Cellcos are spending billions per year (the top 3 spend about $30B on CAPEX for their network). 5G has been hyped to the max. But when will it pay off for the top 3?  Article in FT talks about it. It seems IoT and anything connected will be the payoff,  but when?

Will DISH get its act together and steal some of the thunder by the time 5G is paying off?

The FCC finally got some teeth as they cut off one VoIP provider. One.

Zoom says that online sales are slowing down and enterprise sales are taking much longer.  AT&T has been saying for two quarters that “macro conditions” and late payers (people 60-90 days late) will affect quarterly financials.

RingCentral is thinking about buying 8×8… investors and Wall Street want consolidation in UCaaS as growth has slowed too much to their liking – and stock values have deeply declined. ZK has a take on the deal HERE.

I agree with Zeus on this: “Currently, the UCaaS market has no shortage of providers, and we might have too much supply for the level of demand. In mature markets, share gain is often hard to do without an acquisition.”

Yet RNG has $1.9B in debt already on maybe $2B in revenue (ARR is anticipated revenue based on a full contract– actually revenue is usually less.)  However, RNG  loses money. Having the top telcos in the world – Bell, FTR, AT&T, VZ, Charter, etc. – and you still can’t grow at 35+%? Think about this: How much of the revenue from these sales does RNG keep? How much gets paid to the telco? RNG does all the heavy lifting, implementation, etc. That’s where the costs are.

They could buy 8×8 for about $1.2B including debt. That would put RNG over $3B in debt on $2.5B in revenue. ZK says buy Dialpad and Sangoma too. That would likely cost another $2B for about $500M in revenue. With huge integration issues. Customer migration will result in big churn because if Dialpad and 8×8 customers wanted RNG they would have bought it.  Sangoma has too many companies under the tent for it to make sense to acquire in my opinion.

The biggest competitor is STATUS QUO in UCaaS  (those who have been on a webinar with me this year already know that.)  Premise PBX systems are still selling about 40% of the time. Getting people to go cloud comms is the challenge now that the pandemic has ended.

Order taking is over. From this point forward, selling is required. Value presentation, Discovery, Challenger, great follow up. That is a small percentage of sales people.

 

 

 

I have been busy with a couple of new projects with Turnium and Peace Communications (plus the continuing work for NEC and Intermedia), so I haven’t been blogging.  But here are some updates.

RIFs in the space from RingCentral, Avaya twice and others.

Avaya has a new CEO and some financial troubles. In fact, RingCentral wrote off the money that Avaya owes them. RingCentral is being sold by Verizon, AT&T, Frontier and now Charter. Despite all those top ISPs on-board, growth has slowed.

Zoom launched a bunch of stuff, like email and calendar. They want to be the platform for SMB. They are certainly one of the most prolific feature produces – right up there with Cisco on Webex.

Everyone is trying to be the PLATFORM – doing everything for the business in one pane of glass. All hoping to be the one picked. Except businesses aren’t one size fits all; hence why companies use best of breed offerings and have 40+ apps! It has to be deployed well, trained on, intuitive with a great user design, easy to use. We can’t say that about most software, especially telecom software. Can’t find my camera or my microphone, the Outlook plugin doesn’t work, not logging calls — yeah, people in UCaaS think they are going to be the center of the business universe. Businesses will tell you that you are a utility. They have software to run their business – and THAT is the center of their universe.

Additionally, software like Salesforce, Zendesk, ServiceNow, Workday, Connectwise, Autotask and so many more are platforms with marketplaces that actually do help a business run – and are at the heart of that business.  Easier for SF or ServiceNow to add voice, video and messaging than for Zoom to add ticketing and CRM.

NEC is now paying all agent commissions upfront. Big move. Like JD Wentworth, partners get paid now!

RingCentral and 8×8 are making moves to be more profitable, according to their financial statements. They means layoffs, getting efficient, increasing gross margin by a point or two.

There is a rumor that some entity is trying to buy 8×8. We’ll see. Market cap is $500M and $447M in debt. An easy buy at $1.25B.  With RNG at $1.9B in debt, 8×8 is a deal.

SD-WAN and Cloud Communications are the first two steps for any business on the path to Digital Transformation.

That’s about it for now. I’d complain about the brokers and one PE backed one who is giving me fits and owes me commissions but I’ll rant on that later.

 

Someone messaged me to take a look at a post of mine from 2017.  M&A at the time was mainly on the vendor side – cable mergers, the Birch thing and more.  How did it turn out?

Birch sold to Fusion who then went bankrupt, which is a very Birch thing to do.

Charter/Spectrum got big; is now offering cellular and won a bunch of federal dollars to extend its network in the name of the Digital Divide.

CenturyLink was just merging with Level3 then. They got bigger – but nothing in our space gets better – even with a new name. It became a huge mess and now they are selling off parts  – like the data center business and some of the ILEC and perhaps the European assets. New CEO coming as Storey takes a bow. Oh, and they re-branded as Lumen.

Verizon bought Yahoo and AOL — and lost their shirt – and sold them for pennies on the dollar. They started yelling 5G in 2017; they are still yelling and buying spectrum and trying to get a variety of tech and spectrum to work for the promise of 5G.

TPX and Nitel sold to investors and have not been the same since.  Windstream went bankrupt – and is still trying to recover.

Sprint was for sale in 2017. Last month T-Mo sold the Sprint wireline network to Cogent for $1.

In 2017, Mitel bought Shoretel. Today they are solely focused on premise PBX, having sold the cloud assets to RNG.

Avaya was coming out of BK in 2017 and is now heading back in!

Hundreds of vendors have entered the channel.

Most are still struggling to get traction and make sales. Why? The vendors don’t know how to sell-through or have the basics down (Value Prop, Target, Partner Profile). So they throw stuff at the wall and hope something sticks.

In 2017: “We could talk about cloud services and security, but those are NOT a large chunk of what the channel sells. Even The leader in channel sales enablement of next-generation IT technologies mainly sells connectivity.”  A ton of network is still being sold but for not a lot of dollars. Cripes! 1GB pipes in a data center are $500. So yeah network is still selling but partners have to sell a metric ton of it to make a living.

SD-WAN was supposed to be the next big thing in 2017. Now everyone has it – just like UCaaS. It almost commoditized — but it is the basis for a secure network. Again, it is a hamburger. More providers need to spice up that burger.

The MSP vendors are still in a constant state of M&A and re-branding especially on the security sector.

Revenues were declining as were commissions in 2017. That is still happening, but partners are selling other stuff.  I wrote this on LinkedIn in response to TSBs talking about how network isn’t a significant sales make-up.

One point that keeps getting made is that 5-7 years ago, most of the revenue in brokerages was network/Internet, but today that number is smaller because partners now sell other stuff. That isn’t because of the M&A or the new fangled thing-a-ma-jig at the brokers, it is because network prices have dropped. Ask Verizon, AT&T and Lumen about the wireline business’ 7-9% decline per annum. In addition, broadband sales in the channel increased (which is tiny ARPU). whereas before it was T1 based sales.

Moreover, adjust for the pandemic which gave UCaaS a push; ransomware exploding; contact center getting cheaper and the need expanding. All of this factors into why the mix at brokerages isn’t 80/20 networking/other. CyberSec deals are huge ARPU. It takes lots of network sales to offset one of those deals.

During this period, vendors adapted to co-selling to help close business – business no one would have won otherwise. ALL of this happened before and during the current M&A swing. You can take a bow for it, but there were many factors that contributed to where we stand now.

The channel sales numbers are increasing. That still won’t pay back the $700M in investment money that the brokerages took on.”

In 2017, Microsoft hadn’t quite figured it out, but now they control 290M desktops with Teams out of about 400M. Webex is somewhere around 6M. No one saw Zoom coming. And still no one pays attention to Workplace by FB which landed McDonald’s and its 1M employees!

No one went vertical.

GTT went bankrupt.

We have millions of open jobs. Millions who gave up W2 jobs to freelance and Uber/Dash/Cart. The pandemic burned people out — and made people less nice to be around. For real, people got weird during the pandemic and they haven’t figured out how to play nice with the world they exist in.

There wasn’t any big TSB M&A in 2017 but now there are 3 giants and not much else. TBI is said to be ready to go to one of the bidders – Scansource, Avant (unlikely), Telarus and AppSmart. I think Scansource needs the win here more than any other. I think AppSmart has left the master agency building.

The M&A in the channel has disrupted everything. And it will continue to for about 20 more months. Then there will be some big seismic shifts.

Once the TSBs buy up all the selling partners, where does the growth come from?

Vendors ask me all the time where do we go for more sales?  I have no idea because all the avenues are slowing down.

Looking back on 2017, a lot changed. Some stuff I guessed right; some I didn’t.

Upstack announced its 25th partner investment. At this point, it is just about tying up the existing selling partners. Press releases about 9000 partners aside, producing partners are few and far between – and new blood is not entering the channel as fast as people are exiting. {started this post on LinkedIn}

However, investing in existing partners does not grow the market. It is not a new mouse trap. It is not a flywheel. And it certainly doesn’t scale. The sad part is all this happened just when the Channel had hit its stride.

This is not me picking on Upstack or anyone in particular. Take the money, build the thing, but no one did. Not Upstack or Bluewave or Lightyear. Why? Because it is nearly impossible in telecom.

AppSmart being absorbed by AppDirect looks like a failure. Maybe AppDirect will look at Scansource and see that after 6 years 540 partners out of 30,000 will move to hybrid partners.  Those 30K are VARs that registered users to buy hardware from Scansource. Actively that number is likely smaller – call it 20K and that is 2.7% that are hybrid.  Maybe AppDirect can get 5% to sell QuickBooks or Dropbox except AppDirect doesn’t have a base of 20K VARs that they can market to. They have about 4000 partners, many of whom are re-evaluating their relationship with App-whatever.

The portal changes constantly. They may have developers but not a single UX designer. It is a bear to navigate that portal. They want me to spend 30 minutes on a tour. Why? I don’t have a half hour to waste to place an AT&T EaADI order that will net me less than $100.  I need it to be intuitive. Why do I get hit with ads for an AppDirect credit card and SaaS every time I log in?

The experiment must be over because now it is AppDirect — and I imagine that before even with all the channel people they had there, no one got it, but now that all the channel people are gone, WTF?

Once again, M&A resulting in no synergies, just RIFs.

CNSG people are now at Bridgepoint after AppSmart acquired it in 2019.

I keep hearing how the brokers will help us compete with Accenture and that ilk, but those folks do a different kind of consulting; they don’t do TEM; and they bought a lot of cloud migration specialists – to actual do the cloud migration project – and bill hourly since that is what the Big Consulting firms do.

I look at Intrado, PGi, TPX, Fusion and Birch – and all I see are huge failures powered by bankers.

There is a boatload of debt in our industry.

I don’t see how this works out.

We aren’t recruiting new talent in, while the old talent is retiring or cashing out.

A few vendors have told me that they have maxed out a sales channel or two. Direct and our beloved indirect channel have maxed out the orders. So where is the next sales channel? The next avenue for revenue for vendors?

The SPIFFs are all shifting to emerging tech – CCaaS, SD-WAN and Security – this is NOT stuff that a marketplace will be able to sell. Network, voice seats, cell phones, SaaS licenses can all be sold on a marketplace. Buyers have an idea that they want Dropbox or Box. (Why they wouldn’t just buy direct is crazy to me, but there it is.)

It will require educated sales people and channel partners to sell emerging tech. There are not enough sales engineers and SMEs to scale this. Plus how much effort does a 50 year old want to put in at the tail end of his career?

I have seen the education for new partners. Sheesh!

Plus we are not recruiting. We don’t go after new blood. Everyone hired the veteran that has at least 5 logo shirts in his closet. The vendors do that: a guy gets a job at a new vendor and brings in all his pals. It is the headline on CF website every other day! Veteran so-and-so hired to run program. They didn’t hit a homerun before, but this time, for certain, homerun. Unlikely.  Same stale thinking that got us here won’t get us out of this.

We can’t buy our way out of this.

I just hope some people actually got money, not just stock, a new title and promises, because that was what TNCI gave out.

Things are definitely bigger but not better.

The hope was that a new player or two would emerge. I have seen the regional brokers starting to make moves. Smart because there are partners looking for a safe haven. They need to have a refined message. They need to have proof that they are a safe haven. So far, I have not heard anything like that.

 

 

I write a lot about marketing. Usually the article comes from a project with a consulting client; or reading Seth Godin; or taking a class; or great conversations.

Lately I have written repeatedly about Positioning (HERE and HERE and HERE) due to a class I took with Section4 on Product Positioning.  I do get redundant as I work through the concepts as I type. There are definitely themes to what I write.

I don’t have a marketing degree, so I often wonder how it is that the telecom industry struggles so much with marketing. The concepts of Value Proposition, Positioning, Storytelling, Product Market Fit are foundations of marketing. I know that tech doesn’t spend money on marketing. They think build it and they will come. Do they not understand the Microsoft example? Even a second rate product can dominate with enough marketing.

I can think of a bunch of providers who were first movers in functionality, but got zero sales out of it. Why? Because NO ONE KNEW about it!!! Marketing is how a buyer would know about it.

I often hear that providers have the best people, the smartest people, great tech, awesome customer service – yet they eke by. Best tech doesn’t win. Best marketing wins.

You know why sales struggles to sell? NO marketing help. I don’t mean Lead Gen, which is what everyone wants out of marketing. I mean, the C-Suite has not identified a target buyer, or defined a value statement or anything that would help the sales team sell.

I didn’t say spend money on branding – although name recognition certainly helps. But hire a firm to come in and help you define your Best Customer, your Position, and your Value Prop.

Otherwise your sales people will have to make it up themselves – and will struggle with sales.

On one project we are hiring either a sales dev person or an appointment setting company. Either way, we will need to create and refine a script. We will need to train the person on the product, the company and the value. Why?

There are always 3 sales occurring at the same time: The prospect has to trust the salesperson, that the product will indeed help them and the company will deliver that product as promised.

If the Prospect doesn’t like or trust the sales rep, the deal is off. If they don’t understand the product – What the heck is UCaaS? CPaaS? XSaaS? Huh? Leave me alone! If they don’t believe the company can deliver – we see that often with small companies with big portfolios of products.  So train the sales people, do the marketing basics, aim for the best fit customer.

In UCaaS, in SD-WAN, and now in CCaaS, one after another provider makes up a new acronym (a new category) as if that alone will be the Blue Ocean Strategy. It has to go beyond that. A new acronym isn’t a strategy. A slogan isn’t a Value Proposition either or a Position.

UCaaS and SD-WAN are garbage can terms. They really don’t mean anything. They are a collection of features that make the product look like it belongs in that category. We saw this with Riverbed. It is a problem because it confuses the customer. The sales teams can’t really explain the differentiation either, so confused sales and buyers. That spells disaster.

I put SD-WAN in 3 categories: hardware, Orchestrator or Network-as-a-Service. These are really very different things. Yesterday I was talking to an MSP’s sales rep who was looking for a quote on SD-WAN from a TSB. The CM quoted a NaaS provider for a single small business with 3 employees who just wanted to bond two broadband circuits. That should have been Turnium or Cradlepoint or Rabbitrun, not NaaS. [I won’t go on a tangent on how ineffective TSBs are with knowing what vendors are/do.]

Cloud Communications has a lot of categories; more than just CPaaS, UCaaS and CCaaS. And buyers aren’t looking for any of those acronyms. They are looking for solutions that will improve the business. That will likely require functions from each category, but how well does a sales rep know those 3 categories and associated products? Not very well at all. In fact, most providers have different sales teams selling each category with no cross-pollination.

In the SD-WAN example, at least one vendor wasted their time quoting for this situation [it was not an opportunity].  The reason you do market fit and define a buyer is so that exact situation doesn’t happen. The sales teams spend more time on best fit because they are more likely to buy! That is marketing helping you win.

BTW, this was the funniest slide from the Positioning class: