The Telecom Ecosystem is Shifting Rapidly

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

The Telecom Ecosystem is Shifting Rapidly

The telecom ecosystem consists of a number of pieces: RBOC, ILEC, RLEC, CLEC, ISP, MSO, IXC, ITSP, MSP, data centers, Master Agents, Agents, VAR's. It is shifting.

As carriers migrate from a commodity access business, so too must the master agents, who - more and more - are tying their business models to the preferred carriers.

Master Agents have morphed into a supermarket of services: CLEC, ILEC, MSO, VoIP, MSP and even hardware (like Shoretel). In some respects, the master agents become the fabric for a quote machine. Basically, the machine churns out quotes from a number of carriers. This approach makes busy work for agents, masters, channel managers. It's only necessary because of a lack of value proposition. There is no clear delineation of specialties for the service providers. Not even from their preferred partners.

More and more masters look like Tech Data.

The Masters are going to have figure out their value proposition to the Channel soon too.

So are the CLEC's. All the mergers are just about complete, so before we start another round of M&A (or worse a round of Bankruptcy filings), could we just hear you clearly tell the Channel what your sweet spot is going to be?

Clearly and concisely - not in 71 slides over 2+ hours - but in one sentence (or a tweet), tell the Channel what we should go to you for?

Tech Data offers 3 of the 4 cellcos services and XO services, through TDMobility. It is a small step to become a Master Agent and add 50 carriers. The difference is that TD offers hardware. It's a one stop shop. And the commission reconciliation is done by TD, not me! YEAH!

SYNNEX and Ingram are in Cloud. (No idea the details because the PR reads like someone swallowed a buzz word infographic.) But if these two VAD's start brokering SAAS services, it makes for an interesting day. In fact, if they acquired or partnered with VAR Dynamics, they would hit a SAAS home run.

Next up is Dell. Dell bought SonicWall and WYSE. It clearly has a strategy. My guess is that Dell will want to be the whole distribution system for VAR's in an MSP world. In other words, hardware, devices, cloud services and managed services will all be sold by the VAR channel with Dell providing the back office and the engine. Dell will become a Managed Services provider Enabler.

Transactional Agents will just ride it out. I hear it in their voice. Some will sell Hosted VoIP and some other services, but the comfort zone is on replacement services.  It is very difficult to go from selling replacement services to basically selling insurance (or the invisible).

VAR's are the goal of everyone right now: Carriers, Agents, Cisco, etc. Are they the holy grail? Unlikely. VAR's deal with hardware and delivering their own services. Autotask and Connectwise are a platform to allow them to bill, schedule, monitor, etc. That competes with the carriers.

VAR's, like CLEC's, like control (or more accurately the illusion of control). Telco services with fluid port dates, demarc issues, and other unstable moving pieces are not what they are looking to add.

To be honest, I don't think that the telcos will win the managed services game. They can barely deliver on telco services these days, so how are they going to deliver on software, apps, security and other managed, hands-on, skilled services? Not to mention, the CAPEX of delivering on these services. What CLEC is flush with cash? Most are flush with debt and price pressures are resulting in flat or declining revenue.

Moreover, with the way Agents have been treated as of late (in quite a few noteworthy instances), I'm not certain VAR's will not be enticed to come join that party of MRR.

There are many reasons why I think that cablecos will become the new ILECs and LECs will flounder outside of telco.

IDC SVP & Chief Analyst Frank Gens said, "Volume is going way, way up and price is going way, way down. If [technology companies are] going to drive large-enough volumes to support the revenue levels they're used to, they're going to have to drive the number of customers way up. You'll need millions of customers in order to compete." Gens was talking about software, but it is the same for ISP services, cellular, TV, and voice.

Take conferencing as an example. Why don't the IXC's own that market? It's just a bridge and minutes. Instead Skype, Vidyp and other start-ups have picked that market apart. Even Webex owned by Cisco didn't innovate and own that market. Conferencing is an example of Cloud Communications and SAAS, right? But telcos don't own it. Software companies do. Layer 7 companies. Not Layer 1 companies.

Hosted PBX is another example. ILEC's owned Centrex. Many of them had installed Broadsoft boxes (but were only using it for SIP Trunking). So that market is about 1000+ strong of tiny players picking off low hanging fruit - disrupting the whole sector. Again, telcos did not dominate this segment. Sure there are a lot of reasons for this, but excuses are just excuses. Comcast will probably be the largest player in the Hosted PBX space.

How about data center? ILEC's had space and were colo landlords early, but just didn't want that game. Until now.

And Master Agents just follow the carriers. It's not like they are straying far from the center either. A couple of Masters have TEM platforms. It's a start. But none (that I know of) jumped on the SAAS game early. It's just an example of an ecosystem that follows each other and navel gazes. The main reason is due to the compensation system. Quota is a stern parent.

When I look at what Parallels is pulling together - 350+ apps to API through their portal layer - I see them leapfrogging ahead of the game - or more precisely, creating their own game.

VAR Dynamics does something similar by white-labeling SAAS for anyone to sell. This is the next piece of the puzzle. Network Access, then Apps. Agents already sell some network access. The key is to sell all kinds of network access and a ton of value-adds (like storage, backup, security, compliance). Think like Apple or Google: it's all about the Apps store! Whether that store is run by VAR Dynamics, Parallels, SYNNEX or Ingram, Agents have to find a way to get a piece of that. Why? Because transactional sales is producing less and less revenue and commissions. Last year a GigE port in 56 Marietta in Atlanta was going for $1500 on the low end. Now it's $500. The high end last year was $20K for a GigE; today it is $8K. Revenue is declining; thus, commissions are declining. Agents have to chase more and more deals to make a living.

I propose that Agents have to learn to vacuum. By that I mean, voice, broadband, mobility, security, apps, and other add-ons. Get the whole pie!

The Ecosystem of Telecom is shifting - for everyone. Either shift with it or not.



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