The Forecast Calls for a New Strategy

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

The Forecast Calls for a New Strategy

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Some folks didn't particularly care for the forecast in my podcast with Acuity.

"Hope is not a strategy. [I have a little bit on strategy by PWC here.]

One thing about the channel: Most people are heads down just getting from payroll to payroll with no time or desire to look up and pivot. And, yes, picking a new vendor in a new sector is pivoting. Going from selling Internet to selling cable is not a pivot. Going from data to contact center or managed services is.

Master Agencies, carriers, service providers are all dealing with the traction-attention deficit.

In a call today, we agreed that an MSP is not going to risk his client (billing north of $1000) for a voice deal that will net him less than $150 per month. The risk/reward is too high.

What happens as average deal size is sub-$1000? Think broadband, VSB, single location and other examples as the majority stake of a book of business. That means that each deal is netting $150 (with 15% commission on $1000). That is a lot of deals that need to close to build up a decent monthly check.

Have you seen the look on a VAR partner when they get the check for a 10MB DIA order? After they have received somewhere north of 75 emails about the deal and install?

The answer: go up market. Add more services. Yeah, I know that tune. I sing it often myself. There are only so many businesses with more than 99 employees.

A majority of businesses in the US are small bsuiness. "In 2010 there were 27.9 million small businesses, and 18,500 firms with 500 employees or more." Also, "over 22 million are self employed with no additional payroll or employees." And "Among employer C Corporations in 2012, 99.2 percent had less than 500 workers, and 86.2 percent had fewer than 20 employees." [source: SBA and here]

So 18,500 firms with 500 employees. How many are protected accounts? How many are in play? How many are married to a vendor - AT&T, VZ, Cisco, Microsoft, IBM?

In an ideal world, partners would:

  • Sell Deeper
  • Go up the OSI stack from Layer 1-3 to Layer 7
  • Hunt bigger customers (more than 50 employees)
  • Both Hunt and Farm and perform account management
  • Add Value beyond the network
  • Close the deal instead of throwing a referral

In an ideal world, vendors would:

  • Pay evergreen
  • Not try every trick to stop paying commission
  • Rid itself of Channel Conflict
  • Give same pricing and promotions to channel as direct
  • Stop Power Pointing us to death (Tell stories)
  • Communicate better to the partner about the account
  • Make the Org chart stable and flatter
  • Stop signing up everyone who can fog a mirror.

But it isn't an ideal world. It is messy and busy and distracted. It is filled with buyers who rank root canals above dealing with telecom. The industry is rife with I'll save you money talk that has gotten us to the point we are at now. More price wars coming.

There is another shift coming. If the carriers can automate more and drive sales to e-commerce, Amazon will replace brokers. At that point, pricing will continue to collapse. Look at what is happening to Wal-Mart: they destroyed small businesses; now Dollar stores are snaking their lunch. Retail is taking a beating because it didn't evolve. Sears, K-Mart, Sports Authority, Barnes & Noble and so many other retailers are taking a beating. Go to a mall. How many people are walking around? How many have shopping bags? The answer: very few. They have Starbucks coffee cups, but no shopping bags from purchases.

The channel broker model has to shift as well. It may take a couple of bankruptcies to do that. Or it may take a much smaller commission check. Who knows?

Many agents were supposed to die when long distance compressed, but that didn't happen.

Inter-connects were supposed to go broke when Hosted PBX took off. That didn't happen.

Another batch of partners will come along and bundle multiple vendors into a single package and sell the heck out of it. Until then, keep reading.



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