Commissions by Common Core Math

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

Commissions by Common Core Math

I listened to a presentation recently that suggested that new telecom agencies are not opening up (or at least not faster than closings and mergers). I was skeptical until this weekend when I was doing referral checks.

One MPLS network is worth a lot more than 3 x 10MB DIA sites. When companies talk about moving up to mid-market, it is primarily that the size of the deal will make it worthwhile. The saying goes that it takes the same amount of time to sell 100 seats as 10 seats. That saying is said because it is true most of the time. After 7 phone calls and 40 emails, you eventually say screw it on a 10 seat deal. For 100 seats you will stick it out longer and push through the inertia of the deal.

Math: 100 seats is about $4200 and will ride on good plumbing, while 10 seats will be about $350 and ride on bad plumbing. It is almost a losing proposition when you think about all the project management and post-sales issues. Even at 20 points, that $70 check is going to look puny until you get 30 of them.

Multi-location deals are where the money is. You can bundle more into a multi-location deal - or at least farm it later for more share of the IT/telecom budget - with items likethe MPLS network (or WAN circuits), voice, security, conferencing, hosted email, backup and maybe some SaaS. It makes for a very nice deal.

The lag time between starting the sale till ink, then from ink until commission check is a really LONG time. And if that is a 10 seat deal or a 10MB Internet pipe, you are going to be staring at the check (months later) and thinking: Why am I doing this?

You will need long term thinking or you will start looking for a W-2 position right away. I saw many telecom sales people jump into agency and jump out because of the money. Couple that with as a newbie agent you have to do sales, paperwork, follow up, proposals, project management, quoting, etc. all by yourself. It makes for long busy days - that result in that first tiny check.

VARs don't like telecom because the puny check comes with so many strings that can mess up their relationship with the customer. Voice service being a bigger can of worms than data.

I have a voice deal now - SIP trunks on fiber and POTS lines for alarms, etc. - and the ILEC keeps stalling. techs come and go but haven't installed the copper. The certificate of occupancy for the building requires dial-tone. Three inspections were failed due to FOC dates that are meaningless. It is crazy the number of people involved in the project - yet no one has responsibility or knows what is going on. As the agent, I look like an idiot. It is a demonstration on why VARs don't want to do voice.

When you look at CDW, they have a telecom agency that produces quite a bit of commissions, but it is a tiny fraction of the $12 billion in revenue that CDW did in 2014. It kind of explains why Tech Data ($26.8 Billion) never really invested in the relationships with Cbeyond, Telovations, XO and Microcorp.

Commissions are declining along with revenue and prices. Long term that will have an effect on the sector.

Multi-location businesses and enterprises are the golden goose that everyone is chasing. It used to be just the RBOCs but now every service provider has turns its attention to this target. Red Ocean.

Makes me wonder what will happen with SMB, especially the VSB (10 employees and under). Self service?

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