Cisco cleans up channel act

A channel audit implicated Cisco staff and certain distributors in rebate abuse forcing vendor to part company with several employees and alter Middle East channel line-up

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By  Stuart Wilson Published  April 1, 2004

Abuse of rebate and incentive schemes led Cisco to terminate distribution agreements with OnLine Distribution and Mindware in early 2004. A channel investigation uncovered evidence of foul play involving both the vendor and the two distributors concerned. Several Cisco employees parted company with the vendor as a result of the channel audit. Logicom has since been appointed as a second Cisco Distribution Partner (CDP) to serve alongside existing Middle East CDP Tech Data. Cisco and Datatec — OnLine Distribution’s parent company — worked together closely to uncover problems that existed in the Middle East channel. Edzard Overbeek, vice president EMEA commercial and distribution operations at Cisco, speaking exclusively to Channel Middle East, says: “In this particular case we have seen abuse of Cisco programmes. When we first identified that there were irregularities we flew in teams from Cisco and Datatec to investigate and find out what was happening. The communication between both companies was very open and we came to the conclusion this was something we would not tolerate.” OnLine Distribution is part of Westcon Africa Middle East (WAME) — a consortium that is a subsidiary of South African networking and IT services group Datatec. Westcon Group, a global networking distributor renowned for its close relationship with Cisco, is also part of the Datatec group. Cisco and Datatec’s global relationship remains solid according to both companies but Jens Montanana, CEO at Datatec, explains why OnLine’s agreement with Cisco had to end in the Middle East: “We were involved with the final decision that was taken. In the framework of what has happened, what is going on now, and what we think is in the best interests of OnLine long-term, we decided it was not right to continue this relationship.” “Neither OnLine as an intermediary, nor Cisco as a manufacturer, wish to indulge in misdemeanours, irregularities, programme abuses or however you wish to characterise them,” continues Montanana. “The message from our perspective is that this is a clear signal that we do not tolerate anything other than best practice in our organisation. Other vendors and our customers should draw comfort from the fact that we acted quickly to purge our Middle East operation of these activities and we now have a business compliant with the best practice beliefs of Datatec.” Overbeek admits that a ‘single-digit’ number of Cisco staff left the company as a result of these events. “Have we taken appropriate measures to make sure it does not happen again?” asks Overbeek. “Absolutely. I can confirm that we have looked at our processes, increased them in some areas, optimised in others and built measurements into potential gaps between Cisco and its partners.” Life after Cisco still holds potential for OnLine Distribution. “We are a multi-vendor shop,” said Montanana. “There are principal relationships in place with major vendors such as 3Com and Symbol, as well as some smaller security vendors. That is what we will focus on.” Improvements to systems at Cisco have increased its ability to spot irregularities quicker. “In the current environment, we can track and trace the data in these financial areas once every two weeks,” adds Overbeek. “These events are behind us now and we have learnt from them,” says Overbeek. “Let's move on. That’s the message and that is why we are being as open as possible here.” Jacques Chammas, managing director at Mindware, describes the split with Cisco as ‘amicable’ and is already in talks with other potential vendor partners. These events should not detract from Logicom’s achievement in obtaining privileged status as a regional CDP for Cisco in the Middle East.

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