Remember Taqua, Tekelek, and Coppercom? How about Cypress Communications that used Nortel for phone service in office buildings?

Lucent 5ESS switches are housed in Central Offices and at one time were attached by copper to every household in America to provide phone service. Today, copper is going away and the need for the 5ESS is going away as well.

Cablecos provide more voice service than telcos. Cellular is the primary voice service for many people.

The CLEC industry boomed due to the Telecom Act of 1996. Switches getting installed in every POP and CO with space. Integrated T1 sales brought revenue to many CLECs.

Broadband kind of killed the T1. Also 1.5MB was not enough anymore — or so the buyers were told.

Telecom architecture changed. Cablecos don’t have a CO. They have POPs.

ISPs had POPS (Points of Presence) usually data centers. But last mile circuits often came from the ILEC, so it kind of came through the CO anyway.

VoIP Providers use data centers for their POP or CO. The age of the Central Office is declining. Telcos needed a solid, secure building to house the switch and terminate all those copper lines. Now the copper is replaced with fiber. The switches are just servers on racks. Things changed.

The age of the softswitch ushered in UCaaS. Broadsoft, Metaswitch, Ribbon, Netsapiens, 2600Hz, Freeswitch and others powered many a VoIP Provider out of a data center rack.

Broadsoft sold to 450+ providers globally. Netsapiens is in 200+ providers. Metaswitch is inside the network of thousands of telcos. But today BSFT and Meta have been closeted inside Cisco and Microsoft, respectively.  Now that Microsoft is NFV-ing the SBC and the Metaswitch, what will telcos do?  Get a huge pipe to Azure? Or go another route?

It all depends on what you need the switch for. Many smaller cablecos wholesale voice from a provider like Momentum, because they just need cheap residential dial-tone. Lumen chose Alianza as a wholesale softswitch.

The PE-backed FTTH providers will need a way o provide digital voice.

Much of VoIP and UCaaS backends into a CPaaS shop like Bandwidth.com, who handles all the DIDs and telecom back-end for Microsoft and Google.

There isn’t that much TDM inter-connection left. Now it is inter-connected VoIP.

So if Residential Voice is your primary reason for a switch, what do you do?

What if the ISP has 10K, business voice lines? What will they use?

Getting a big pipe to Azure for 10K B2B seats might be cost prohibitive. Might require too much expertise.

With the average business having 12 employees, what kind of B2B offering do you need? Or do you have to be like FTR, VZ and AT&T and have multiple offerings for small, medium and large businesses?  Depends on your geographic market.

This is what providers are going through today. Join a webinar I am doing with ECG on May 30 titled:  BroadWorks, Metaswitch, NetSapiens, Ribbon: What does the future hold?

Lumen uses PartnerTap to facilitate a co-sell arrangement with partners. I was invited to 7 opportunities to do this. These are 7 accounts that over the years I sold to that procured a service from a provider that now identifies as Lumen. In all 7 instances, it has gone nowhere. I spoke with a CM about 2 accounts. I needed billing info because I have no idea or insight into what they have now. Crickets. Nothing back from the CM.

Through the PartnerTap portal I pinged the other 5 CMs. I emailed him. Crickets.

Lumen has been cancelling services, retiring products and running a revolving door of personnel so this situation will only get worse.

Now the Prez & CEO of Lumen tells CRN that they are going to use the channel to get more Enterprise accounts.  One, they can’t manage any accounts they have now. Two, few partners sell to enterprise.

I run into this too often. Sell My Stuff!

You want partners to sell your stuff – and you can’t understand why they don’t – and you kind of think they should or they are missing out. And you are angry at the Channel.

Here’s why this may not be working out.

1. Do you have a clearly stated Value Proposition?
2. Do you know who your Target Customer is?
3. Do you have a Partner Profile?

Without those 3 things, your program will struggle.

If you can’t explain Why You and not the myriad of others, then you offer a commodity and it better be at a low price and decent commission.

If you don’t know who your best Customer is – or worse, you think it is Everybody – you have a problem.

• 98% of US businesses have fewer than 100 employees.
• 89% have fewer than 20!
• 72.5% of C Corps in US had fewer than 10 employees!
• 7.5M businesses account for 61.5M employees – (8)
• US businesses average 12 employees.
• There are only 60,000 orgs with more than 500 employees.

The target is Small Business. Which size? 20 employees? 99+? 150? It is NOT 1-1000. It just isn’t. The average is 12 employees.

You want to win? Figure out how to streamline sales and service to very small business. That is a majority of the market.

You don’t have a Partner Profile, so you don’t know who to recruit. So you spend time and money recruiting anyone and then sales are slim.

You need to know your target customer in order to identify partners who also sell to that customer!

What business model works best for your service offerings and compensation? MSP, VAR, Agent? If you don’t know, that’s trouble.

Who is the Buyer?  Most partners sell to the IT Admin or the CIO/CTO. If your Buyer is the CMO or the CFO or HR, well, most Channel partners will not reach that Buyer.

If your buyer is the CISO, find a partner business with a CISO!

Selling your stuff is hard. Are you easy to do business with? You think so, but are you?

Do you know why Customers buy from You? If not, get on the phone and find out.

Everyone thinks that anyone can sell their stuff to anyone. It doesn’t work that way. You aren’t selling bottled water or potato chips. Sure, the market looks like the supermarket aisle of potato chips or bottled beverages, but you have to figure out why the customer picked you from the aisle.

Funny thing, execs are angry at TSBs and Partners because they are shelling out dollars but not getting enough sales. They don’t like paying out SPIFFs and commissions. Have you examined what selling direct looks like in terms of costs and results?

60% of salespeople do not hit quota! You have to pay salary and benefits. Do you know what the cost of customer acquisition is?

Just some things to think about what you ask a Partner Why are You Not Selling my Stuff?

 

The costs of driving sales.

• SDR (Sales Development Rep) is $40K + incentives + benefits.
• Sales Rep $60-85K + incentives + benefits.

Pay-per-click is running $20-60 then there is your Google Rank Score.

• Someone has to manage that spend (Google Ad manager is $100K or $500 per day with benefits).
• Someone has to maintain the SEO and website content ($100K).

At $40 per click, let’s say 1 out of 7 is a warm lead. That is $280 for a lead. On top of the Ad Manager, SEO, and webmaster.

How many of those leads will the sales rep convert in an hour? These leads are only good for an hour. If he converts 1 out of 2, your cost of a lead is now $560. Plus $1500 for the day for Sales Rep, SEO and Ad Manager.

Right now, you do none of that. You don’t do SDR. You don’t have a Lead Gen program. You can barely explain Why You.

Heck, you don’t have a Product Manager or Product Marketing Manager to manage the Product, features, messaging and road map.

You have a bunch of partner managers who recruit, manage and co-sell with partners. Not many people are good at all 3 functions.

So you pay partners a 5x SPIFF and 25% commission to the TSB. You pay the CM in place of the Sales Rep. You aren’t paying for SEO or SDR or Google Ads.

Average sale is 12 seats at $15 is $180.  The SPIFF is $900. Not for a lead, for a closed sale. You don’t pay for cold or warm leads, just closed sales.

The commission is $45 per month while the customer pays you. You still keep 75% and your costs are under $6 per seat usually (or 40%).

Do you know how many channel only vendors there are? Lots. Why? Because this math works out.

Your mad because sales aren’t booming in a hyper-competitive market with compressing pricing and, quite frankly, slowing demand.

The channel does not create demand. The channel supplies demand.

More than 85% of channel partners procure services for SMB!!!!

When you talk about SME or Enterprise or Government, I know you do not have a clear understanding of the Channel – and discount everything you say.

 

I covered much of this earlier in my post “Is the Channel Dying“. But yesterday at Cloud Communications Alliance event, I have never heard someone spout so much incorrect information. As someone said, it is opinion, but it is wrong.

The Channel is many business models. If you treat MSPs like Agents or like ISVs, you will miss the boat.

The Channel does not supply Demand. It fulfills demand. The demand is created by the vendors.

The channel for the most part supplies SMB. Not SME. Not Enterprise. For most of my 25+ years in the Channel as a VAR, Agent and Consultant, Mid-Market and Enterprise were mainly protected accounts – by AT&T, Verizon, Lumen, Cisco, Microsoft, Dell, Xerox, etc.

The MSP will win. This might have been the only thing she said that was true, but even that is subject to how much PE and M&A enter that space. There are 62K MSPs. Go look at the CompTIA data. 85% of them do under $5M in revenue and service the small business!!!  OH! And they bill monthly. What do you think Datto, Kaseya and ConnectWise systems do? They bill monthly for RMM.

I got to hear Janet say the Agent was dying again. One day she may be correct. So far she is wrong.

Are we aging out? Yes. Is the recurring commission model dying? No.

Will Agents become influencers? I don’t see too many successful affiliate programs, so doubtful. People have zero memory of the Linkshare-CJ days, so we will probably repeat those mistakes soon.

Telarus, Avant. TD Synnex, Ingram Micro, CDW and D&H are not the same. At all.

Ingram Micro, Scansource and TD Synnex are VADs. They are in the warehouse game. They are true distributors of software licenses and hardware. Ingram and TD have divisions that are brokerages and cloud marketplaces. Neither of those divisions approach what they make on the VAD side yet, despite years of trying. For TD, Advanced Solutions encompasses cloud and brokerage — or their recurring business.

Scansource is more like Ingram than like Telarus. Scansource may do $300M in commissions on telecom recurring services, but they do $3B in moving hardware and licenses. TD Synnex moves $14B per quarter. TD does $8B in the US.

“TD SYNNEX’s 23,000 co-workers are dedicated to uniting compelling IT products, services and solutions from 2,500+ best-in-class technology vendors. Our edge-to-cloud portfolio is anchored in some of the highest-growth technology segments including cloud, cybersecurity, big data/analytics, AI, IoT, mobility and everything as a service.” That’s the brokerage and cloud marketplace – the recurring EaaS. TD and Ingram bill VARs and MSPs (and other partner types). They do not bill the end user. Neither does Scansource, because the brokerage does not bill for services either! The vendors bill the end users and pay a commission to the brokerage.

CDW and D&H sell direct. That is the difference. Period. They were like Sears and Service Merchandise – they had catalog sales.

Scansource did screw up the NewCo announcement. I wrote about that HERE. All of the brokerages have bought bases in one way or another. Do the TSBs have a problem? Yes.

700 vendors have entered the channel in the last 5 years. Even if they gave $1000 to each TSB, that would still be a lot of money.  TD has more than 2500 vendors to pay for the privilege of distro.

Will commissions get cut? Already have. 8×8 and Dialpad lowered commissions on new sales two years ago. There were probably others.

Will AT&T and Verizon shutter their channel? They have waffled on the channel, but they have not closed it. The channel is a significant piece of the SMB pie. There are a lot of intricacies of the channel at a giant. Some years they co-sell. Some years they don’t. Is there abuse of that? Yes. Does the abuse outweigh the good? No. I only know of a handful of agencies that have been shut off from VZ and AT&T.

She forgot to mention Bluewave and Upstack. But Bluewave, Upstack and Bridgepointe are a different vehicle from Telarus and Avant. They are rolling up agencies for a direct play. Telarus and Avant are still largely brokerages.

The TSB only has 2 revenue streams – MDF from vendors and commissions from sales (which they pay out at from 50-95% to partners). They are looking for other revenue streams to pay back the loans from PE.

While they all look alike, they are all vehicles – but some are sedans, some SUVs and some crossovers.

Marketplaces. TD, AppDirect, Ingram and Pax8. Pax8 is a pure play. They are at $1B in ARR. How much do you think they get to keep of that? You get pennies from the vendor that you share with VARs, MSPs and other partner types. The marketplaces have to pay for developers, billing and security.

Microsoft talked about wanting Agents to sell Phone licenses. This is as screwy as everything I heard during the session at CCA24. If you do not understand the Channel – its vehicles, the partners, the business models – then please go sell direct.

If you think an unpaid sales force shouldn’t get recurring commissions as long as the customer is paying you, then have a different partner agreement (and see how that works).

If I heard one more person talk about partners sitting on yachts, I would have screamed.  Most partners who sold their business are back selling. Most did not get yacht money. Even Ian and Drew aren’t sitting on a yacht. When you make these comments, it shows contempt for the people you are hoping will “partner” with you and represent your company and services to the market. If you feel this way, go sell direct.

On SPIFFs: No one is forcing you to pay SPIFFs. If you think you have a unique service offering or bundle or widget, by all means take it to the market with a different payment plan to the channel and see how that works.

When people don’t understand the channel, and they believe the stuff that was being thrown out yesterday, THAT is why your partner program is lagging.

You can find me on twitter/X @radinfo or call me at 813-963-5884 todiscuss this with me.