Mitel announced a partnership with RingCentral.

Mitel PR. Yahoo news version. TalkingPointz viewpoint.

My interpretation is that RingCentral paid $650 Million to acquire Mitel tech, client list and sales force. The intellectual property concerns CloudLink which is a software connector for Mitel PBX’s can utilize some cloud functions. [NEC has a similar offering called UNIVERGE BLUE CONNECT BRIDGE that connects NEC PBX’s with NEC UCaaS functions.] This is the migration path for on-premise PBX customers have to UCaaS without an immediate forklift upgrade. As Mitel said: This is the key.

Mitel was acquired by PE money in 2018 for $2B. This is the PE firm getting $650M from RingCentral. The PE firm (SearchLight) will buy $200M in RNG stock as an investment. This is the best deal that SearchLight could get. There was no way that Mitel’s UCaaS business was going to catch up to even 8×8. So this was the best way to mitigate the losses.

This is a hard day for both Mitel partners and customers. This is end of life for all Mitel hardware. This is end of life for MiCloud. This is end of life for Five9’s partnership with Mitel.

This from MITEL Sales: This is a partnership, not acquisition! (Me: Sure because RNG doesn’t want the Mitel carcass.) RNG purchased Intellectual Property/patents from Mitel. MiCloud Connect NOT going away as Mitel will continue to service, support and honor ALL commitments (as usual). (Me: Just no more upgrades, bug fixes or anything new.) This is the killer: Net new opportunities we will transfer/partner with RC effective immediately. Mitel re-iterates that CloudLink is Key! It allows Mitel PBX customers to migrate to RNG MVP easily.

The Big Q from Partners:  Whose paper is this on?  If this is straight agency, they have no more customer control or top line revenue. And at any time these partners could have been selling RingCentral or any other UCaaS provider if they wanted to. Now they are forced to! That won’t end up well.

The media is claiming this is great — only for RNG stock holders. RNG stock is up! Big deal. They just coughed up $650M instock and cash to Mitel/SearchLight! SearchLight buys $200M in RNG preferred stock, which pumps the stock up. What does Mitel do now? And like the other 9 partnerships this won’t be a killing either. RNG is up 38% YoY this quarter. Zoom was up 54%!

Mitel partners now have to explain this EOL move to their customers (who will feel as betrayed as the partners). Then they have to sell their customers on CloudLink, then on RingCentral. This will be an uphill skirmish. PBX partners who are not already selling a UCaaS flavor, think hardware is the way to go and that cloud is only for some people.

“Product will continue to be branded RingCentral MVP, accelerating availability to Mitel’s entire customer base through RingCentral’s and Mitel’s combined channels. Additional product enhancements leveraging joint technologies beginning with Mitel phone and device support for RingCentral MVP is planned for the first half of 2022.” This sounds like RNG is billing – and the Mitel brand disappearing. Terry Matthews must be crying.

A little history story…

In 2013 at the Cloud Communications Alliance meeting in Clearwater (Florida), RingCentral’s CEO proposed to the members of CCA that they dump Broadsoft and use RingCentral. Eight years later AT&T, Verizon, Avaya, others and now Mitel have done so. [The long view for certain.] For ILECs it makes sense to leverage RNG with co-branding. This deal is not like that.

There are so many factors in play in the marketplace right now. Too many UCaaS providers, not enough sales/demand. Sure the TAM is huge but the sales are slow coming. Even with all its partners, RNG is only up 38% YoY.

PE money wants a return. This gets them $650M back on their $2B acquisition in 2018. That’s better than waiting to see if MiCloud can catch up to 8×8, which several agree it will not.

Most pundits are bullish on this – for RingCentral. For Mitel it must have been the best of really bad scenarios. The partners will suffer the most.

This is just another deal for RNG. They keep adding sales avenues but aren’t really seeing Microsoft or Zoom type results. One of their partners – Atos/Unify – is looking to sell. That doesn’t help.

There is also a market swing taking place probably as a result of the pandemic. Everyone talks hybrid solutions but in this case, UC providers have to work around Microsoft (or Google), so they sell Routing which is SIP Trunking or if you are fancy CPaaS.

Zoom and Talkdesk added phones without calling it UCaaS, because businesses are looking for phone like VoIP functions. On the CCaaS side, it is UC+CC or CXaaS. More and more UCaaS is being squeezed in favor of simple functions like Routing to Teams. Even twilio – one of the largest CPaaS providers – rolled out a CCaaS offering in the guise of customer experience – and skipped UCaaS. The market has shifted.

Background:

Per RNG’s 8-K SEC filing on 11/9/2021: “The Company will be Mitel’s exclusive provider of Unified Communications as a Service (“UCaaS”) offerings. The Company also acquired certain intellectual property rights for a total consideration of up to $650 million, of which $50 million is held back to cover potential claims and certain events post-closing. The Company paid $300 million in the form of cash and approximately $300 million in the form of 1,281,504 shares of Class A Common Stock…”

“The Company also entered into the Investment Agreement with Searchlight II MLN, L.P. (“Searchlight Investor”), pursuant to which the Company sold to Searchlight Investor, in a private placement under the Securities Act of 1933, as amended, 200,000 shares of newly-issued Series A Convertible Preferred Stock, for an aggregate purchase price of $200 million. The Series A Preferred Stock issued to Searchlight Investor pursuant to the Investment Agreement will be convertible into shares of the Company’s Class A Common Stock, par value $0.0001 per share, at an initial conversion price of $269.22 per share.”

see more here.

To go back to the CCA story, RNG launched: “RingCentral Rise, a new platform designed exclusively for service providers around the world. By leveraging Resources, Innovation, System integration, and Experiences (Rise) from RingCentral, service providers can now offer their own unique, cobranded unified cloud communications solutions including team messaging, video meetings, cloud phone system, and contact center solutions to businesses around the world in a fast, flexible, and scalable manner.”

What is Mitel’s CloudLink? ““Through this strategic partnership, we are acquiring IP related to CloudLink, which enables us to integrate RingCentral MVP with on-premises infrastructure,” he said. “CloudLink is a clear bridge to the cloud. It provides middleware that enables customers to integrate their on-premises infrastructure with MiCloud cloud platforms, and is now being repurposed to integrate with RingCentral. With CloudLink, Mitel’s 35 million-plus customers will be able to use the RingCentral app for team messaging, video, and to make calls with the app that leverages existing Mitel on-premises PBX. Every strategic partner makes a difference, but this one in particular is unique because Mitel now has a leading cloud solution to upgrade its base to. There is now a new opportunity to leverage CloudLink to provide a more flexible path to a leading cloud solution.” [CF]

Forrester’s Jay McBain is touted as a channel expert. He is a favorite to keynote in Vegas. This week I did agree with one point he made:

“In an inventive world, we’re not a product sales company anymore. Companies’ growth will come from driving adoption, deeper integrations and stickiness, and driving cross-sell/upsell/enrichment of other parts of their portfolios and other innovations.”

If you want to increase CCaaS (and other Smart tech) sales, there will need to be a BDR position that works with partners to upsell/cross-sell into accounts. It will need to be a proactive collaborative effort. The BDR person will need a decent amount of knowledge about a broad range of technologies available. Various use cases and other granular marketing collateral will be needed to facilitate this upsell.

Your CRM should be flagging accounts by size, vertical and buyer title.

• – Size – small biz, mid-market, enterprise – all buy different.
• – Vertical – sell deeper into certain accounts by bringing a specialist in like you do with Healthcare and Hospitality.
• – Buyer Title – might determine which departments are being sold to.

Telecom has always been a product based sale. And more accurately, a replacement sale. More transaction and substitution than anything.

• * PBX to IP-PBX to Hybrid to Cloud. 
• * DSL to T1 to Ethernet.
• * Router to managed router to SD-WAN.

It’s why the channel struggles to sell more. We sell the replacement or the next level up because Discovery and solution selling are hard(er). And channel has been about supplying demand, not creating it. The vendors are not doing anything to increase awareness or education or market offerings at all. Beyond the big boys – AT&T, Comcast, Verizon, Cisco, Microsoft – pushing their usual services, who is advertising to the buyers about Cloud Contact Center, Smart tech, IoT, CyberSecurity, AI or any emerging tech? When selling CCaaS, Smart  Tech, Cyber-Sec, AI and more… there is nothing to substitute. It is about Solutions and Outcomes.

When you sell by outcome or by educating the client on the tech available to improve their business processes, that’s where the Consultative Sale is. That’s where the Advisor piece really hits the gravel. It is also where the larger ARPU is.

While the channel does not create demand, it should be helping to educate the buyers. The Buyers are not supposed to be up to snuff on what tech is available; that is the advisor’s role. We should be showcasing the best tech and practices to our clients in order for them to stay competitive. There are partners that do that. Some partners are specializing like in cloud services or in CX or in cybersec. This might be the answer to longevity.

Selling dial-tone replacement versus migrating a business to a system that allows for omni-channel engagement with employees and customers is a big difference. Some of it is mindset. If you think the cloud isn’t for everyone and hardware owned is a better deal, well, your slice of the market is small and will not grow, but also there isn’t a lot I can do with that mindset.

It is why vendors will have to jump in to cross-sell and upsell. The ARPU, user adoption, stickiness and customer satisfaction will require the vendor’s interaction. I don’t think partners will do it alone. Will they upsell? Will they offer training to increase user adoption? Will they check on customer satisfaction of the tech? Will they cross-sell products to better the outcome or secure the tech? I don’t know.

Partners need to be better trained in – not product – solutions and sales strategy around the solution.

Partners deals should be deconstructed so that other partners can learn from the wins (and the losses).

Of course, vendors struggle with this themselves, so empowering partners with this will be difficult. But as more vendors lean on the channel, it will be the vendors who fully engage with the partner that wins. Not the best SPIFF, but the most trusted partner.

“Hello Peter. I enjoyed your Master Agent article very much. You touched on some points that I wish our leadership would take into account. I am also seeing many partners going to indirect sales and some who just skip the Masters all together and signing directly with the [vendor]. So, here are my questions for you; (1) Where do you see the channel going in the next few years? (2) With so many changes in the horizon, should those in the channel now be looking to get out? (3) If so, where in the Telcom space should they focus their attention? (4) If not, what should they change and what strategies should they start with now? Thanks for the article! Have a great day!”

There is a lot to unpack from the dialog around my last post.

(1) The Channel is going to look very different in a few years. Many partners are aging and not many new ones are coming on. There will be many openings for people who want to sell AAS for commission as opposed to getting a sales rep job with salary and benefits.

If any of the roll-ups work out and don’t become TNCI, there will be pockets of areas for partners to excel – even as a regional master agency/broker. It will take specialty and focus.

(2) Should you get out? Up to you. Ride it out into the sunset if you can; take an exit (that isn’t really an exit); or carry on! Although many are betting on buyers leveraging marketplaces, how many SMB owners do you know that know what they want/need and where to get it? There is far too much technology available that has outpaced the average business owner – not only to utilize but to even know about!! Luckily, most vendors do a poor job of talking Use Cases and speaking English in marketing. Most marketing is a wordle of buzz works in the hopes of SEO — a miserable strategy since not many buyers are searching for CCaaS or CXaaS. You know what I mean? Or omni-channel customer experience enhanced with ML and AI. Yeah, Joe in Procurement is really searching for that! But there is the opportunity: Someone has to help businesses procure and leverage the awesome tech that is available.

To do that, a partner has to be dedicated to learning – that isn’t for everyone.

(3) Where to focus in TELECOM? Look to your customers! Who do you sell to? What do they need? How can you help them? What will they pay for?

Another aspect may be look to what looks interesting. IoT is just now coming to small business the way it did for Smart Homes (think Ring or SimpliSafe). There are many cool tech items available including NEC’s Smart Workspaces. The best way to make hay is to specialize in a vertical or two. Learn the lingo, the vendors, the thought leaders, and the emerging tech and how it can be used. Word of mouth in a vertical silo echoes loud!

(4) The best strategy is to focus on the customers! Someone has to teach them, assist them, and help them reach the outcomes they are shooting for. That was originally the idea behind the Channel. Most people didn’t know anything about computers and software – VARs and SIs came along to help businesses utilize Microsoft, Oracle, etc.

Today, the area with the most upside is Cyber-Security. There are plenty of places to get certified including with CompTIA. Take sales training from cybersec vendors. There is a lot of room to grow and prosper.

Another area is Customer Experience which is a combination of UCaaS, CPaaS, CCaaS, AI and other stuff. Mid-sized businesses with 150+ employees will be the sweet spot to bring CX to. Or chains that have not seen technology like dry cleaners, florists, bakeries. There is a whole market for selling broadband, POS, phone system, website, marketing and self-serve.

(5) My Cloud Voice Alliance talk is tomorrow on “So you want a channel partner to sell your stuff!” One of the CVA Board members asked me how the changing channel affects white-label folks. I haven’t given it much thought. My first reaction is that as more and more vendors look to the channel to be their sales force the channel is NOT growing in numbers. Different sections of the channel are growing like developers/ISVs. PS (Professional Services) shops that can do some dev and software roll outs. But just plain sales partners are not growing.

The biggest problem vendors have is that they are missing components necessary for a successful partner program. There are very important elements that a company has to have before a partner program can work. I am not talking about a commission system either. The foundations for a partner program are fundamental: Marketing, value prop, systems, process/procedure, service delivery to name a few. Most vendors are missing the Value Proposition — and that is the most important piece as prices decline.

I hope that helps. If you have more questions, comment on the LinkedIn post; drop me an email; message me on LinkedIn; or hit me up on twitter.

Got a call from the owner of a master agency Sunday morning. As soon as I saw the call, I knew he was telling me he sold. GCN sold to Upstack – and Chris Palermo is now President of Upstack. Now 3 of my 4 brokers have sold. That makes me uneasy. It feels like my income streams are in more jeopardy than ever before.

At the same time, a West Coast broker went to AppSmart – and a midwestern broker is eyeing PE money.

Everyone thinks I lean toward pessimism, but the truth is I am a Realist. Read the tea leaves people!

The actual sellers are being acquired under exclusive deals. These sellers previously procured services via at least three – and up to five master agencies. (On the name change). This has a ripple effect.

The West Coast broker lost two of its top performers to AppSmart. This crippled them so that they too had to sell. GCN was a top performer for at least 3 master agencies. These 3 will now have to scramble to cover that lost production.

AppSmart, Upstack, Intelysis, Avant, Telarus are not producers. They are brokerages, handling the vendor contracts and commissions. The only thing they distribute are checks to the partners who are actually interfacing with customers.

We are at a crossroads here. There is price compression in UCaaS, SIP, Bandwidth and other silos. That equates to more deals needed to be inked to maintain the level of income. However, you can only close so many deals in a month. At the same time, vendor quotas are the same or increasing. This is resulting in some partners holding direct contracts to sell.

The pundits will be in Vegas next week yakking about the changing channel. I am certain one of the usual suspects will say the channel is dying as they always do. This time they might be right but for the wrong reasons. Jay says Shadow Channel. JS & TB say Partners need to re-invent their businesses to keep up. The channel is ready to retire.

When most of us got in the channel, there were numerous CLECs competing with the ILECs. Now the CLECs are gone. There has been significant consolidation in the vendor space (e.g., Comcast buying Masergy.) Several of the resellers suck at actually delivering services. What is a partner to do?

The channel has been selling replacement products for 20+ years. Vendors forgot two important pieces to the channel: Partners Supply Demand; not create it. Vendors push technology, not solutions. These 2 things oppose each other, because vendors want partners to create demand and sell solutions. Vendors don’t really market to the customers like Microsoft or Dell or AT&T. That marketing to the buyer is what creates demand. All boats rise with the ocean is about demand and awareness. Partners supply demand.

Master Agencies and Distributors do not create demand either. VADs distribute software and hardware not to end users but to partners. Master Agencies are at least two spaces removed from the Buyer. All the Buyer interaction is still with the producing partners, who are tiring.

A recession, a pandemic, reduced commissions, vendor consolidation, brokerage consolidation, technology changes – it is a lot to absorb, adapt to and stay in the game.

I have seen several partners become realtors!

Think about the technology changes from switched LD, T1s, DSL, routers, T3s, OC-x to VoIP, SIP, Ethernet, FTTx, 4G/5G/LTE, SD-WAN, Cyber-Security, UCaaS, CPaaS, CCaaS, CXaaS and so on and so forth. All in one career – unless you work at a reseller in which case you are still tackling POTS lines.

Selling UCaaS started as a replacement service for POTS, PRI and PBX. Now to solution sell you have to understand all the AAS’s – CPaaS, UCaaS, CCaaS and SIP trunking (Direct Routing to MS Teams). Vendors still treat it like technology product instead of solutions because they want to reach a wide audience. That’s why there is price compression – $5 for a UCaaS seat!

Who wants to continue on this ride when your commissions are looking jiggy?

After all the problems with CenturyLink, Nitel, Granite, et al, I am running out of vendors who can deliver service. I am also saddled with disgruntled customers that these vendors screwed up. All for less money.

I can see the writing on the wall. Unfortunately, the channel argues over a stupid term – Master Agency – while the industry is twisting to private money and the number of partners is declining. Way to keep your eye on the shiny, noisy object instead of the hard truths.

This week I saw a PM on LinkedIn post about all the fun he is having at events. I have another CM who is giddy over the events coming. Last year with no events was it that difficult for the vendors and masters? Did all that MDF burn a hole? Events aren’t what matter. Service Delivery, follow through, Use Cases, Verticalization, Differentiation — these things matter. Too bad no one gets that.

Other articles: The Channel Will Look Different; and Where do Partners Fit?;

Master Agencies are looking to rename themselves. Many are looking at the technology distributor label, but that just is not the right term.

We have VADs – value added distributors – already like Tech Data, SYNNEX and Ingram. Distros are simply logistics and distribution. They do not intercede in your income. When you buy a software license or a cloud service from a VAD, they invoice the VAR (partner) and the partner bills the customer. The billing arrangement is between the partner and the distro.

In a master agency model, the master is the broker. They own the contracts. All commissions flow to the master and are paid out to the partner. The master controls the partners’ revenue.

The term for this is BROKER not distro. Like an insurance broker or a real estate broker, the master agency is the contract holder and payee from the vendor. Calling it anything else is kind of misdirecting the relationship. A VAR’s relationship with a VAD is different. Some can say it is similar for licensing but licensing can be moved. It may be a hassle to do so, but it can be done. If a partner wanted to change its broker, it has to sell a new provider to the customer.

There may be some value-adds that a master agency provides it’s partners but mostly it is the contract and commissions. With exclusivity coming back in the guise of investing in partner businesses, MASTER Agency is even more appropriate that distributor. At the least BROKER is the proper term. They don’t bill. They simply hold contracts and collect commissions. What exactly are they distributing?

At least Jenne understands that it is a master agency and a VAD, depending on if it is an agency/commission deal with the partner or a billing one.

Even UCaaS vendors – like NEC, Avaya, 8×8 – understand that it is an agency relationship when it is commissions and a distro relationship when it is sort of white labeled with the partner performing the billing and first line of support.

In the fuss about MASTER being an ugly word, it explains the situation pretty clearly. Not many seem to complain about the sub-agent term but that seems to be a term that the money folks grasp pretty well.

Either way, pick a term that actually defines the relationship, not some marketing fluff that sounds nice or maybe looks better to Wall Street.

SIDE NOTE:

When a partner sells to AppSmart or whoever, AppSmart or the Investor/Buyer tries to move as much commission as possible on to their direct agreements. It may be due to better contract terms or it aids in satisfying vendor quotas (in the contracts). Many partners sell through other partners with a huge pass-through (85-100%). They do this for many reasons. When a partner sells the business assets, this is not a desirable arrangement. The broker buying the assets will look to move all that third party commission to their own contracts either at renewal or sooner. The original partner doing the pass-through will end up on the short end of that stick. It will create even more of a mess in the partner community.

Going forward, I will ascertain that the agency I use for a deal has a direct vendor contract. I will also ascertain as best I can that the agency is not looking to sell. There is already enough uncertainty in this business without wondering what financial event is going to trip me up.