InterNAP Sweeps the Legs of Agents

Peter : On Rad's Radar?
Peter
| Peter Radizeski of RAD-INFO, Inc. talking telecom, Cloud, VoIP, CLEC, and The Channel.

InterNAP Sweeps the Legs of Agents

In March, InterNAP notified agents that it would be making changes to the Agent program. It was going Master-centric.  According to the phone call I just received, 400+ agents that have agreements with InterNAP were given the boot. With 30 days notice, most carrier agreements allow for cancellation. However, most of these contracts were Evergreen, meaning paid for as long as the customer that the agent delivered to InterNAP remained a customer of InterNAP (and paid its bill). The Evergreen clause was revoked.

Why would InterNAP do this? Simple: to save money and immediately add income to the bottom line. InterNAP is like the ugly sister of Savvis, who was acquired by CenturyLink. In the midst of all this Cloud Ballyhoo, InterNAP wants to put some lipstick on the pig, so it can get a date to the M&A Ball.

Most agents can't or won't sue. Not many lawyers will do this without a retainer. It costs a lot of money to sue a carrier with $240M in revenue. But this time they may have to.

This is a new game. Cut off the channel. Save the commissions. Book them as revenue. Make yourself prettier on Wall Street.

If this works, it will be repeated. (I have my own guesses about who will do this next).

Agents have to sue to get word to The Street. The Channel drives at least 10% of the InterNAP revenue. That goes away now. Even as I write this, Agents are dialing customers to move them to a new home. This happened to Equinix when they cut the Switch & Data channel off. The revenue dropped the following couple of quarters. Churn goes up.

As everyone races to join the Cloud Provider Club, they are also hoping that the Channel can deliver revenue. Not if you play like this.

Service Providers are asking where the Channel fits in the Cloud space. Well, if you are going to screw the Agents that drive revenue for you, why would Agents want to go to Cloud?

Why would VAR's? It is actually a simple path for a VAR to become an MSP and Cloud Provider. Why would they need InterNAP or Equinix? Neither one owns anything exclusive like an ILEC does.

If Agents let InterNAP scrap all these contracts and revoke the Evergreen clause, it makes the landscape iffy going forward.

Let's not forget that Cisco lost in Court for their VAR contract, so there is a chance for a win. If you want to talk about it, email me.- on the record or off.



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