Everything is Changing, No One is Happy

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

Everything is Changing, No One is Happy

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????


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