Peter Radizeski is Founder and President of RAD-INFO INC. He is an accomplished blogalyst, speaker, author and consultant. He has helped many service providers with sales training, marketing, channel development and business strategy. He is a trusted source of knowledge about the telecom sector. His honest and direct approach make him a refreshing speaker.

Look for his innovative ideas and analysis of current technology on his blogs.

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Like Cars in the 1950s

Did you know that from 1920-1960 there were hundreds of US auto manufacturers? Then it collapsed to just 5 – Ford, GM, Chrysler, AMC and Studebaker, according to Wikipedia.

Most of the collapse was due to the Big 3 claimed 94% of the market by 1955. So a hundred other companies were competing for 6% of the market.

And it was a Big Market. “A total of almost 58 million cars were produced and sold during the 1950s by the American manufacturers. Compared to the total population of the United States by the end of the decade, 179,323,175, that is almost one new vehicle for every three living persons of all ages.” [wiki]

It reminds me of the cable industry. There were hundreds of mom-and-pop cable companies. Some merged to be regional; some sold out. Now there are 660 cable operators according to NCTA, but it is mainly just 4 with majority market share – Charter, Comcast, Cox, Altice.

CLEC numbers have dwindled. RBOCs are back together in 2 buckets – Verizon and AT&T. Frontier, CenturyLink, Windstream, VZ and AT&T have the lion share of the business telecom market.

Hosted VoIP/UC is a lot like the auto industry in the 1950s. Only the product is so similar as to be indistinguishable. At least, cars had distinguishing features like car doors, lines, looks, radio, interior. VoIP pretty much all looks the same. Some of the mobile apps are starting to change that a little.

Some of it is scale. Once the Big 3 got big, costs go down, name recognition goes up. The smaller guys cannot afford to make one-tenth the number of cars at the same cost. Vendors give volume discounts but when Ford is selling 12M cars and Edsel is selling is 108 thousand! there will be cost differences. It is one of the things that smaller ISPs don’t grasp. They want to resell from AT&T or Verizon for cheaper than their vendor. It doesn’t work that way in any industry. Do you think Firestone sold tires to Ford for a lot less than Edsel?

The problem with cable/pay TV right now is that the OTT product is a little cheaper and much better at meeting the needs of the buyers. Think Netflix or Hulu.

There are so many analogies but look at Italian food. Chains with Italian food like Olive Garden and Carabba’s appeal to masses who just want food that looks Italian and is affordable. The foodies want the authentic food. Still others want pampering and service etc. VoIP providers are shooting for the masses. They have a mass market product for the masses. They are Olive Garden. However, in technology today, there isn’t really a MASS market. There are many market segments with different types of buyers with varying needs and desires.

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Only so many brands (I use that term loosely in telecom) will dominate the mass market. Everyone else will be niche or fringe (like the MSO sector or even the auto industry).

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    Some Thoughts for the Day (Part 2455)

    Despite growing 93 percent from a year ago, Microsoft’s Azure hasn’t made a dent in Amazon’s share of the $10 billion cloud market, according to Synergy Research. Amazon’s AWS held steady at 33 percent of the worldwide market share of cloud infrastructure service providers in the first quarter, according to Synergy. And though it grew just 43 percent in the first quarter, Amazon’s cloud revenue is more than the next five providers combines, Synergy estimates.

    It isn’t a sprint. It isn’t about just growth. It is about steady growth and customer experience. Also, product-market/fit.

    On LinkedIn this morning, there were at least 3 posts from channel managers closing business for their partners. If the channel managers are closing business, that is a better use of time than recruiting. And maybe a trainer is needed to teach sales skills and product to both channel managers and partners to keep those skills and knowledge fresh.

    The other topic on LinkedIn this morning: SD-WAN. All generic info being shared under the umbrella of the vendors. This is not a good start to content marketing. This is not a good start to branding and positioning.

    Seth Godin is giving a 100 day online marketing seminar. Take it!!!!

    CenturyLink data centers were acquired by a group of private equity firms (Medina Capital and BC Partners) for $2.8B. This group will combine the 57 data centers with four cyber-security and data analytics portfolio companies to form Cyxtera. (Who picked that name?) The CEO of Medina Capital will be running the new firm and he used to be CEO of Terremark.

    Verizon closed on the sales of their data centers (formerly Terremark) to Equinix this week. Windstream sold theirs to Tierpoint a while ago.

    The divestiture of data centers by Windstream, Verizon and Centurylink does not represent a bad position for data centers. It means that the telcos didn’t have the skills to leverage DCIM. The data center market is hot and growing. Inter-connection, peering, colocation and cloud computing infrastructure (IAAS, PAAS, VM, Hosting) are all in demand right now. Data center construction is growing by 8% per year.

    Polycom was acquired by a PE firm. Many top execs have left. One went to Star2Star. This week the CMO went to Intermedia.Net.

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    The Red Velvet Rope

    Popular nightclubs have a red velvet rope next to the line outside. Outback Steakhouse did better when there was a line outside. Everyone wants to go to the popular place, the in place. Today, the VIP Room or VIP Experience are hot luxury items. So why is your channel program all about recruiting with a mirror?

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    By that, I mean, if you can fog that mirror, you are a partner.

    Shouldn’t partner programs be more like the NFL or NHL draft than an army recruitment office?

    Wouldn’t it be better to not sign up everyone?

    It would certainly help providers’ partners if there was demand for the service offering and if there was just a handful of partners to supply that demand. Instead we have little demand* for the services and everyone can be a partner.

    That is the VAD theory, because a value add distributor is similar to a store. They can carry anything. They are in logistics, warehousing and distribution. That is all the value they bring. In stock or not?

    On the Master Agent side, I just don’t understand the signing up of 20+ UC providers, 10+ data center providers and 10+ Microsoft Partners.

    For perspective, USLEC had 26,000 clients when Paetec bought them; Cbeyond had 51K when Birch acquired it; 8×8 has 48K. These aren’t large numbers. “In 2012, according to U.S. Census Bureau data, there were 5.73 million employer firms in the US. Firms with fewer than 500 workers accounted for 99.7 percent of those businesses, and businesses with less than 20 workers made up 89.6 percent.” [SBE] The sweet spot for businesses, according to CompTIA, is 10-100 employees, which represents a 20% slice of the overall market – or 1.8 million businesses. FYI, 50K of 5M is 1%.

    What’s my point? No one is crushing it (or ever will). A lack of funds, crappy marketing (if any), no focus and flawed strategy that is poorly executed are all factors that mess with success in telecom. If AT BEST you are going to get 50K businesses, do you really need 450 to 2500 partners signed up to hit it?

    Wouldn’t providers do better with the zealots?

    Verizon and BellSouth/AT&T used to be exclusive. Partners could only sell their services. It worked out well for both parties. It meant there was focus, specialization. Co-selling worked too.

    By signing up every master agency, vendors think they get access to more partners. They don’t. Most partners use 5 (five) master agents. VARs use at least 2 (more likely 3) different VADs. So by signing up more partners, vendors get their logo in more places, but they don’t get more partners. In fact, what they DO get is to fork over more dollars for events.

    The model can’t last much longer. And if they did the numbers over the last even 4 years, they would find that Pareto knew exactly what he was talking about. Also, that the amount of busy work given to channel managers is just piling up. Hard to hit quota when bogged down with recruiting, quoting, selling, reporting, funnel and a hundred other things.

    What vendors confuse is exposure for demand; logo placement for marketing.

    I’ve written about it often and enough. Where’s the competitive analysis of the marketplace? Who is your target? Why do they buy? Why YOU and not THEM?

    It is very different with network. Lit buildings and fiber routes are the factor. You don’t have that with managed services or security or cloud. The limiting factor for voice/VoIP/UC is LNP which has mostly been solved (except for pockets of independent IOC territories).

    Put up the red velvet rope. Sign up, train, on-board and work with partners who actually want to work with you. And limit that. It builds up the relationships that you have. It makes your partners stronger.

    It isn’t going to limit vendor revenues, because vendors are probably quoting and saying YES to stuff that they shouldn’t be. Vendors are NOT getting deals that they would like to – or that they built for – because they are too busy chasing every single partner and every single opportunity. In the process, the vendors are diluting their message (brand) and wearing out their channel managers. But hey what do I know. I have not only seen this playbook, everyone has a copy of it, and yet no one is winning using it.

    *DEMAND = after 15 years, UC has only penetrated to 29% of the market? CLECs have been around since 1996 and can’t get more than 1% of the market – in 20+ years.

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    Cloud, IOT and DC Tidbits (Part 2454)

    Tidbits of surveys from the 451 Research and other studies.

    Cloud

    Cloud adoption remains strong, with 60% of respondents indicating either Initial Implementation (31%) or Broad Implementation (29%) of production applications. Just over a quarter of the respondents are either Running Trials/Pilot Projects (15%) or Discovery and Evaluation (12%).

    Respondents were asked to pick their top cloud computing related projects over the next 12 months and Cloud Security (37%) topped the list followed by SaaS for Application Modernization/Migration (33%) and Technology/Infrastructure Refresh (32%) was a close third.

    “The [451] survey also asked if organizations are using professional services for their cloud enablement and it turns out that they are almost evenly split, with 41% indicating that they do use professional services – while the other 59% said they do not.

    451 Research reports from HERE, HERE and HERE.

    IOT

    Compelling Business Need (52%) was the top driver for increases in IoT spending while another 48% cited Improved Daily Operational Efficiencies second, and Respond Faster to Customer Needs (43%) was third.

    Currently for the vast majority of respondents, 87% said they did not have a dedicated budget for IoT, but rather it is part of their overall IT budget. In contrast, only 13% said they have a dedicated budget for IoT.

    IoT presents new deployment challenges, so respondents were asked about their key IoT-related technology priorities. IoT Security (47%) tops the list, followed by Big Data Analytics for IoT (34%) and IoT Infrastructure Equipment (31%).

    IT Pain Points

    For those respondents that are adding dedicated staff in 2017, the top skillset they are looking for is Data/Analytics (70%). Security (55%) and Cloud Computing (55%) are tied for second and Network Edge/Perimeter (45%) is third.

    According to 48% of respondents, Cost/Budget is the chief IT pain point, followed closely by Responding Effectively to Changing Business (45%) and Security Issues/Concerns (41%).

    Data Center Priorities and Pain Points

    Respondents were asked how they would address a shortage of floor space or power capacity within their data centers. An external fix, to Utilize Off-Premises Public Cloud Providers (37%) topped the list, followed by two internal initiatives: Consolidate IT Infrastructure to Accommodate Power and/or Space Availability (34%) and Expand an Existing Data Center (26%).

    Respondents were asked about their highest-priority projects for data centers, and Improving Existing IT Asset Utilization (48%, up 4-pts) remains at the top of the list. Data Center Consolidation (28%, up 2-pts) is a second. Upgrading/Retrofitting an Existing Facility (20%, down 3-pts)is in third place.

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    LEOSAT Building MPLS Satellite Network

    Ronald van der Breggen, Chief Commercial Officer at LEOSAT, agreed to an interview after WAN Summit NYC that we both attended.

    RAD: What does LEOSAT do?

    Ronald van der Breggen: LEOSAT is launching an MPLS network in space at 1440 km altitude. Once accessing this constellation of MPLS routers (mounted on satellites), we can carry traffic from anywhere to everywhere with lower latency than fiber and with capacities in the Gigabit range. Whether one wants to go from an Oil rig in the Gulf of Mexico to a mountain top in the Himalayas or from the middle of NYC to Abu Dhabi, this constellation will allow you to setup the connection almost instantly with a performance and security that exceeds fiber.

    Interesting that they would setup an MPLS network now when everyone says MPLS is dead.

    RAD: What did LEOSAT expect to get out of WAN Summit?

    Ronald van der Breggen: Satellites are traditionally perceived as slow and expensive. So first and foremost we wanted to change that perception to one of satellites ‘providing real solutions for global data-networking’. LeoSat can e.g. help Telecom operators to connect their global customers faster, help them in providing ultra-secure networking (LeoSat carries traffic physically separated from terrestrial networks), help them with connecting mobile sites, off-shore sites and sites in harsh environments. All of this can be done either as a last mile solution or as a more secure end-to-end solution. The list of options goes on and on and working with resellers and customers in Maritime, Enterprise, Media, Government, Oil&Gas and Mobile, we’re enthused by hearing so many new application areas on an almost daily basis.

    Ronald van der Breggen: At the WAN Summit, we enjoyed a lot of enthusiastic responses that lead to quite a few follow up meetings.

    RAD: How is latency faster on a satellite than on a terrestrial network?

    Ronald van der Breggen: Latency is indeed a lot lower, NYC-Tokyo is under 100ms, whereas terrestrial is 150-170ms. Even if a straight cable were built, we’d still be 20ms faster. As light traveling in a fiber optic cable travels at 2/3 of the speed of light, we start showing latency advantages when cable length starts exceeding 5000 km. Every satellites adds roughly 2ms in latency (conservative estimate). For extra proof read the Leosat FAQ

    A press release that he sent to me: LeoSat Enterprises Contracts First Customer: Faster than fiber: Leosat’s lowest-latency solution expected to revolutionize data connectivity in financial trading sector.

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