Someone I met in Vegas was a laid off CM who was discussing how exciting it was to launch her partner business. I hadn't heard from her and just checked on LinkedIn. She is back in the W-2 world of being a carrier channel manager.
Over the years I have met a handful of CMs who had been doing Agent business on the side to build up enough MRC (monthly recurring commissions) to make an easy slide over to the independent side.
There are a couple of executives to made the leap into master agencies by bring a deal in their back pocket big enough to start them off.
It takes a while to find a prospect, ink the deal, get it installed and then get paid. Number porting for anything voice and fiber installation for anything network can push out delivery dates. The other problem is that if you sell a 100MB pipe $995, after waiting 120 days for install and turn up, you get that commission check of $150. That isn't going to go far. You need to be selling deals every week. Not dabbling in it looking for a whale.
So while I understand the side hustle on being a partner, I don't know how anyone can look at it and call it easy.
An Agent is often described as a lifestyle business, too. Sure there is flexibility and monthly recurring commissions help, but you only get to eat what you kill. Time off comes with an opportunity cost.
That lack of a guaranteed check accompanied by those luxurious benefits are usually the deterrent to a switch from CM to partner.
]]>If you cannot see the flash mp3 player, you can listen on SoundCloud HERE or download the mp3 HERE.
]]>What do you do when a $60K MPLS network is replaced with a $40K SD-WAN network? And when some of those Internet links are not even on the carrier's network?
What do you do when 10GB trans-continental private lines are so ridiculously low?
Well, the management has to re-adjust their reality for the sales team. It isn't the salespeople's fault that price is eroding fast. That is an industry wide executive decision. There are no safe havens for high margin. Even SD-WAN which was hyped just a year ago has fallen under the I Will Save You Money banner (already).
Much of the merger mania is based on synergies - or that at scale the same amount of people can take care of more revenue, which adds margin. A few of the mergers are due to a debt burden that becomes due. That was Intermedia's problem in 2001. No one learned that lesson. Avaya faces that problem today with a debt load that cannot be serviced by its revenue.
But direct sales, channel managers and partners face declining revenues across the board. This means less commissions, less margins, less profitable quarters.
When cablecos stop paying commissions on modems sales (like ILECs did with anything TDM or DSL), what will the channel do? I ask because all the SD-WAN hype is about a branch office utilizing broadband - DSL, cable modem, fixed wireless, 4G, satellite or a combination - for lowered costs but improved performance via that special little white box of SD-WAN.
Also with the shackles off at the FCC, we will see bigger mergers and most likely port blocking will become a thing again. OTT VoIP providers will have to figure out how to circumnavigate the waters pf port blocking on broadband circuits at SOHO, branches and rural locations. It will be interesting.
But that is all down the road. Right now we face consolidation of vendors but price erosion, which may be accelerated by the MPLS to SD-WAN transition. Oh, Goody!
I say this a lot but we have to sell a lot more, faster to maintain.
We need to Land and Expand. Get the pipe but start taking apps and voice, backup, DR, security. It will become imperative to take a chunk of the whole customer IT/telecom budget to survive.
Carriers can help by stopping pushing product and going to a holistic package approach of bundling products into a turn key solution like UC + 4G + Internet + POS + Compliance + backup.
Or savvy partners will start bundling multi-vendor solutions themselves to get more of the pie. The carrier will be stuck being a component.
Co-Selling will be a see-saw. The carriers will like it to protect their own offerings and sales numbers but will hate paying twice one the sales.
We are in for a ride about as smooth as dealing with the airlines! Happy Travels! Back to CP Expo 17 now.
]]>They are jumping on the bandwagon for a number of reasons.
One is Consolidation. The new landscape of Ethernet is cable and ILEC. The CLECs are mostly all gone. You have to expand the catalog beyond just network operators and VoIP.
The other reason is price pressure. Pricing across all telecom products - mobile, bandwidth, Ethernet, VoIP - has been declining about 3-10% year over year, creating a problem for the operators and partners. When pricing craters, you have to sell more and more and more to maintain the same commission level. At some point, just selling network isn't going to work because you can't close enough deals or even fill a funnel fast enough.
When 1GB pricing is less than what 10MB pipes were just six years ago, think about how much you have to sell and how fast.
Even the current price war in VoIP/UC isn't helping. Because there isn't enough Demand for UC - the demand is for POTS replacement and dial-tone - the price per seat has dropped. It hovers just below $20 right now.
I understand that the customer wants the cheapest price - and it is easier to take the order when you find the lowest price - but you have also just lowered your commission.
Providers are starting to cut commission points when they lower the price. Partners and Channel Managers aren't happy. Well, then sell it at rack rate.
So carriers consolidation means fewer vendors and pricing compression means less overall commission. More vendors are needed. Luckily over 600+ vendors have entered the space in the last three years while more than one-quarter of the partner channel have moved on. Retirement, M&A, and business shift/pivot have resulted in a lot less sales partners at a time when there are so many more vendors to choose from.But to be realistic choosing a UC vendor among the 2000+ available is like picking Red Delicious apples at the grocery store. They all look the same. How many do you want to smell and test for firmness before you pick one?
The cloud computing piece, as we found out two weeks ago, is owned by Amazon. AWS and S3 are hosting about one-third of the web!!!! Rackspace, CenturyLink, Azure, Google Compute, IBM/Soft Layer and the others haven't really stepped up their marketing game (even in the wake of Amazon's outage.)
Businesses are moving to SAAS, IAAS and other computing environments. Partners are in a position to offer assistance to businesses in this regard. It is uncharted territory for many, but the business model has shifted to wallet share. If you want to survive (and thrive), it is about getting more wallet share from the customer. That means selling them email, Office365, VoIP, colocation, security and more on top of the network and bandwidth that makes up the typical sale.
We have seen a number of press releases in the last 4 months about SD-WAN - mainly about SD-WAN providers signing up with carriers and with master agencies. SD-WAN the new UCaaS!!! This technology could be the next big thing, but they said the same think about IP Centrex (VoIP) over 15 years ago and about WebRTC.
Our biggest problem: We push Product. That's right. We are a bunch of Product Pushers. We would make ideal drug dealers because we don't create demand, we just push a product on someone who wants it.
We don't sell Solutions. We don't even offer Solutions. The vendors don't offer solutions either. They pimp products. It makes all of this really hard to sell.
]]>That typically means that more agents are needed each year to bring in those deals. Unfortunately, the channel is aging. Many are nearing retirement. And about one-third of the VAR crowd pivoted to other tech business models (like coding).
Master agencies have a habit of doing 100% pass through of commission between themselves. That worked when the carriers were paying an override for hitting bronze, silver or gold level (as in the BellSouth program). Then the masters were running off of the override.
Today, we have MDF and co-marketing funds, but mostly these are used to finance road shows and events. These events are for recruiting and vendor awareness, but also face time, training and fun. But there are more and more of them. And carriers have a set budget for marketing dollars. That budget runs out fast!
Those MDF monies are NOT used to float the business.
Let's do the math on a pass through. It takes at least an hour to collect commission from one carrier. That person is making, say, $16 per hour, which is $24 per hour after taxes and benefits, etc. It costs about $2 to cut a check to the other agency. So a 100% pass through is actually costing your business $26! And that is despite the size of the deal.
If it is a cable deal (ARPU of $350) or a OTT VoIP deal (ARPU of $400), the commission is $35 and $100, respectively because commission rates for VoIP are higher. Even if you keep 5%, that is $17 and $20 respectively. You still lose on a 95% pass through.
There are a number of pass through deals. So many that it is hard to track who the underlying contract resides with.
That is also a lot of W-9 IRS forms to track!
]]>Price compression on network, bandwidth and voice has become so bad that it prompted all of the consolidation. Cogent and HE certainly fuel the price erosion but agents selling the lowest price all the time on everything is only speeding it along.
Yesterday, I saw an ad for Broadview UC down to $17.95 per seat (lower if you have 75 seats or more). Folks, that is not a lot of money to do a lot of work.
There are over 2000 companies offering some version of Hosted VoIP/Hosted PBX or UC. There are companies selling it for less than $10 a line if that is what you want to do. Google it. You can find them. But 20 percent of $10 is not worth the cost of the time to sell it.
And all the calls you will get from the customer due to poor quality.
No one wants to walk away from an opportunity. Many provider vice presidents don't know how to say NO to a crappy deal either, because they just want revenue -- even crappy revenue.
I guess Windstream finally realizing that much of its small business revenue was unprofitable wasn't enough of a wake up call for company execs and Agents.
Robotics and AI are coming. They will replace any transactional sales agent. Ordering on price: the customer could do that on Amazon -- or on GeoQuote.
Agents have to re-think where they bring the value because like newspapers, taxi drivers, and a host of other jobs, AI is going to destroy it.
My slides from my talk yesterday at TelePacific, who will be announcing the new brand in Vegas at CP!
]]>How do you enable Partners? A bunch of ways.
Clear messaging with a positioning statement. Who benefits from your service, why and how. Who being the exact target.
Take friction out of the process whenever and wherever possible. It is crazy to me that in 2017 more providers aren't using e-signature and transitioning paperwork to online forms.
Sales tools like case studies, deployment manuals, tech specs and more.
User training to make adoption easier and deeper.
When Zane says, "It isn't enough to have just an amazing product or the richest commissions, because if partners are not fully enabled to really market it, they will not position your product first." What amazing product? There isn't a clear winner in UCaaS at any level. While Broadsoft has the majority share, it is divided up among 400+ providers. So what amazing product?
The richest commissions change weekly. Providers are willing to pay almost anything to put any revenue they can get on the books - good, bad, under water or even horrible fit. And this leads to a host of problems on the deployment side, on the customer satisfaction side and later on the commission side (when the provider realizes it is under-water and wants to change compensation or when customer quits early and provider nets the commission out.) I wish I was making this stuff up, but it happens every week at most organizations.
And then we wonder why the UCaaS space that was supposed to be so hot is not.
8x8's numbers were kind of surprising because while numbers went up they posted a loss.
This goes to show you that just one huge deal can change everything (if it doesn't sink the company in the process of deployment!): "New enterprise Master Service Agreement signed with a Fortune 50 health care corporation to provide services to up to 10,000 users in 450 medical offices. [AND] New enterprise agreement signed with a national retail chain for over 10,000 seats across 3500 locations."
]]>The one thing missing from this cloud strategy: business model.
For all the talk about monthly recurring revenue, the commissions off cloud services are tiny compared with the time it takes to sell and support.
Even with the drop in uptime for carriers, the amount of support for network services is small. The sale is easy. The commissions are fair. High ROI.
Microsoft Office365 is starts at $60 per seat per year. That is a commission of fifty cents! If the client calls with just one support call, all of your profit is gone.
In network, almost all carriers deliver services as advertised. There isn't really a big trust issue with the customers. It's plugged in and usually works. Stays up most of the time.
The same can be said of PRI. But SIP trunks? That gets tricky with inter-operability, with porting numbers, with quality of service. There are so many providers that it isn't even possible to do an apples to apples comparison. Easier to sell POTS lines, in my opinion.
UCaaS has been notorious for porting problems; QoS issues; lack of user training; and deployment mishaps. Also, too many features, not enough pain for the buyer to move to what looks like a complex system. At ARPU of about $350, that is a lot to overcome to make a little bit of money. The SPIFF War that pays out up to 6X MRC is getting attention, especially if the partner can just throw a lead over the fence, let the ITSP close it and collect his $200 after passing GO!
The big impact from cloud is the integration. But who is going to do that integration? Who is going to come in and add the Zaps or the IFTTT? Who is going to script together the various pieces of software to get data to flow without swivel chair?
On a client call recently, they mentioned that many IBM A/S-400s are still in service. Those applications don't easily port to the cloud for a number of reasons. There are a number of software applications that won't easily port to the cloud. That's why we have the Hybrid Cloud strategy, right? Which just means that some stuff stays as is, some stuff goes to AWS/MS/IBM/Rackspace, some stuff moves to a private data center. (SD-WAN plays the part of making that network optimized for a hybrid environment, or as I like to call it the usual system.)
I'm not saying cloud isn't here to stay (see here). I am saying that the Business Model for Partners to be Cloud First has not become mainstream yet.
A good Cloud Engineer/Cloud Architect or a knowledgeable Sales Engineer are expensive full time positions. It would take a lot of large deals to begin to offset that investment in talent. There is a new skill set needed for cloud services that wasn't needed for managed IT services. New sales skill set too as the sale transitions from transactional replacement of services (cable for T1 or Ethernet for T1) to consultative selling involving business needs and impact.
"What we've found working with clients who want to begin taking advantage of the cloud's cost and accessibility advantages is that they will start new projects in the cloud, but will leave their legacy systems intact." To find these deals, you would need to be proactive in marketing your firm as a cloud expert (and actually have the chops to pull it off without burning the client and your reputation, which is a real problem that vendors don't want to address.)
Personally, I wonder about the economics of cloud. VDI, UCaaS, CRM and Office 365 are going to cost you ($40+$30+$100+$5) roughly $175 per month per employee. At 99 employees that is $200K per year. Seems like a lot, but if you are the partner and you get most of that share that is $20K per year in commission.
]]>Hwver, today Equinix bought 29 data centers in North and South America from Verizon for $3.6B!
Equinix continues its expansion in major cities ignoring the Tier 2 and Tier 3 cities that other data center companies are moving toward. That expansion to the edge "is an industry wide shift in focus to edge computing and having these peripheral data centers in tier 2 markets might very well be a more comprehensive strategy to having a footprint where your clients need to be. In the Future, clients will look to the edge, meaning closer to their end users and subscribers as they expand out from their primary markets," remarked Dany Bouchedid, CEO of the data center master agency COLOTRAQ.
Bouchedid continued, "As an industry we need to collectively adapt and do away with old ways of thinking even if we are still taking about traditional data centers. This reminds me of the wireless cell site deployment era. The initial deployments were always tier 1 markets yet once that reached a saturation point, the carriers had to move to where more subscribers resided. So they began to expand into tier 2 and 3 markets. What we are seeing in the data center industry so far is purely demand driven."
It is also profit driven. Data center companies are real estate companies. It is why a few of them are structured as real estate investment trusts (REITs). It is why investment dollars flow into a third, fourth and even a sixth data center in an NFL city like Atlanta, Chicago or even Phoenix.
CenturyLink just sold their data center business for $2.1B to a coalition of PE firms headed by the former CEO of Terremark. C-Link was getting enough out of their data center business AND they needed cash for their Level3 bid.
Meanwhile agents are left wondering about commissions. Will the new company continue to pay the commissions? Or will that fall to CenturyLink? Who is billing the client now? Which company will the customer renew with?
Tierpoint rolled up Windstream and other data centers. They are held by a PE firm. This is a risk for channel partners because of the potential for sale. In other words, will your well written agent agreement be enough to continue to see commissions after a sale like CenturyLink's or even Windstream's?
One executive at a master agency noted, "The battle between Digital Realty Trust and Equinix continues! IO, Cologix, and Interxion are next."
]]>Jeff Ponts of Datatel; Emmett Tydings of AB&T Telecom; and Chris Palermo of GCN joined the podcast this week to talk about the M&A in the industry and what partners can do to mitigate risk in 2017.
It has been a turbulent year with a lot of mergers and acquisitions. It makes people anxious.
Jon Arnold is a fellow blogger who recently saw Guy Kawasaki keynote Nextiva's event. The one thing lacking in telecom is Innovation. As partners, WE need to innovate to the tune of adding new skills, being creative, thinking through problems and cross-vendor solutions.
Give this podcast a listen - and leave your comments.
If you can't see the flash mp3 player, you can listen on SoundCloud HERE. Or you can download the mp3 HERE.
]]>AT&T with its DirecTV buy and its grab for TW is basically following Comcast's playbook. Comcast bought NBCU, is becoming an MVNO (cellular reseller) and has a $6B Comcast Business division that is going to chase enterprise (much to the dismay of CenturyLink and Windstream).
Verizon is busy selling off wireline assets and buying up as much spectrum as its AMEX card will allow in a heavy bet that 5G and IOT will solve all of their revenue and cable issues. In a move bizarre move, VZ bought up AOL and Yahoo as content plays. This playbook is solely Lowell C. McAdam's.
Frontier, Fairpoint, CenturyLink and Windstream are RLECs looking to get out from under a heavy debt burden without cellular assets and without a content play. Each has its own playbook.
Windstream buying EarthLink almost makes sense especially at a $1.1 Billion all stock deal. (This move doesn't hurt the channel since both providers were pro-channel.)
CenturyLink buying Level3 is not only surprising; it is disheartening. Level3 has its problems certainly. Yet its management understood the business it was in and what it took to win business. For a partner, that is a plus.
To fuel that $34B deal (total value of stock, debt, etc), CenturyLink is selling its data center business (Qwest and Savvis) for $2.1B to a coalition of PE firms headed by the former CEO of Terremark. This coalition is also buying 4 cyber-security firms to build a global cyber security business. Partners are curious if they will still get paid on deals already sold. And what the future holds here.
FPL getting acquired by Crown Castle also makes partners worry about commissions, since CC doesn't have a channel and doesn't retail its fiber.
The CLEC industry is practically gone now. After nearly one trillion in investment money dating back to 1996 or so, most of the CLECs we have come to know and sell are pretty much gone.
What does that leave the Channel? IOT, Cloud, UCaaS, SD-WAN, security - basically selling managed services. Network is going to be tough to sell and make a living on as prices continue to erode. SD-WAN for the win!!!
Network is easy to sell and there is demand for it. You really can't say that for any other product in the portfolio.
Data center is still alive and well. Long live colocation!
]]>As one CEO told me, "Luddites are still selling network. And the price compression is killing everyone." I know. Revenue and price compression are working against everyone.
I get requests for Gigabit pipes in rural areas that come with a budget of less than $3K. It is unrealistic, but you can't explain it to people. They don't want to hear it.
Providers would like to sell more managed services. They probably could if they told a better story besides we want to manage your technology. MSPs do a good job of explaining the value of outsourced services to businesses, but carriers do not (yet).
While partners hear all the chatter about cloud, colo, SD-WAN and UCaaS, they realize that network is the easier sale. And you have to sell more and more to stay even.
Some of it is a Trust issue. If the vendor has screwed up number porting on a PRI or POTS line, are you really going to sell their UCaaS?
If the carrier can't find their network maps, do you think they can do a good job with SD-WAN?
If the billing is always an issue, why would you sell complicated stuff with that vendor?
Personally, I have an issue selling managed router. It is overly automated with no human interaction at all. Automated emails and trouble tickets mean an angry customer.
Would I use that carrier for managed security? Um, no.
Some of it is a Clarity problem. By that I mean, the vendor catalog is so larg - and it is usually delivered to the channel in a fashion similar to confetti: thrown at you. There needs to be more context. What is the core product? How do the rest of those services align or add value to that core? Who buys it? Why do they buy it?
Additionally, there needs to be more proof that clients are buying it.
Meanwhile, another provider enters the network fray: Google Fiber is looking to partners to reach the small business market. "Aaron Withrow, channel partner manager for Google Fiber, acknowledged the challenges in selling to businesses and offering them value beyond a boatload of bandwidth." [CP]
An ASIDE: the reason folks sell SIP Trunks in place of UCaaS is a similar argument. It is a faster sale - straight up replacement transaction.
]]>How are your commissions holding up? You know, on that legacy stuff you sold?
According to reports from agents, Sprint is cutting legacy commissions to 5%. Oh, and that is retroactive to when they were first thinking about it. They forgot to say something but what can you do. Things slip through the cracks over there at Sprint all the time. Like the fact that they have a fiber network, the famous pin drop one (1986). Or that Internet bandwidth prices have dropped since they last sold a Gigabit port.
Channel Partners is reporting that Windstream is cutting commissions on PAETEC circuits. Windstream has been all over the map recently. No more sales under $1250; price increases; MITEL-Avaya-Allworx-Broadsoft-somebody-buy-some-UC-please*. It has cost many partners a good chunk of business - and commissions, which are the revenue and life blood of agent.
One agent was describing how he lost commissions on a huge deal because the direct account team cut him out of the loop. This happens. You have to stay involved with the client.
I don't think you can be an agent for longer than 5 years and not take a beating on commissions somewhere along the line. It sucks but you can whine about it all day or get on with your life. Best advice I can give: live to the letter of your agent agreement. Outside of that, it is gray and subject to the whims of the carrier.
]]>In telecom, that usually means that the C-Suite doesn't care where the revenue comes from - indirect or direct. If you look at current available data between 35-65% of new mid-market deals are coming in from channel. So yeah the C-Suite doesn't acre where the new revenue comes from - as long as it comes in.
For Wall Street it is all about the revenue. On Main Street, where channel partners earn their living, it does matter. Agnostic does not mean Parity.
Parity means that Direct and Indirect have the same pricing team, same promotions and get the pricing at the same time. Everything is equal.
Parity, in some eyes, is pairing up the partner with a direct rep. Personally, I don't get it, but Qwest, Smoothstone and other carriers have used that strategy. That is duel compensation - and the CFO won't let that happen forever. It messes with margin, profits and EBITDA.
I was at a non-telecom client this week discussing channel strategies. They asked about Channel Conflict. This is a well known "feature" of channel agnostic sales. Some companies have Ink Wins as the motto. This usually means dirty pool. Someone is pulling tricks to get the contract without the work. (Been there, seen that, have the tee-shirt.)
Other programs use Deal Registration. Deal Registration is great in theory but, in some cases, the sales teams just upload their contact lists as "deal reg"! Best way to handle this is a CRM system that can track activity. Who talked to who, when, about what? What was the follow up like?
There has to be a top down understanding of channel in order to have parity. Often, the C-Suite only cares about the top line - and the VPs or Directors fight it out. That seems healthy, right?
Channel Parity is possible. And it is better than Channel Agnostic.
]]>You might be too hard to do business with. Too much friction and I will sell the other guy.
Right now, you might not be paying enough, especially in relation to your product value or ease of doing business with you.
Your partners may not want to sell what you want them to sell. And you can't make them.
Your support of partners isn't what it could be. That could be that quotes take too long; that there isn't enough self-serve; that the channel people don't know enough or unhelpful or just clueless.
Just a bit too much channel conflict. Right now, a partner I know is getting rooked out of a lot of commission on a Big Logo that they delivered to the vendor. The vendor took over the account. These are reasons that we stay away from vendors. We don't want to get screwed over on commissions!!!!
In the case of at least 3 vendors I can think of, word on the street is that you aren't really channel friendly. You are in when it suits you; and out when it doesn't. So partners don't like risk like that.
Tough to get honest feedback but you should ask -- if you really want to hear it - and say that you CAN take it. Then just accept it.
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