the value for Cisco.

It's easy to find your top partners, how much we're all making off. Like I said, you got your one alliance manager managing that partner. So, everybody knows. But for kind of the unwatched masses out there, how much value are they bringing in there? We're trying to find ways to really identify that value.

Manoj Fernando (LiteScape):

Just one other thing to just add to that also is if you look at Cisco and you take a look, let's say they're chasing a deal that's $5-10 million, something like that. If you had an application like ours, let's say cost $100,000. But that one little application will help them close that $5 million deal. A good example of that is the legal space is a typically a lawyer's bill for every minute they talk to you. But without that application that we did have, it really helps Cisco close the deal because without that, they couldn't get there. So, that's some of the metrics that they're going through right now in various verticals, saying, "What is the value this added applications bring on?"

Eventually, what we hope is that it also leads to an acquisition and then all the value from that product [inaudible] Just another thing…

Rick Tywoniak (Cisco):

Well, paying your alliance manager maybe, yes.

[Laughter]

Audience (Q&A):

Will you get us on [inaudible]?

John Soper (Moderator, New Paradigms):

Brian, do you have a question?

Audience (Q&A):

Yes, I do. To Brian's point, Brian made a comment, a couple of minutes ago that's probably directed with Manoj as your deal. Brian made a comment a couple of minutes ago that if you had an opportunity in Louisiana, had another opportunity in Chicago and another one in wherever and you were ridding on plane to go handle that and you found yourselves deluged with opportunities. So, you're a small company to a Cisco or an SAP, now they can dial up opportunities in a heartbeat. How did you manage it, how did you manage the engagements to keep yourselves from other resources, [inaudible] integration, [inaudible] put this together, what [inaudible]. How did you manage that?

Manoj Fernando (LiteScape):

Well, one of the things we did initially, especially going, "Can you come here? Can you come there?" We used to do a lot of that stuff. It's like you realize that Southwest is the cheapest airline that you can fly in the last minute and those are the things that you realize. We even look at ATA, those are the airlines you look for, for those kinds of tickets. But initially, when we used to get a call, it's like Cisco, they're dealing with all Fortune 500. So, you're on the plane, you're all excited.

But after about three or four months, you realize that you're just being shuffled around the country but there's no money coming in. We can't survive being a start-up. But then, you eventually kind of hone in on life. If it's legal, you know you have value there and Cisco needs you to sell the product. Then you start looking for those particular opportunities. 

Then for the bigger ones, you look at Cisco and go, "Look, I have no money. You want me to work on this, you got give me something." Eventually, maybe you'll be able to slowly opens Cisco's closed checkbook to start paying for those things. Not in the airline tickets but at least them paying for some type of development or some type of marketing dollars to actually get them to do some of those things. To start this, you're running around like crazy, but after awhile you start getting a little smarter in terms of managing the time.

Gamiel Gran (Cassatt):

I don't think there's any easy answer, whether it's Southwest or ATA you go. You get there, you're very visible. Just going back to the point of the first win, I think you do everything you can to be as visible and aggressive as possible, overstep where you have to. That does have to evolve to the point where you turn the table. I think where I've been successful there, you kind of sit down if this isn't going to scale. If it doesn't scale and I break, then the opportunities break. So, we got to do some skills transfer here, we got to really enable this to be more broadly understood and mutually come to that determination.

I'm in Cincinnati this afternoon and Miami tomorrow, it's just not going to work. We're going to break the opportunities here. So, it evolves to that where it's obvious you need to scale the resources.

John Soper (Moderator, New Paradigms):

We have time for maybe one or two more.

Audience (Q&A):

Yes. I have a question, kind of a risk question to the Cisco and SAP guys. In a former life, we're putting together a deal with a small software company to create a software tool for our system that we were selling. So, we were OEM-ing the end result. That went along just fine for four or five years and then the president of the small company got himself caught in a little fraud. 

As the feds were coming through the front door, he was headed out to the back door to a place in Europe that nobody could get to him with, with all the money. Which left us high and dry without a product and we had to then… The whole purpose of the thing was so that we didn't take our developers and go write the tool. Now we had to take our developers offline and go write a tool.

So, what things do you go through or what processes do you go through to kind of protect yourself from something like that, some frauds, sort of pulling the rug out from underneath you? 

Kevin Ichhpurani (SAP):

So, one of the things we look very closely at in situations like that is the financial viability of the company. So, we deal with our own analysis of the balance sheet, the income statement, the audit. In some cases, when we do an investment, we do the legal due diligence, looking at the articles, incorporation and liens against the assets and so forth. But it's very important, there is a tremendous amount of risk because the moment you have two or three customers live, you're downside exposure is huge. 

So, really doing that thorough financial, legal due diligence is critical. Then, of course, having language in there such as Escrow agreements in the event that the company goes into bankruptcy, that you have access to the IP in order to support existing customers is also critical.

Rick Tywoniak (Cisco):

We're the same way. Encode escrow and things like that for only [inaudible] and things like that, and the due diligence. Sometimes you just take a risk. We took a lot of risk with companies that you look at their infrastructure, a real small start-up company. But the innovation is there and they're going to help you get to a leadership position. So, you just take that risk, put a code in escrow. Even with that, a company without a business thing, I don't even create one of my [inaudible] Cisco code map.

So, you just take the risks, sometimes it comes back to bite you. I don't know if there's an easy answer to that than the traditional do due diligence, code in escrow.

Audience (Q&A):

 [inaudible]

Rick Tywoniak (Cisco):

No.

Kevin Ichhpurani (SAP):

No, everybody has the code.

John Soper (Moderator, New Paradigms):

Okay, I think we can do one more.

Audience (Q&A):

I have a question for Manoj and Gamiel, actually. So, I worked for Cisco and we tried to integrate a program to… talk offline about this. So, I'm trying to integrate a program to help smaller companies give us some creative use cases of how network intelligence can be used for developing net new applications or services. One of the concerns that I have is that suppose I call you or you. You're doing whatever you are at the start-up, part of a small company and then you get a call from Cisco. 

Obviously, there's excitement and stuff. How do you guys keep the balance between whatever else you were doing and all the resources that you think a relationship with Cisco would entail - presentations, discussion, demos, whatever else. If the tendency to say, "Oh my gosh, this is the biggest thing that's happened to me. Let's drop everything else, let's do this." But what happens if the Cisco relationship doesn't pan out?

Gamiel Gran (Cassatt):

I'm pretty cut dry. It's "Thanks for the call, but what does it mean to me?" You got to be very careful with your time as a small company. If I prioritize Cisco as a strategic partnership, then I want to know if you're an angle to get to that. If you're not, then no, I don't have time.

Audience (Q&A):

But what my question is beyond that. So, Cisco means well, everything is lined up. But to create the relationship would take the lot of resources from your end. Can you balance that with whatever else you are doing in terms of your quota market?

 Gamiel Gran (Cassatt):

Unless you can quantify the benefit to me, no. I'm not sure I'm following the question other than you're asking for whether we can balance the time to spend with Cisco versus some other partnerships.

Audience (Q&A):

It ends back to the risk that the Cisco relationship may not pan out. At that stage, have you just juiced out completely?

Gamiel Gran (Cassatt):

I've got to be very judicious and determine whether or not there's accountable revenue that I could quantify in some time through. I got to qualify that call just like a customer. Is it worth my time? Be very cautious to say, "Yes," because I know it's going to take other resources.

In a small a company, I think your resources are all at risk. It's a cost of sale of some level, it's a trade off. Would I rather have the resources on the phone with a customer or on the phone with a research discussion? That's black and white to me.

Manoj Fernando (LiteScape):

That's interesting way of looking at it. For example, when you get a call from Cisco, so then you decide with Cisco. Eventually, you're kind of working with them for five years or something like that. You kind of figure out who are the key phone calls you're going to take. Does that make sense? So, if Rick calls, you better take the call, or as an example. So, another good example is today, if an account manager from Cisco calls me, I would tend to quantify the deal a lot. Even past experience. Even if you we're working with some of the largest retail firm. But we have to really quantify it because we can spend cycles and years going around with nothing coming in.

But on the other hand, if you get a call from Cisco, says, "I'm so and so from the office of the CEO," you know that's important. It happened. I mean it happened very recently. So, a lot of it is, to an extent after so many years, you try to pick and choose who is making that phone call or which group within Cisco is making that call. It happened very recently, the person who's making the call, two hours later was dragging down to Cisco to do a presentation. You would put everything aside and go there no matter what because it's who makes the phone call from Cisco. Not because immediately you look at it and go, "That could be the largest opportunity we have…" and they immediately will follow something like that.

So, you're kind of go through the stage now where you start to quantify who makes that phone call. That has become some of the key things because you are trying to figure out who the people are, who the names are and things like that. This is a joke. But you do not say you get a call from Ned Hooper's office, I would be down at Cisco in the next 10 minutes. It depends on who makes that phone call. So, that's when you start working. 

If it's typically like an account manager or something like that, you really have to point if they're large enough, do they have a sales force you say, "Hey, why don't you talk to out sales guy on the east coast," or something like that. So, you got to be a little more smarter about being able to figure out who is making that phone call. But trust me, [inaudible], you may have to run when you get that call.

Audience (Q&A):

It sounds like you guys have two different approaches to it. Obviously, you're showing a lot more enthusiasm to it and I'm glad it worked out for you. Gamiel is a lot more judicious and careful. My personal thing would be that I'm glad it worked out for you but there's this and that approach.

Manoj Fernando (LiteScape):

Yes, you can use this kind of approach. When you are a company that's not venture backed [inaudible] is a different story. When you are a VC backed [inaudible] means a completely different story because they have so much money. That's the first question that VC will be asking at the next meeting. So, it takes that thing, you have to kind of tie everything to everything at the end of the day.

Audience (Q&A):

 [inaudible] a question.

Rick Tywoniak (Cisco):

 [inaudible] team does have a reputation, very responsive. So, I constantly get hit on by deal with salespeople and say these guys are really good and they're very responsive, and I don't think they are, sometimes they are. So, they aim to be responsive and focused, that's how I think they got to have [inaudible]. I don't know what their [inaudible]. It worked out for everybody.

Audience (Q&A):

John, can I ask a quick question?.

John Soper (Moderator, New Paradigms):

Sure.

Audience (Q&A):

So, this had happened with this company up in Redmond and I'm not saying that it's a Cisco employee. But in general, people are concerned, start-ups you have creative ideas. Microsoft has rubbed some people the wrong way. In these kinds of relationships, how do you make sure that you're interest and IP is being protected?

Manoj Fernando (LiteScape):

It's a risk, it's a huge risk. Initially, when you came up with the idea and you take it… I mean, we have gone to Microsoft, too. There's no denying it. But when you go to Microsoft, the minute you walk in there, you're most scared of Microsoft than you're scared of Cisco. At the end of the day, Cisco is not known for being a software shop. Microsoft on the other hand, they'd throw a bunch of engineers and they're going to build it for you. But that's the risk that you run all the time.

I mean every time you go for a meeting, you always run that risk of saying, "Am I giving too much to it?" In this case, in some instances, you show a slide or do something else. Next thing you see, it's on their road map. 

[Laughter]

You know where that came from and I saw this in one particular instance but that is the part that you know you have to… If you only benefited your [inaudible] maybe you can get to the customer faster and you've built a big enough customer base, that you have an edge over that or the other tactic that you working with Cisco in the early days when you're coming up with all the ideas. That you think that all these people at Cisco know who you are. So, Cisco is to come up with it, you might have some protection from the sales guys because of all the work that you've done with them. But that's a big risk, every single say of your [inaudible].

Audience (Q&A):

 [inaudible]

Manoj Fernando (LiteScape):

You go into it. I mean, in your PowerPoint, you can put [inaudible] and it means nothing. Mutually, in the air, I mean, I can't remember how many I have signed. It's a big risk. That's a huge thing for us day in and day out. Did you sign an NDA? Okay. Then you can do whatever you want.

John Soper (Moderator, New Paradigms):

Thank you all for some enlightening questions. I'm sure that the panelist will be around for a little bit afterwards. We're going to have a little more networking and food. So, there will be another chance to kind of ask some questions one on one. I want to especially thank the panel for a very enlightening discussion, I thouroughly enjoyed it. Before we close out, I think I want to turn this over to Jim to close out the evening.