Updated: Feb 23
ClearEdge was recently asked to review a new type of Cisco agreement called the Strategic Portfolio Agreement (SPA), which grants the buyer entitlement to all the Cisco products they currently own, including services. Initially called the Whole Portfolio Agreement, the new offering is like Oracle’s Unlimited License Agreement (ULA), and covers covers unlimited organic growth on anything with a recurring cost – meaning all Cisco software and its maintenance. (Unlimited use is rarely granted in Cisco agreements.) Hardware is not covered by the Cisco SPA, although some unspecified hardware maintenance is included.
The biggest challenge for customers regarding an SPA lies in inaccurate demand forecasting. The vendor will likely propose an agreement that features “significant savings” over its estimate of the customer’s BAU; it’s up to the customer to run an internal analysis of their environment, both on the baseline and upcoming growth, to validate the BAU provided by Cisco. This means making sure that no solutions are being included in the BAU that are not required by the business.
The only way to verify that these Cisco offers are competitive is to build out the BAU project by project over the term and ensure everything that is projected in the proposal will, in fact, be consumed. This exercise will provide a solid foundation to determine whether the deal will ultimately provide savings.
Clients may face significant increases at renewal because Cisco does not protect customers on the backend of their agreements, as a rule. Without competitive renewal caps in the contract, substantial growth during the term may lead to pricey renewals. We urge customers to closely monitor usage of any new solutions adopted in the deal to avoid surprises down the road.
The SPA could be a great savings opportunity if customers are well prepared with their demand numbers and have upcoming projects of which Cisco is unaware. In this type of scenario, customers can take advantage of the unlimited growth benefit in the new agreement, because Cisco will have anticipated a lower BAU and set a lower baseline.
Also, history tells us that customers who adopted Cisco’s Security EA when it was initially offered realized significantly better deals than those who inked similar deals years later. Early adopters were able to lock in competitive spends with the vendor, who was eager to sell the new offering. We suspect that like then, Cisco sales reps will be motivated to sell the SPA, which could potentially increase usage of various and previously unpurchased solutions in environments across their customer base.
For more information about negotiating with Cisco, download our recent blog titled Cisco: Deal Challenges and Best Practices or contact your ClearEdge representative.
Brianna Foley is a ClearEdge Analyst.