On Rad's Radar? - commissions Archives

Monday Morning Quarterback

2013-02-04T15:56:33Z

The 49ers got robbed by the refs twice in the last 3 minutes of the game. And the viewers got robbed because most of those commercials sucked. Just my opinion of course.

But we start Monday with Oracle buying Acme Packet for $2B! Sonus must be mad. They have a market cap (NASDAQ: SONS) of half that.

TNCI is still in bankruptcy and has a stalking horse bidder in Blue Casa Telephone. That may prove troubling for TNCI agents (and the Agent Alliance, who really bet the farm on the TNCI Equity Plan).

Telefonica is looking for Channel Partners. I am looking for one of Telefonica USA's channel people to reach out to me for an interview.

Interesting article from The Atlantic: Why Americans Hate the Media?

Everything is Changing, No One is Happy

2013-01-25T15:08:19Z

Belkin is buying Linksys from Cisco, who is exiting the consumer business. What are they doing with the Scientific Atlantic set-top boxes?

Logitech is dumping some of its product lines as it re-vamps.

Andy says that Yahoo Voice is shutting down.

Microsoft sales of Office365 are decreasing.

Intermedia is acquiring Telanetix, which does business as AccessLine, for about $55M.

EarthLink is laying off as they realign.

So much is changing - and so fast.

You know what else is changing? The role of Master Agents and VADs (like Tech Data and Ingram).

Dell knows that hardware sales will continue to decline, which is one reason it is looking to go private. Microsoft knows that its best days are behind it. WinTel used to dominate the computing space. Then Apple iOS starting winning laptops and smartphones - and definitely the tablet sector. Android is the O/S for smartphones and tablets, but Chrome laptops are also in the market.

When everything is wireless do you need switches and cables?

Level3 just revamped its Channel, but the masters are wary of signing it. XO has a new contract out that masters also are balking at signing. Why?

Qwest/Savvis/C-Link stopped teaming agents with directs, but Level3 instituted something like teaming. There is a commission hit for teaming. Here's the dilemma:

One, prices keep dropping, so commissions are lower. Agents have to work harder to make the same money.

Two: Current customers want to lower the bill with every contract renewal, which means that commissions dip (or disappear) unless the Agent switches its customer base to a new provider.

Carrier Quotas keep going up, despite No. 1 and 2. So Masters can't hit the quota, lose commissions and can't pay the agents.

Everything is cloud, but revenues are much smaller, the sales cycle is longer, and the sale is more work for the agent. For less money.

Telecom - you know, the network - transport and transit - are still selling, and agents still want to sell it, but the carriers don't (or can't maybe) pay commissions on straight network sales. So Agents look for carriers that will pay them to sell transport and transit. Masters don't get this business. Carrier Channels sales dip. The cycle spins.

Most Cloud services providers don't work with Masters, so those sales don't go into the Masters revenue. Lost revenue.

VADs like Tech Data and Ingram are selling cloud, cellular, network and hardware.

VADs already have a relationship with VARs. VARs are comfortable with their relationship with the VADs. Why would they switch to the Masters?

Gartner's Bova likes to talk about the transformation of Agents but she misses two key points: Agents are on a hamster wheel and can't just jump to a new one because they need to keep the cash coming in to satisfy quota, bills, churn, etc.

Point 2 is that there isn't an easy transformation path for an Agent to become a cloud services broker. A billing system, integration with the vendors, cash flow, liability, and other factors all get in the way of an agent becoming a CSB.

Despite what the Carriers want - more sales, more VARs selling their stuff - and what the Masters want - pretty much the same thing - the cogs in this wheel - the Agents and VARs - are not yet ready or in any position to make sweeping changes to their business to satisfy Carriers or Masters. The VARs and Agents have a business model that they are running with every day. They have customers that they are trying to satisfy every day. The added pressure from carriers and masters to transform, while also sacking their current revenue stream is a catalyst for disaster.

Look around - Intel, Microsoft, Dell, Cisco, EarthLink, Cbeyond, Logitech - these are just the companies TODAY that I see in turmoil. All of these sell via a channel distribution model, so if they see revenue hits what do you think is happening to their channel partners????

DUH

Cloudy Math

2012-12-11T03:10:14Z

There is a lot of talk about the big money that Agents and VAR's can make if they just switch over to sell Managed Services and Cloud Services. Here are some facts about cloud.

M5 had the highest ARPU (average invoice per customer) when ShoreTel bought them - at $2000. Most other cloud communications providers hint at lower ARPU - maybe around $1000 per customer. However, 8x8 and Cbeyond are public and their cloud ARPU sits at between $200 and $250.

When you examine the "cloud services" of many carriers, it is just Hosted Exchange, Sharepoint and maybe some backup. That's $9 + $10 + $20 = $39 per user per month. Add in a Hosted PBX seat at $30 and you are now at $69 per month. For 20 employees, that's not a bad billing invoice for Agents, but it is also an unlikely sale. What small business will pay $1380 per month for phone and email? A PRI at $550 plus maybe $100 for the PBX lease and $50 per YEAR for Google has you covered. Add in some Dropbox and Bingo!

This isn't to discourage you. It's to put a pin in the hype balloon, which is starting to annoy me.

You will have to sell upmarket. There are 83K businesses in the US with 100-499 employees, according to the 2009 US Census (the last year data is available). With 1000 cloud service providers in the US that will be a fun Red Ocean to swim in.

There are only 17,500 business with more than 500 employees. That 's the spot you would like to sell in but you would need to be connected or a white elephant hunter.

That leaves Agents chasing 20-99 employees - since that is a majority of the businesses in the US. Let's call the average 40. If you sell that business the full boat: Internet, Hosted voice, email and backup - the ARPU is worth it. The sales cycle will be longer. The deployment will require more input and project management than Agents are used to. (In fact, it is more than most carriers have ever had to do!!!) Post-sales support will also be required. So overall, it is a lot more work for a stickier client with more ARPU than you are used to. Are you up for that challenge?

Let's go back to the 8x8 example at $256 of ARPU. That's about a 9 employee shop. So you sell them 8x8 voice, cable modem AND another broadband service (like DSL or 4G or fixed wireless). You offer them Google Apps for SMB via NeoNova for some small change. Add in some Mozy Pro back-up (or Carbonite or other backup service that pays you). Next you try to get the cell phones - there has to be a couple that are corporate owned -- for a few more dollars. Don't forget the 4G data plan.

So you wrapped up the Internet Access, mobility, voice, some DR (disaster recovery), backup, email and office suite. After that, what software do they use? How about Conferencing? Do you see? You have to grab the whole wallet (or you can't make much money).

It has to become a lot like McD's. What do they do? A call center hits you first in the drive-thru with, "Would you like to try our ______ special today?" No. "okay. Order when you are ready." But don't forget "Do you want fries with that? or can we Super Size that for you?" It sounds cheesy but you are going to have to do it.

CenturyLink, XO, MegaPath and quite a few other carriers offer transit, Hosted voice and cloud services. It will all be on one bill, with one carrier to blame, with one throat to choke. It makes it easier to sell --- check boxes on an order form or site survey.

You better hurry because the MSP's like MindShift and others are already out there doing this.

When you consider that Parallels AS platform allows hosting companies - like Intermedia.Net - to sell, bill and deploy these services (Hosted PBX, email, storage, office) with a click on an online order page, spend this month - the last month of 2012 - deciding what your plan is going to be for 2013. While I hate the hype, many of your competitors are already targeting your customers. Selling them a T1 will be easy after they sell them VDI or backup or Hosted PBX. Then what do you do?

Again, you have to do it but I wanted you to have a realistic view of what it was going to be like. You have vacuum up the services - all of them - heck, sell them office supplies if someone will pay you for it! Managed Print anyone ;)

Things VAR's Will Love About Selling Telecom

2012-09-28T18:09:02Z

As the carriers look to the VAR space as the new sales channel, I would like to tell the VAR community a few things that they will love about selling telecom.

1) Install dates that are fluid. Porting numbers happen at the whim of the carriers you are porting from. The FOC date (when carriers install circuits) will move without notice or at the most a day's notice.

2) Your current partners - HP, IBM, Microsoft or Cisco - have never snaked a deal from you, but in telecom it will happen often. Recently, one CLEC said no to quoting a Gig Network and carrier sales was in the customer the next day.

3) Commissions - every week the CFO examines the carrier's balance sheet and wonders why agent commissions payments still have to be made. In some cases, like InterNAP, they make the wrong decision and cut the agent program. You haven't seen that from your side.

4) Until recently, VAR partners weren't offering competing services. So you have Microsoft and the Office 365 monstrosity, imagine that every day from every carrier. A VAR offers Hosted email, so does the carrier. A VAR offers managed router and security, so does the carrier. Every day for every service, VAR's - and MSP's - will be competing head-to-head against a carrier, the so-called "partner".

5) VAR's are used to billing customers directly and now those bills will come directly from the carrier, interfering with the relationship.

This may sound sarcastic and even bitter, but with 13 years in the agent space, I have experienced this stuff as well as been told numerous stories by other agents. This is Telecom - and telecom is broken.

It has been 16 years since the Telecom Act that basically created CLEC's and the vast majority of them still do not have a smooth operation. Sad really, especially if you consider that at any time a giant like Google or even Microsoft could come in with a disruptive service and wipe it all out.

The VAR/Agent Comparison

2012-09-12T13:41:32Z

At Channel Partners Expo in Orlando for TCA. Our first member networking event last night went very well with a good sized crowd. Today we have the TCA's 6th Channel Chief Summit with guest speaker John Zanni of Parallels.

The top Channel executives and even the bigger Master Agencies are all chasing VAR's. And this show is so cloud themed an agent would be hard pressed to find a telco element, which I think leads to less Agents, but perhaps not more VARs, since they have their own shows, including DreamForce this week.

While taking with one channel head, he mentioned that the numbers guys always want justification to continuing paying on that line item called commissions. What does an Agent do that a direct can't do? It is this thinking perhaps that leads to VAR - value added reseller. The Channel would like more value add from Agents. Supposedly. But do they really?

I think not. For example, when I was consulting heavy for about 14 months, the number of quotes that I asked for dipped a lot. Many channel execs asked WTH? So they still have quota out gunning value.

Recently, a CLEC, who purports to have a big fiber network, wouldn't quote out a GigE fiber route for a consulting client. It was not a price issue. We were creating two diverse physical routes to Atlanta to two different data centers. This CLEC had the west route. They didn't quote it, but their Carrier guy showed up and sold it. So how was I not adding value?

I have news for the CLEC's and Cablecos: VAR's don't have these issues with their vendors. You want to compare VARs to Agents. Well, let's compare Carriers to other Vendors.

I was a VAR for three years. HP, Intel, Microsoft and Novell NEVER snaked a deal on me. CLEC's - as often as they can - and ILEC's even more often.

I never worried about commissions selling hardware or software. Why do you think VAR's want upfront? No need to track the commissions - and no holding it over company as Damocles' Sword.

Also, Cisco, Novell (at the time) and Microsoft are household names. It is easy to recommend household names.

So the next time you want to compare the two channels, maybe look at how carriers are different from vendors.

During the recession, I was at a Tech Data/Cisco event in St. Pete, where Cisco basically told their Gold Partners that they would help them through the economic slump. Cisco paid for audits for a year, so they would have data for when the economy came back and companies needed to refresh hardware. Cisco made certain that its partners wouldn't fail. Have you ever heard of a carrier doing that??

The problem that I have seen for 13 years (with a couple of exceptions) is that while the carriers talk about Partnership, it is mainly talk to get the unpaid sales force to sell their stuff, but when HP, Xerox, Cisco or Microsoft say partner, they mean we are in this together and we will help you succeed, because when you succeed, so do we.

Final note: if you want more value from Agents, where are the webinars or courses on network design or VLAN structure or Hosted PBX deployment?

It Isn't Easy Being an Agent

2012-08-01T02:57:26Z

Tonight at a networking event I met a former VZ employee - a channel manager for the last 5 years. He told me he was going to be an Agent to put his telecom knowledge to work to fund his life's endeavors. He kept going on about dabbling in the agent thing part-time. Picking up a project here or there. But "No Door Knocking or Cold Calling for me!" I finally hit my limit and said, "I'm going to be direct and it may hurt. Being an Agent isn't a part-time business - unless you want less than part-time results. It's a full-time gig plus some." He didn't take the hint.

He goes on about being able to help established agencies be successful. No specific examples. By now, he had me irritated. (He was a loud talker too.) If you helped agencies become successful, why not ask one of them for a position? If you helped agents be successful, why did VZ let you go? (Okay, that just may be because VZ has an awful channel program.)

Then he started dissing agents who take advantage of the compensation program by signing upgrades and similar activities that ILEC channel programs encourage for customer retention.

How can you work in the channel for 5 years and think it is a walk in the park to be an agent? He is not the only channel manager that ever told me that the grass is greener as an agent, yet didn't want to give up the salary, benefits and stability of a corporate job for the uncertain world of being an agent.

The take-away for me is that Channel employees might have an unrealistic view of being an Agent, which might translate to the perception that the commission checks are not earned in some cases. This misperception might be why the Channel Heads have to justify the commission line item on the CFO's balance sheet so often.

Good News from CenturyLink Channel

2012-07-10T18:21:05Z

Sat in on the CenturyLink Channel Alliance - Get back in the Game Roadshow in Tampa this morning. It was nice to see Stacy Conrad from Microcorp; Josh Anderson and his co-workers from Telephony Partners; Dale Tucker from CCA; and put a face to an old Qwest SE, William Hobbs, now a CCA Emerging Sales Technology Consultant (ETSC) for Florida. Hobbs did a nice job on Why VPDC and The Benefit of Cloud over Colo. The roadshow had 3 parts (Hobbs did part 2):

New Savvis-CenturyLink Phase II Rules of Engagment overview;
Cloud/Hosting Solutions portfolio;
Third Party Data Center Updates/E-Line;

Dale Tucker went over the Rules of Engagement, You definitely need charts and glossaries to follow along the categories and acronymns. Basically, colocation, managed hosting, virtual private data center (VPDC), public cloud, private cloud, and managed servcies (like Hosted Microsoft Exchange) are all available to the Channel to sell at full commission - unless you engage an account exec - then it is HALF!

For agents used to working with AE's, this will be a bummer. However, half is better than zero. Also, with the ETSC as your godfather inside the C-Link-Qwest-Savvis beast, you won't need the AE.

A lot of colo and data center business comes from the Channel.

And for those that do not know how to sell Colocation and Data Center, the TCA has done quite a few webinars, including Getting Your Arms Around the Cloud by Allan Watkins of Total Telecom Management n Atlanta and Let's Talk Colo, moderated by Khali Henderson of Channel Partners magazine and featuring Dany Bouchedid of COLOTRAQ and Chris Palermo of GCN.

Tucker did mention that Savvis is working on a sales certification for colo and hosting. This silo will be a huge focus for C-Link it seems, especially with 54 data centers

Hobbs spoke about not talking about the technology of cloud, but about the business side of cloud, especially cloud services like VPDC and Compute-on-demand. It's about right sizing the data center. It's about OPEX versus CAPEX. It's about DR/BC. It's about getting out of the IT business and back to their own business focus.

C-Link also has an initiative to light up data centers with C-Link network - wave, IP-VPN, MPLS and Internet Bandwidth. There are 154 data centers now. In Jacksonville, FL, C-Link is putting in a ring to connect CSX, Peak10, Colo5 and the C-Link data center on a metro fiber ring. C-Link is also connecting 4 data centers in Charlotte on a metro ring. AboveNet did something similar in Atlanta by connecting almost all the data centers on a metro fiber ring. Agents can easily sell ELine, IQ Port, Private Port and WAVE into these 154 lit buildings.

Hobbs pointed out that the integration is going well with CenturyLink-Qwest-Savvis.

All About Low Price

2012-07-04T17:10:52Z

I write about Low Price a lot.

While reading a trade journal, it got me thinking again about why this industry sells on price.

My thoughts:

You go low price because you either don't want to take the effort to sell or you suck at sales. [That's snarky but probably true.] I know there I times I don't feel like actually going through the whole sales process - discovery, questioning, needs analysis, probing - just to find out that the prospect is only concerned with price. It is annoying.

If you are a transactional agent (or a veteran T1 slinger) and you offer up 3 or more quotes, you are not selling. You are taking orders. There is nothing wrong with that. It IS how the telecom industry has acted since LDDS began discoounting long distance services back in 1983. But let's call it what it is.

Times they are a-changing.

If you just ask the customer for his bill or what he wants quoted or what he already has quotes for, you are order taking. There isn't a lot of value in that. Or a lot of commission.

I could see if you did that, then vacuumed up the rest of his telecom spend, but that's not what happens.

At the least, you could ask a couple of simple questions, like:

Are you looking for the cheapest? Or are there other factors at play?
Do you know the difference between broadband and dedicated Internet?

If you wanted to be a daredevil, you could ask these questions:

Are you worried about downtime or outages?
How important is reliability?
What does an Internet outage cost your business oer hour?
Do customers still order by phone? What would a dial-tone outage cost your company?

Remember that the prospect doesn't know telecom - that's your job - and it is your job to educate them about what they are asking for (versus what they need or want).

In managing salespeople, I sometimes think low price is about the thrill of the hunt - hunting for ink - on the way to the goal of Quota. In some cases, it is about reluctance to rejection as in "if I put forth a sales effort and don't win..."

Let's face it, offering the lowest price is faster. It takes some time to prepare to ask questions. As pricing is dropping, it takes more sales to make a living. Who is going to expend the extra time? It is easier to keep searching for the cheaper carrier.

It wouldn't hurt the Hunters to do some farming. By that I mean, upsell or cross-sell to your current client base in order to make:

the customer stickier to your business;
more commission/revenue;
yourself more valuable to the customer's business.

Even IDT todays makes its $1.2 Billion in revenue from a myriad of service offerings. It isn't all just LD revenue.

One last fact: the low price customers are also the biggest pain in the butt, which costs you time (time=money).

Agent Exclusivity

2012-06-26T14:06:52Z

There is a lot of talk in the Channel about Agent exclusivity to Master Agencies. Most of the talk is from Masters.

Telecom is an industry of short memory. We forget everything.

We forget that MCI left many agents high and dry when they filed the largest BK in history (up to that time).

We forget that telecom companies have a history of BK - Cogent, Above.Net, MCI, XO, Integra, Williams, Global Crossing, Birch, MacLeod, Winstar, Adelphia, Covad and the other DLEC's (see here and here and here). Over 60 companies have filed BK in our industry since 1996. We may yet see another round of that soon.

Now Master Agencies have not gone BK as far as I know. However, with the increasing pressure from carriers to hit quota quarter after quarter or lose commission points, it is only a function of time before Master Agencies have to "re-adjust" the commissions they pay agents.

Agents learned in 2002 that you cannot have a single source of income. Period. Look what happened with InterNAP just recently!

There are reasons to use more than one Master Agency - other than shopping commission points. I use one for AT&T only - and I have since I parted ways with my BellSouth agent.

My current Masters do not have a contract with MegaPath. MegaPath seems to have an offering that my clients might like. Should I ignore that or find an agency with a contract for MegaPath?

At the end of the day, I have to think about my business, my revenue and my customers. I don't put my revenue above my customers, but I do put it above my vendors and partners.

No one is making certain that my business is doing well except for me.

One other memory loss: there was a time that carriers had exclusive agreements (at least the ILEC's did). What did the Agents do? Set up a different LLC for each contract. There have always been ways around exclusivity. Do you we really have to play that game again?

Better than forcing exclusivity, how about giving your agents enough reasons (VALUE) that they won't look elsewhere? That's the real answer - for Masters and Carriers.

FINAL THOUGHT:

It is funny that this conversation comes at a time when traditional agents are largely being written off for VAR's as the future of the Channel.

The New Channel Myth

2012-06-21T20:54:19Z

The new myth about the Channel that everyone is spouting is doom and gloom. In Larry Walsh's latest, he talks about VAR's closing, vendors selling direct and other woes.

Here's some news for you: the Channel has ALWAYS competed with Direct for sales - VAR's and Agents. And we always will.

Can some of this stuff be sold via a website? Certainly. It ain't free though. A robust e-commerce website can easily cost $1 million to create and more bucks to maintain and update. It has to work on how many platforms - IE6-9, Firefox versions, Chrome, Safari and mobile? Then there is the SEO and PPC campaigns to drive traffic. Not free either.

In addition, shopping cart abandonment rate is 75%. So your PPC campaign is going to be expensive, while you figure it out and remove all the hurdles. (However, most companies never improve their website or work on the abandonment issues.)

And if it can be sold online, it can be price shopped online. So margins will be slim.

The ILEC's have tried selling small business services (and residential offerings) online. It is cheaper to get a customer to sign-up online as opposed to dialing a toll-free number. Humans cost 30x what a website does, but you can't sell complex stuff that way. Even Hosted PBX with number porting and extension-to-desktop mapping requires more than many can do with a website.

Telarus has GeoQuote. That has already powered how many agents to sell commodity telecom services like T1, DSL and POTS for the lowest going price.

VAR's have accounts with both Ingram and Tech Data. Many have sold gear by utilizing the API's from these VAD's to add to their websites. This has been going on since before 1999! It hasn't really affected the landscape of the Channel either.

One thing that will come into play: while that commission line item on the balance sheet keeps getting larger, the cost of direct sales is just as large and expensive. As benefits increase along with the cost of commercial real estate and taxes, the indirect channel looks more and more promising.

There is always attrition. Small businesses close. M&A occurs. New VAR's and Agents open up. It' show it always was.

Will order-taking decrease? Certainly. Mainly because the price points and associated commissions will be just too low to sustain an agent's lifestyle. It happened with Linksys routers and DSL modems too.

Will there be a massive re-boot to the Channel? Doubtful. It will be a slow, pain-staking shift that most won't notice.

A CLEC called me about hiring an old telecom salesman. The guy wanted $55K base and would only accept $1800 in quota. That just doesn't pay out. A $55K salary is really $75K with office space, benefits, taxes, cell phone allowance and mileage. While if he hits quota from month 1, he will bring in $140K in revenue in that year, but that's not $140K in net income to pay that salary. Compound that times 1000 salespeople and see if that works out. Now add sales managers, regional managers, national managers and executives - it falls apart pretty quick.

That same $140K at 15% is going to cost you $21K that year from an agent. See the difference?

We've seen Cbeyond and EarthLink fire direct salespeople recently to hire sales teams that can sell clouod services. We'll see how that works.

As I have pointed out before, cloud is not about replacement services and telecom sales are all about replacement services.

VC-backed and public companies won't be able to make enough sales with just direct and online sales to move the needle enough for thier masters on Wall Street (or Silicon Valley). And it will come at an big cost.
Yet how much M&A can you do, especially when you consider that M&A usually fails at achieving any of the synergies and benefits that the CEO puported to Wall Street?

Yeah, the Channel is going to change, but what else is new?

Transactional Agents Called Names

2012-05-04T15:56:44Z

Over at CP, the transactional agents are being called Prostitutes and Zombies in opinion pieces. I find that sad considering that the Zombie comment comes from a guy who whined because he couldn't make huge commissions off call centers any more.

The one thing that most of these opinions neglect is that the World of Telecom is all about Transactions. It is a business based solely on Arbitrage.

Going back to the Golden days of Long Distance, newcomers (the IXC's like MCI, Sprint and Qwest) entered the market by starting a price war. It continues to this day.

Every CLEC that enters a market does so by undercutting the ILEC. Rarely has this been done with any innovation. Even the DLEC's that launched the DSL market in 1999 - Covad, Rhythms and Northpoint - disrupted it with old Bell Labs technology. Bell Labs had discovered DSL technology in the sixties but did not introduce it until 1987. DSL wasn't standardized until 1998. Their whole schtick was to undercut the T1 market.

Hookflash pointed out today that not much has changed in telephone since 1876. Layer 1 may have changed from copper to fiber to radio spectrum, but voice is ultimately the same.

Even VoIP is just another example of arbitrage. Phone.com and other VoIP Providers - most notably MagicJack and Vonage - constantly talk about the cost savings of VoIP, using the technology as simply a replacement for the POTS line.

If you can sell it online, it is Transactional!

As a nation we might have been better off NOT breaking up AT&T. Bell Labs was a national treasure of research. And, look, the gang is back together. The Death Star still flies.

So when you jump on Transactional Agents, take a good look at your own business. You probably market on Saving Money. Where's the Value in that?

And don't give me the "It's how we get their attention" dribble. This industry is in a race to zero. It's the Wild West of prospectors looking for short-term gains -- and I don't just mean just the newer providers. Look in the C-Suite and the Board of Directors at any ILEC or CLEC. All they care about is short term gains.

So who is really the Prostitute here?

The CEO (and his other C-Staff) who lies to the FTC and FCC about a merger and cries about it later, because they didn't get their bonuses?

The Congressmen who take trips, meals and money to stay in office to maintain the status quo?

The CEO of a yet-another VoIP company, who is just out to grab some market share with an Asterisk-based switch?

Just because you sell some cloud services, doesn't make you a non-transactional agent. When you take a customer's telecom spend from $500 to $650 per month by upselling cloud, then you can say it. But if you take $500 per month in spend and shrink it, you are just as transactional as the Zombie - you just color it different.

Cable has come storming into this sector with nothing more than a price gouging grab at market share - which is strictly Transactional!!!

We are all going to suffer because of the Arbitrage mindset. Commissions will decline right along with price. It will be harder to make a living. It will be harder for the LEC's to hit revenue, so debt will cost more, eventually leading to BK.

We have too many players in this Industry and not nearly enough that are innovative or add any real value. And many that barely make ends meet. All of that just adds to the price war, which leads to more transactions.

So who are you calling names?

Basic Math for TNCI

2012-04-26T14:47:36Z

TNCI (Trans National Communications International) filed for Bankruptcy in October of 2011, owing Sprint ($5M), AT&T ($1.66M), Verizon ($1M) and Qwest ($1.9M). VZ and AT&T have liquidated CLEC's before for less than $2M. I'm not trying to be pessimistic here, but realistic. Commpartners was liquidated for less than $2M and AstroTel was forced to sell for less than $1M.

Other debt includes Citizens Bank of Massachusetts with a secured claim of $4M and USAC for $1.3M (that's USF funds they collected and did not pay to the government).

TNCI filed a reorganization plan, according to Channel Partners. This is where Basic Math skills act like a fan to the smoke. "In financial statements filed with the court, TNCI projects 2012 total revenues of $73.3 million. Of its projected $60.2 million in total direct costs, TNCI anticipated that agent commissions will account for nearly $8.3 million in costs." First off, $73M - $60M - $8M = $5M left over to run the business and pay back debt. Payroll, benefits, rent, utilities for a CLEC for less than $5M per year in Boston. Out of that $5M they have to pay back the secured debt to the bank and the USF money to USAC - a total of $5.6M. That's lean. That's the kind of math skills that got them in BK to begin with.

There is also the question of the commissions. At a standard rate of 15% on $73.3M, the commission payments should be $11M not $8M.

I just don't see how this works out for the 600+ agents. The customers will be fine either by going direct to the underlying carrier (who wants to recoup losses and maintain revenue streams) or moving to another carrier. Hopefully, agents are working on that now.

Get Off the Agents' Back

2012-04-12T21:48:50Z

These were my thoughts on the 2011 CPZ that I was a panelist on. These are my thoughts as a reaction to the latest CPZ.

Surprisingly, not everyone read my post about how the whole telecom eco-system is shifting. Agents, Masters, Carriers and Cloud Providers are all going to experience a Shift.

Did you ever see Shift Happens?

Considering all these factors - Quota, Debt, declining revenue, pricing pressure, and flat markets - the future does not look bright.

Most of the people who were talking on the CPZ 2012 video about transactional agents are not actually agents and to my knowledge never have been.

Does a subset of Agents shop masters? Probably. On the other hand, I know masters who shop to sub-agents with "I'll give you another point or two to go with me." Part of this is due to the weight of quota on the Master Agency business. Master Agents are under a tremendous pressure to hit quota to keep the support level and sustain the commission revenue at its current level. So don't get mad at the Sub-Agent when Masters are doing it too.

Value and Telecom

The whole Industry talks about VALUE, but can they describe it? No. Our Industry has been a series of me-too, arbitrage bandits selling the same thing: UNE-P, Integrated T1, SIP Trunking, and today it is MPLS. It's all just similar looking and sounding services. How does an Agent or a Prospect tell the difference?

Branding is non-existent in our space, except for the Duopoly of ILEC and MSO. You create value with branding. Other value comes from benefits and differentiation. We are lacking the Differentiation.

Without value, it becomes a commodity. Commodities are price shopped. Tell me the difference between any two Internet T1's or any two SIP Trunks.

Carriers are Unhappy with Agents

Just because Agents don't act like you want them to doesn't mean they are all in the wrong. You built this current eco-system. Now you want the ship to turn on your say so. Easier said than done, pal.

Truthfully, have you done all you can to give Agents the tools they need to sell your product? Not to be repetitive, but have you established your value statement? Do you know who the target market is? Do you know what triggers the sale? Who is the actual buyer? Answer those questions first.

The Industry wants the Channel to go upstream, except they don't. By that I mean, the carriers want revenue. Period. It's all about quota. While they might want an Agent to sell MPLS, they aren't turning away T1 business either. However, they want the Agent to turn away from that business to go upstream. Yeah.

Keep in mind that it might be that the marketplace doesn't want to go upstream either.

Right now, Cable is doing an excellent job of disrupting the market and stealing business with cheap loops.

At a CLEC training, it was stated that cable would own the sub-$500 business. It sounded like they were conceding it. The cablecos will become the de facto ILEC's. I have no idea what the ILECs are going to do. Only the 2 RBOC's have a cellular business. And CLEC's will probably run into too many problems to continue to sell network access.

In that same training, the CLEC stated they wanted Multi-site, multi-access business. Unfortunately, everyone wants that business. Masergy, Smoothstone, EarthLinke, Megapath, Netwolves, Wind, CenturyLink - just to name a few. To hear carriers talk, I guess, MPLS is the new Integrated T1 (in every way). They say there is more margin in it. No there is not. There is more revenue per customer, but they will have to give away margin to (A) hit every site and (B) win the business in a hyper-competitive marketplace.

No one buys the way most service providers sell either. That's why the carriers are always searching for Consultative Sales Professionals. The whole industry sells what they want - and it is followed up by a series of me-too. Just because one CLEC is selling Managed Security does not mean that the marketplace wants it or will buy it or that it will want it delivered that exact way. It also doesn't mean that the next eight CLEC's or service providers need to market that same offering. Do we know what the marketplace is expecting?

How Things Can Shift

One thing that could cause a big shift is if Tech Data becomes a Master Agent. With TDMobility, they already have the platform and are selling cellular in a Master Agent model. Plus by offering mobile device management, TEM and all that hardware, they have caught up to the big Masters. CDW could become a Master Agent if they wanted to - and they might have to in order to sell more hardware.

Dell could become a Cloud Provider. As it stands now, they are an MSP Enabler. And Dell is selling CDN now! It will be interesting to see what Ingram and SYNNEX - both betting on cloud services for their future - do to not have to compete with Dell head-to-head, while also competing with Tech Data.

I don't think that most telcos will make the shift to managed services and cloud successfully. It's labor intensive. It doesn't scale like telecom. They think they can automate everything, but that only works for cookie cutter stuff. Plus they can barely deliver telco services without a headache. I think MSP's will win this war. Any company that can integrate apps (like CRM and invoicing with Exchange and Sharepoint) will be successful. If they partner with VAR's who can handle the on-going maintenance and support that all this technology will require, they win big.

Can the Channel change to become Trusted Advisors? Probably not all of them. Selling Cloud is different than selling telecom. Period.

The Channel basically sells replacement services. Here are some examples: VoIP for POTS: SIP Trunk for PRI; Ethernet for T1. Each transaction is replacing like for like. Even MPLS is just a replacement for Frame Relay, ATM and IP-VPN.

That is why selling Hosted PBX and other cloud services are so challenging: It is not a simple replacement. It's not like for like.

The sales process for selling replacement services is pretty easy. When the sale becomes about business process change or fork-lift upgrades (like Hosted UC or Virtual Desktop), the sales skills are different. The sales cycle is different - and longer. Provisioning takes longer. Ultimately, commission payments are much later.

This is really important to remember.

Selling Cloud and Managed Services will not just be more of a challenge, but it may be less satisfying. Why? Transactional sales types are motivated and driven by quick hits and a lot of ink in a month. Extended sales cycles are less motivating to this type of sales person.

Moreover, as commissions decline with the price decreases, agents have to sell more and more to maintain their revenue goals. Shifting to new products, new sales skills, and a different sales approach will be a huge leap, especially without training, a financial cushion, a deep desire for change, and vendor support.

Agents are not FARMERS! They are Hunters! They do not do Account Management, cross-sell or upsell to the base. Smart agencies will higher a couple of farmers to work the customer base and perform account management.

All of this makes me wonder who will be the Agent of tomorrow, who will be grooming accounts and performing consultative selling of complex solutions to their customers?

An Interview with StartMeeting

2012-03-19T17:40:38Z

I had a long talk with Greg Plum, new VP of Channel Development at start-up, SmartMeeting.com at ITEXPO East. He agreed to a short interview.

What's the special sauce for StartMeeting?

StartMeeting incorporates components of web conferencing that have become familiar and trusted, while introducing some new features, including fully integrated toll, toll-free, and HD VoIP audio options, custom greeting and on-hold music, and a fully customizable meeting wall for meeting hosts, all at price points well below the industry.

Why should agents and VARs choose to sell StartMeeting over other web conferencing options?

StartMeeting offers a simple, intuitive, and effective communications solution. Our aggressive pricing, starting at $19.95 per month for a 50 seat license, coupled with a reliable, fully-integrated, audio bridge, will get a prospect's attention. Our differences, including HD audio, social platform integration, and our customizable meeting wall, will make them loyal, long-term customers. Since ease of sale is paramount to the agent, our proprietary provisioning system affords the agent 80 pricing scenarios, paying commissions ranging from 25% to 35%, all via a promo code matrix. It doesn't get any easier than this.

Name one sales trigger for web conferencing.

When a prospect tells an agent they are using ANY web conferencing solution, the agent should recognize this as an opportunity to win this prospect as a customer and save them money by offering StartMeeting. This could also be used to get the attention of a seemingly impervious prospect. Agents can now show them something different... Disruptively different.

CALL TO ACTION: StartMeeting will be offering free demo accounts to agents and VAR's.

Zayo Buys AboveNet

2012-03-19T15:31:01Z

It was a big surprise this morning to hear that Zayo bought AboveNet for $2.2B. My first thought was "Where did Zayo get the money?" I mean, the Dealbook writes, "As of Dec. 31, Zayo had about $25.9 million in cash and short-term investments, along with $682.7 million in long-term debt. It currently has a credit rating of B2." Apparently, Zayo backers and bankers went into their reserves to buy AboveNet. I guess the heady days of Bain LBO is back, thanks Mitt! (LBO is leveraged buy out).

AboveNet was one of the few fiber shops that had its act together. They know where their fiber is. They can quote it fast. They can deliver on what's quoted. And they knew their sweet spot. Except for US Carrier and FiberLight, no other fiber CLEC's that I have dealt with can say that. (I'm waiting over 6 weeks for quotes and maps from IFN and L3.)

This will be Zayo's 21st acquisition. I hope the integration goes well, because in the past Zayo has had issues with their knowledge of fiber assets. It has improved. Google earth!!

Zayo doesn't sell via the Channel - direct sales only. Via email from Dan Caruso, when asked about the Channel this morning, "I am sure we will be supportive of efforts Abovenet has underway."

Rob Powell likes this deal, even at 9.2x projected 2012 EBITDA. I think scale for scales sake is the problem with telecom. Mounting debt combined with shrinking prices does not make for a healthy business. Zayo and Level3 are buying up a lot of the competition, but that hasn't really increased pricing because Cogent and resellers are still there dropping their pants to win any revenue. And the ILECs are in a price war with the cablecos.

I mainly sell transit and transport. Fiber companies are my bread and butter. It is certainly easier to just check a single fiber map, as opposed to a number of them. Here's hoping for a smooth integration.

DEBT

The debt in this industry is crazy. AT&T and VZ combined have $105 Billion in debt. The top 5 MSO's have about $100B with Comcast at $40B. Level3 is at $8.5B. WIND has $9B. CenturyLink has $22B. When you are paying 7.75% on those notes, that's big bucks! Zayo already had $682.7 million in long-term debt; now it will have about $2.9 Billion in debt on approximately $900 million in annual revenue.

I still think that taking Cogent out would be a good move for L3 or someone. You get fiber, revenue, lit buildings and take the low priced carrier out of the market. It did take almost a year for AboveNet's investors to sell, so maybe in 3Q or 4Q. Most buyers - L3, CTL, WIND - have already bought something and are still refinancing debt as well as integrating what they bought.

For the Channel, this mounting debt is scary. Why? Because the CFO looks at the line item for commissions that grows every quarter. He wonders why he has to keep paying it, The CFO thinks, "If I wipe that line item out, our books look great." That's the scary part.