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UCaaS Tidbits March 2023

The analysts talk about UCaaS HERE.

Th Avaya bankruptcy: they all seem to take it at face value and that it will all go according to plan. I think it will go more the way of the Windstream bankruptcy, where the banks that just gave them unsecured loans and the fraud will throw a wrench in this deal.

RingCentral will make out because they have a seat on the Board and will be putting ASO on Avaya paper. That relationship changed. Enterprise customers cannot easily move. They want Private Cloud which they can get from NEC, Mitel or Rackspace.

ZOHO enters the UC space. Zoho’s CRM and productivity suites have 30M users.

This was the most interesting Question: “Webex sees a decline in collaboration revenues (-10%) – are we really seeing a reduction in online meetings and collaboration as Cisco’s CFO suggests?”

Microsoft Teams is killing it. There could be real explanations for this decline: (1) Businesses with multiple collab apps are now moving to one. ZK suggests better packaging for WFH sales would help. (2) Some of this could be price compression like Jon Arnold mentions. Or the way Cisco is bundling/discounting Webex. (3) It could actually be a sales decline. Webex is a weird resell for the CSPs that used to run Broadsoft. There is a licensing server. They have to jump through Cisco hoops for certification. AND they don’t actually run the application, Cisco does. That isn’t a lot of incentive for many CSPs to push Cisco. CallTower is now advertising Webex, Microsoft and Zoom.

UCaaS was a solution during the pandemic, when people were on fire and needed anything to put out the fire. Today, we still have Work From Home, yet selling UCaaS is harder and slowing. Why?

The key to winning for UCaaS players is really about integrations and packaging.

Partners can still make money the way inter-connects did despite the fact the PBX box resides in the cloud. It will be the local support, integrations, training and upselling of functionality that wins the day.

Jon Arnold says that no one goes into UC to make money any more. They do it to make their customer stickier. That doesn’t bode well for the pure plays.

It is Fundamental

Sales is like sports: it is based on time management and fundamentals.

Time management is vital to a salesperson’s success. You either manage your day or your day manages you – and you won’t be hitting goals that way.

There are so many things to do from admin tasks, CRM data entry, Prospecting, Meeting, Networking, etc. that if you don’t black your time well, you won’t get much done. Managing how you spend your time is the magic of sales.

Time is Money. And we all have the same number of hours, so get efficient and block time for responsibilities.

On the other side of the coin is fundamentals. Meet, Ask, Quote, Close. The most important part of that is the ASK. If there is one area in the sales process that you can improve on to become very successful, it is Discovery. WHY? How? What?

  • Why are you upgrading bandwidth?
  • What websites do you need to get to with less latency?
  • How are you securing that Internet pipe?

The one who asks the best question wins!

You can certainly transact business to win the business, but if you learn about the business and where it is going, you will get more wallet share as well as referrals.

If you can bring together a multi-vendor solution or a single bill solution, you are ahead of the pack. This is the magic that Partners bring. Yet it still comes down to how well you do Discovery.

Deals sit for a long time when the sales rep doesn’t really understand what Pain they are solving or Why the customer is making a change or what Outcome they are looking for.

Without the WHAT/WHY, even follow-up is dry.

Hard to enroll someone in a solution when you don’t know the Why or the What. Yet many sales reps do a very poor job of discovery.

Be Prepared. Ask great questions. Be Interested. Listen for Pain. Probe. Make the time spent with the Prospect count!

These are the basics. We have to improve our sales fundamentals.

UCaaS Sales Snapshot for 1Q2023

UCaaS sales are slowing, especially to bigger businesses. The national average of 13 seats seems to be holding.

The free phone promotions are back.

The SPIFFs are getting bigger.

The only interesting announcement was from Broadvoice with integrations into Zapier and Webhooks. This is where the differentiation comes from: Integrations. This is where the efficiency comes from. This is where the hook comes from.  [Try to remember that UCaaS is just software; telephony is just one of the things it enables.]

There has to be a reason to make a move to cloud communications, beyond my PBX broke (the #1 reason).

I know you are tired of hearing me say this, but more marketing has to be like Weave. No talk about an acronym; just outcomes!

The ROI and TCO stories alongside the Use Cases of business outcomes is what is needed to get businesses to make the move to cloud comm.

The only reason a 9 seat deal fell in my lap was because buying 3CX had too many upfront costs. OPEX versus CAPEX – an old tale.

The CAPEX for the PBX is between $3K and $5K, but then there is maintenance, software assurance, telephony and installation charges. They don’t get all the bells and whistles that a cloud communications solution offers like mobility, softphones, voicemail-to-email, call flip, simul ring and more.

They don’t get the collaboration piece either. File sharing, Presence, chat/messaging, SMS and so much more.

But they don’t even know any of THAT is available unless you TELL them!

When they shop for a PBX, many buyers are still thinking about the buying experience 7 years ago when they last purchased a phone system. And they think it is still JUST a phone system. Educate them on what is available.

Remind them of the  business continuity and disaster recovery features of cloud comms.

Hey, even putting them on a SIP Trunk with all of their DIDs offers them some DR effect, as they are halfway to cloud comms at that point.

What do they do for conferencing? Audio, web and video? Do they use Slack? Zoom? MS Teams?

Discovery is about finding out. Not just let me see the phone bill. Let’s discuss all the ways that you communicate. Would you like that in a nice, neat single app?

Are they bouncing between apps? Would one solution that encompasses all of it make it more efficient? Easier to manage?

Who handles licensing? Who is checking to see if there are licenses being paid for (by employee credit cards) that pay for apps that could go towards a single platform for the whole business to run on. In a belt tightening, these subscriptions are part of the TCO calculation. The extra seats or circuits (like copper pairs from the mid-2000s) or fax or POTS lines are all payments being made needlessly.

We need to actually sell. That means Help, Educate, Discover and Impact Business Goals.


Did the First Domino Fall?

Bluewave Buys SinglePoint from Soterra Capital. In 2016, Soterra bought Sky Technology Partners, SinglePoint and Palladium Communications Group. Maybe one of the earliest roll ups of partner agencies. Soterra flipped that to Bluewave.

This could just be a blip. Or this is the beginning of investors seeing very little return on their investment and looking for the exit doors.

Partners are quietly talking with one another about the mess that is the TSB/TSD space.

There is no loyalty left. There is some anxiety.

I have expressed how hard it is to work with my TSBs. How hard it is to get paid from any of these PE-backed firms.

They have too many vendors that they no nothing about, have little contact with and have even less back office support for. How does that work?

At this point the TSB is just an event planner and hopefully a commissions broker. I know they will argue with me about their value, but maybe the top 10% of aligned partners can see it, but the rest of the partners can’t see it.

I can tell you from partner calls that most partners who have sold have disappeared. Swallowed up in a sea of PE dollars, “integration”, “synergies”, “game-changing”, and paradigms that have shifted.

LinkedIn is filled with events that are absolutely worthless for the vendor, the partner, and the customers. Golf, sporting events, dinners, cocktails – WOW! It is fun, but is it getting it done?

I don’t think many are paying attention to the Marketplace chatter, where the partners become Affiliates. Remember the days of Linkshare and Commission Junction (circa 2006)? Yeah, that will be AppDirect. Don’t believe me? Read the press release from the TBI acquisition and notice the verbiage. No mention of telecom or telco. Lots of talk about customers. AppDirect just wants the customers. The partners are just a pain in the ass in the way of the marketplace. They just need the partners to send the links to their customers, so they can go buy a license for Dropbox.

Several vendors are re-examining the MDF spend. What happens when the one of the only three revenue streams of the TSB declines sharply? Trouble.

The TSB has 3 revenue streams: commissions on a 70-92% split; MDF; and direct selling. The largest budget items are payroll and commission payouts.  The payroll has to be obscene with hundreds of programmers (and not a single UX Designer!), back office, vendor relations for  a 1000 vendors, commissions team, engineering, executives and channel management.

FYI, the average UCaaS sale size in 2022 was 13 seats. At $20 per seat, that is $260. The partner gets between $182 to $239. Put another way to process that order and collect the commission the TSB keeps between $21 and $68. Do you know how many of those orders you have to process, project manage and collect on????

My estimate is that at least one of the PE backed brokers breaks in 2023. I don’t see sales growing much in 2023. All the layoffs at the vendors is having a trickle down effect of tripping up sales. The economy is slowing down sales — or the perception of the economy as seen through the grocery bill and the layoffs. Quite a few macro-economics that will slow sales down at a time when the PE firm is watching the numbers.

There is another factor: exhaustion. Partners who haven’t sold, but want to, are about to go through yet another economic cycle. Since 2000, there have been way too many of them – and it is exhausting. Some will likely sit this one out.

I know a few agencies that are just riding it out — not selling anymore, just living off the commissions until they are gone.

None of this raises the oceans.

True, a few new agencies are starting.  They will be selling advanced services. That will move a needle. Yet the number of multi-location and enterprise businesses are less than 75K in the US. Everyone wants to sell to them; not everyone can. Enterprises are NOT moving off Avaya because it is too complicated of a project. Articles have been talking about the cloud migration back to colocation in 2023 to contain costs and control. Mainframes and AS400’s are finally being put to pasture. These are projects for the Big Consulting firms.

SD-WAN in its third iteration is getting cheaper. 5G and satellite are being used instead of terrestrial broadband. Fiber is going in the ground in droves. There are like 40M copper circuits out there.  Layoffs mean TEM projects. Everywhere I look I see transactions that will drive savings for businesses, which the channel is great at! But that doesn’t help the bottom line of the TSB much.

I think we will see big SPIFFs all year for sales because the sales will not be plentiful. Also, there are far too many vendors in every market clamoring for sales. They may need to pay steeply for those sales.

Cisco, who is far behind Microsoft on UC&C, is paying 6X MRC SPIFFs to agents on Webex and Webex Contact Center. Buying the market share.

It is barely February and I am already exhausted by it all.

BTW, Shepstone looks like he is making this video on the TBI blog at gun point. I guess that lowered valuation didn’t get him excited enough for the video.

The Broadband Fight

“Charter made broadband available to 200,000 new rural locations in 2022, according to Winfrey. The Charter rural take rate for “passings open at least six months” is “ahead of expectations at about 40%,” he said.”  That is the ROI on their RDOF winnings. [telecomp]

A ton of private equity money is following the government funds into putting fiber assets in the ground. A few PE firms bought a small ISP and poured $100M into each to jump start FTTx projects.

Quite a few winners of government funds were WISPs who ended up getting investment dollars from cablecos or VCs.

There is going to be massive amounts of fiber projects in the next two to three years.

One ISP got caught lying to the FCC about where it had network in order to block funds going to anyone else.

There has already been a couple of PE M&A, whereby a PE firm has sold its investment to another PE firm in the telco/fiber space. There will be a lot of M&A as it gets harder to install the fiber due to a lack of crews, supplies and gear.

While Charter claims a decent take rate, how are they turning up residential customers so fast? My experience is that it takes hours and they use contractors. Not certain they actually have 40% paying for lit service yet. Maybe 40% signed up.

This will mean more M&A in the ISP space as broadband scales, just ask JAB (recently acquired!)

I think it will be a wild ride since several ILECs are no longer incumbents but PE owned companies trying to figure out the asset allocation.

I hope this time round the fiber maps don’t get lost and are added to FiberLocator and Connectbase so that future owners and customers can find the fiber.

I think that cable’s heyday has peaked. Going forward FTTH and FWA via 5G will start to impede on cable subscribers. Verizon is already seeing success there.

“Total broadband net additions of 416,000 was the best total broadband performance in over a decade, reflecting a strong demand for Fios and fixed wireless products. This result included 379,000 fixed wireless net additions, an increase of 37,000 fixed wireless net additions from third-quarter 2022. The company reported sequential quarterly net addition growth in fixed wireless throughout 2022. Full-year 2022 total broadband net additions were 1,290,000, an increase from 409,000 total broadband net additions in full-year 2021. 59,000 Fios Internet net additions.” [Verizon]