Agents, VARs and the "Cloudy" Lines Between Them

Recently, Evolve IP held an event at the Franklin Institute in Philadelphia.   At the event, we invited our various channel partners to hear about the state of the industry, the growth of our company and what we called the "Reinvention of the Channel".     My point in this post is not to provide a commercial for our channel.    You can find out more abo ut that at our web site.

What occurred to me, while I was standing in front of the room, was the varied types of companies and skill sets represented in the room.

We had traditional telecom agents, Interconnects, VARs and Integrators.    There were also Sharepoint developers, CRM consultants and Telecom Expense Management professionals.   A year ago, many of these people would not have pictured themselves in a room together.

While adoption of cloud-based technologies amongst end-users continues to grow at a steady pace, the adoption of cloud-based technologies across various distribution channels has not been even.   Despite the rhetoric being expounded on these types of blogs, Agents adopted services like Hosted PBX, UC and Cloud Call Center services much more quickly than their counterparts.    And why not?  For this group, cloud services quickly enabled them to get at some wallet that they historically shared with Interconnects, without the responsibility of installing the system and supporting it.

While many larger Interconnects, have had carrier services groups for some time, smaller Interconnects, have historically, stayed on the sidelines, concerned about eroding their base and missing commitments to their premise-based vendors.   Some commented that they wanted to wait until their vendor came up with a cloud strategy (that's a topic for a different post). 

VARs, two steps removed, looked at this entire game as over-extending themselves into telecom - an area that historically was a cost-saving sale, not an area that provides the VALUE that their name suggests.

Perhaps most importantly, the biggest reason that Interconnects and VARs have stayed on the sidelines is compensation.   Most cloud providers pay distributors for services like traditional telecom agents - as a monthly residual based on a percentage of the end-customer's monthly contract.    While Agents have built up books of recurring business over many years, small Interconnects and VARs generally see most of their money up-front, and as a result, live a little more hand to mouth.   Sell a server, collect from the customer, pay the vendor for the equipment in 45 days and keep the lights on in-between.   Obviously I'm over-stating, but I think you get the point.

In order to ease the transition, Service Providers of all kinds must allow this community to ease into the monthly model.    While nearly everyone agrees that an established, predictable monthly revenue base is a better way to live, it needs to actually BE established before it can be counted on to keep the lights on.   Providing more money up-front to VARs and Interconnects, with a lower residual, will enable these companies to get started selling the cloud.    Allowing them to adjust those percentages over time, will enable them to build a base.   And engaging them in providing the professional services required to install any service (cloud or not) like on-site installation and training, will enable them to keep the people (on whom they have built their businesses) busy and employed.

The writing is on the wall.   Microsoft is providing their products on demand.   PBX manufacturers are trying to build service provider models.   Mid-market businesses are adopting virtualization by leveraging cloud resources, not by buying big iron.

VARs and Interconnects must evolve (pun intended).   Its the responsibility of the service provider to help them do so.