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VoIP and Making Money
Here is the latest article on making money in VoIP and how to partner/resell the products and services needed to make you wealthy in the IP communications business. John McDonald will be on my panel next week at Internet Telephony Conference & Expo that focuses on Making Money Selling VoIP. The target for this session is resellers looking for companies who have products and services worth reselling. I sincerely hope to see you there.
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When Everyone Wants to Be Your 'Partner' … Be Careful Who You Walk Down the Aisle With (Part 2).
By John McDonald, Kayote Networks
[The second in a series of articles. Follow this link for Part 1.]
As we discussed in the first part of this series …choosing a partner is just that. You must find an Agent Program/Reseller Program or White Label solution that fits both you and your customers' needs. I appreciate the feedback that I received on the first installment.
Once you have made the decision to choose a partner or partners there are a number of points in the contract that you will need to be aware of. Some agreements are as short as two or three pages while others seemed to have been written by a legal team bent on hiding and confusing issues important to your company. Below are the typical sections in an agreement and a short explanation as to their relevance to your partnership:
Definitions -- This is very straightforward. Pay attention to any clause that says "Qualifying Usage and Fees" as this affects your commissions.
Appointment -- Gives you the right to market and represent products.
Limitation on scope of authority and relationship created -- Need to be careful here. Your Agent Manager may have been using the word "Partner" … this section articulates how you may market and use your relationship. This section will also let you know how you may utilize sub-agents and to how many levels of distribution. Also be aware of the following language … your "Partner" has the right with notice to amend your territory or product and if this is an Agent Agreement they clearly state that the customer is not yours.
Agent responsibilities -- Outside of the normal language look carefully at statements that appear contradictory such as "Agent must maintain a direct relationship with Customer" and "If agent causes customer to switch products to another provider" and consolidate that with the section titled Limitation on Scope. This is also the part of the contract where you acknowledge your complete understanding of the rules and regulations of the FCC and your state and local regulatory authorities … that's a joke.
Rates and tariffs --You need to agree not to quote price points not agreed to by your Partner. Get all quotes in writing -- that is not standard list!
Promotional and marketing activities and materials -- Be careful here as I have known of Agents who have lost their partnership over misuse of Partner Logos. Read this carefully. Additionally, while you are negotiating this point ask to see if the Partner offers marketing incentive materials and or budget.
Order processing procedures and limitations -- Your Partner has the right to reject any order, for any reason that you submit.
Activation limitations and delays -- Essentially, if the order is hung up in provisioning through no apparent fault you may NOT try to lead your customer, sorry Partner customer, to a different provider.
Service authorization; letters of agency; other verification procedures -- Keep accurate records!
Changes in customer service and termination of services to customers -- This section allows your Partner to change rates and rate plans. You will also acknowledge that they can terminate your customer -- sorry there I go again, their customer -- for any reason.
Commissions -- This is the fun part. In a pure white label or reseller market this is fairly straightforward. Bear in mind that you may still be held to minimum commitment for volume of sales. In the pure agent model you will be held to a minimum commitment that you will be able to ramp-up to. Additionally, if you fail to hit this commitment, in some cases, you will forfeit your future commissions … you have got to be kidding me! You will also be paid commissions on a sliding scale based on the total volume of qualifying services (see above). Be very careful of language that indicates that they can change the commission structure at anytime with a (blank) day notice. Be aware of language that can cause termination based on the percentage of bad debt.
Indemnification -- Interesting section in that what it comes down to is that regardless of how messed up an order gets or disrupts a customer's business regardless of fault … your Partner can never be held legally responsible. Nice.
Term and termination of agreement -- Usually given for 1 or 2 years with automatic renewal. And by the way, after termination the customer belongs to your Partner (you did sign a non-compete!)
Insurance -- Some require from 1-2 million dollars of coverage. Fairly standard.
Assignments -- You cannot roll your existing base into a new company or a master agent.
Governing law -- Get used to this … Delaware, not negotiable. Although you may luck out with another state of jurisdiction.
Consider: How does your Partner handle conflicts with direct sales staff? Does the Partner have "Channel Neutrality"? How would they handle up-selling an existing customer?
Once the agreement has reached the point of signing you will need to start the process of nurturing your relationship. We will address this in the next installment. We will also address some examples of companies and master agents worth reviewing.
John McDonald, VP of Sales and Marketing at Kayote Networks, has had many successful years managing third party distribution. If you are interested in presenting your agent/distribution program please email him at john.mcdonald@kayote.com with a short synopsis.
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Marc Benioff Strikes Back
I love Marc Benioff’s messages to the industry. He never fails to blast his competition who in this case is virtually the entire software industry. Take a look at this paragraph for example:
Meanwhile, leaders of legacy platforms are undeterred in their belief that the answer for software that didn’t deliver on its promise is yet more software. We understand that this evening Oracle will announce its Fusion stack of large application after application. This is software’s “Shady Pines” with a fresh coat of paint, but it doesn’t mask the fact that this paradigm is headed into retirement. Oracle’s coalition of the unwilling- a combination of applications from companies that resisted merging-has a monumental task ahead of it.
I have posted the entire e-mail from Benioff who as usual makes some good points ina colorful and certainly non-boring way. I wish all CEOs sent me e-mails like this… It mould make life here at TMC that much more interesting.
In the interest of balance, you will likely want to read Bob Liu’s recent article on the company as well.
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Friends,
Welcome to The Business Web™. It’s another chapter in “The End of Software.”
As I said at Dreamforce in September, www.AppExchange.com is the most exciting and important product I have ever worked on. The AppExchange embodies the power of social production (made popular through open source, blogs, Wiki, and other Internet systems) in attacking the traditional monolithic enterprise software applications dominated today by vendors with 1990 architectures. Social production architectures embrace a few simple truths: Dependency on those cumbersome and inefficient behemoths can be lethal to productivity and innovation, there is always a better answer out there in the global community, and only the most open and democratic systems will enable the discovery and distribution of that better answer.
You can watch the webcast replay of the January 17th AppExchange launch here: http://phx.corporate-ir.net/phoenix.zhtml?p=irol-eventDetails&c=141811&eventID=1192764
It’s an idea that has caught the attention of the mainstream media. I was stunned to see New York Times columnist Thomas Friedman and Fareed Zakaria discuss the concept on a recent episode of “Foreign Exchange.” See for yourself by visiting the show’s Web site (http://foreignexchange.tv/index.php) and viewing “Last Week’s Show” with Thomas Friedman. It’s a fascinating half hour with comments on salesforce.com about 17 minutes into the show.
Still, this utopian vision needs a secure, reliable, scalable platform to provide today’s businesses with the stability they need. That’s where the AppExchange comes in with the tools, databases, and directories for generating secure, scalable, and reliable applications delivered on the world’s most robust on-demand platform. Who would have thought that in 2006 we could have application “mash-ups” that can run businesses like the ones in the AppExchange from technology companies such as Google, Adobe, Skype, Esker, and hundreds of others? These applications were not born in conference rooms, emerging after years of negotiation and planning. Instead, open Web services standards have allowed users to invent new, unique applications that go far beyond the original intentions of the creators of their components. This is The Business Web™-the creativity of social production in action, and a most compelling example of The End of Software.
For business anywhere in the world, of any size, this means instant results. Just log on and get everything you need. No software or hardware to buy. No one to hire. For any area of your business. Whether you are in the
For our customers, the opportunities are amazing.
Large companies are adopting the dream as their own. We have thousands of users at name-brand companies, including ADP, Cisco, Merrill Lynch, Honeywell, Aon, Sprint/Nextel, AOL, and many others. The AppExchange and The Business Web it makes possible is great for small and medium-sized companies, but it will reach even our largest deployments, such as ADP, with its more than 6,000 users. The power of the AppExchange platform is that it is one of the only ones to reach companies of all sizes, by using the same concept of democratization made popular by utilities themselves.
Partners see the benefit right away.
We are providing much greater business value by democratizing software development and distribution in the way we democratized applications themselves to create The Business Web. We are seeing a variety of new companies emerge as well to support this platform. http://www.dreamfactory.com, http://www.remend.com, http://www.bluewolfgroup.com, and even http://www.crmorbit.com in
Meanwhile, leaders of legacy platforms are undeterred in their belief that the answer for software that didn’t deliver on its promise is yet more software. We understand that this evening Oracle will announce its Fusion stack of large application after application. This is software’s “Shady Pines” with a fresh coat of paint, but it doesn’t mask the fact that this paradigm is headed into retirement. Oracle’s coalition of the unwilling- a combination of applications from companies that resisted merging-has a monumental task ahead of it.
The contrasts between our model and that of the legacy enterprise software industry have never been so pronounced. I hope it’s as exciting to cover these developments as it is to bring them to market.
Aloha,
Marc
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Broadsoft
It seems like the explosion in companies selling hosted services has had an amazing impact on Broadsoft the leader in supplying service providers with hosted platforms. I have heard good things from Broadsoft’s customers and I have seen the company do better and better as of late.
The company put out a release today touting its accomplishments as of late. They are now delivering services for 6 of the top 10 and 11 of the top 25 global carriers (based on revenue). They are also delivering the first IMS-compliant application software to market through partners such as Ericsson, Lucent and Italtel.
The company furthered doubled revenues for the year. This marks the eight consecutive quarter of sequential quarterly revenue growth. Not only has the company been ringing up new sales it has been busy adding services such as custom ringback and a video softphone.
Furthermore, the company has built a converged services platform used to offer advanced calling services between 3G mobile phones and IP video phones.
I keep hearing more and more positive news from the service providers offering hosted services. Although my informal polling in the past has shown that enterprise customers are lukewarm to the concept of hosting, service providers tell me the customers they have are hooked and love the service.
They argue that hosting is just so much more flexible and cost effective than a premise based systems that every SMB will have to consider and deploy hosted solutions. They go on to say that large organizations are hosting their remote workers and branch offices as well.
Another benefit of hosting is that it decouples telephony from the last-mile solution allowing companies more flexibility in changing last-mile providers. This also means companies are more easily able to negotiate favorable rates for access.
The service providers further say that with more education, the market will do even better. I am aware of some big plans from these hosted providers to do an incredible amount of promotion and education in 2006. If this is the case then the outlook for hosted VoIP could be much larger than expected.
In addition as more remote workers are created – and this trend seems to be speeding up not slowing down, we can expect the desire for hosted service to grow as well.
If the growth turns out to be as large as the optimists hope then we can expect Broadsoft to continue its rapid growth for some time to come.
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