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:

 

Recently Moody’s rated a private UCaaS provider, which led to a discussion on where the  market for UCaaS is going. We are past early adopters and firmly in a Red Ocean in my opinion.  Here are several factors that will affect the growth of UCaaS.

The primary hurdle is the dominance of Zoom and Microsoft Teams. Cisco is struggling for Webex get a sizable market share. Meanwhile MS Teams is approaching 300M users worldwide. Zoom has hit 3M Phone subs. RingCentral only has 3.5M despite 9 large partners and thousands of channel partners.

Think about that for a second: Cisco is struggling to seize market share with Webex.

We are in a Red Ocean. Red Ocean Strategy is in play.

Since most UCaaS providers struggle for free cash flow, investors have had to pour lots of money into this space. For several investors, enough is enough, yet the avenues for exit are limited as SPACs and IPOs aren’t effective in current market economics.

The CAC (cost of acquisition) has included free months of service; free phones; 10x SPIFFs; and lately reduced MRC. This means it takes longer to see a profit per customer – if ever.  Luckily, free phones offers are slowly fading, especially as the providers highlight mobile apps and softphones. SPIFFs are also not as generous as in previous quarters and there are more gotcha’s per promotion.

UCaaS isn’t the preferred product (and never has been). UC+CC or CPaaS+CC or Direct Routing or some combination of these functionalities. This makes selling it harder since the sales teams need to understand the products, packaging and features better in order to offer the right service offering that will appeal to the prospect in front of them.

It isn’t simply how many phones? It is what are you using now? What isn’t working? What is the long term goal of this project? What are you trying to achieve by changing? This is no longer transactional.

There is a shortage of people who can consultatively sell these services. For years, telecom has been about replacement services. Telecom has been order-taking replacement service for a savings since long distance. Broadband as T1 replacement. UCaaS as PBX replacement. Even SD-WAN to replace MPLS. Those kinds of sales do not lend themselves to a exploration of business goals and outcomes, pain points beyond price savings. This puts pricing pressure on the providers, especially with a max $10 price tag from Zoom.

Take into account that – like Moody’s said, “other telecom providers can and do offer similar services bundled with connectivity services” . As I have stated over and over again, there is a lack of positioning and differentiation in the space. Hence, providers take revenue any way they can get it – Direct Routing, SIP trunks, free months, white-label, retail, resale, low price. To some extent RingCentral and 8×8 are great examples of that.

This isn’t sustainable strategy to be all things to all people. To try to sell anything that the customer will buy. AT&T used to be the go-to for all things telecom. Now wireline sales are declining rapidly across all ILECs. Government and enterprise sales are decreasing at AT&T as other vendors have moved in to sell services that eat up some of the AT&T budget. For example, Comcast winning a government contract is free money for Comcast who never had government contracts before — they all went to VZ & AT&T. Now everyone is taking a slice off the government budget.

Personally I don’t see CAGR above 15% for most providers. RNG and Zoom may see 25%+ growth but the rest of the players will only be growing at 10-15%.

Now that SPIFFs aren’t as generous, we will likely see a decline in UCaaS sales. Many people believe the channel is coin operated. I say most sales are – direct or indirect. As an independent commission only salesperson, a partner will sell what is profitable and/or quick. When the SPIFFs were generous, that is where partners’ attention went. Now that the SPIFFs have softened, attention will drift elsewhere.

NOTE: If the channel is coin-operated as many believe, then softening SPIFFs must soften sales. In addition, unaligned partners will shift to sell where the SPIFFs are (move on to the next vendor who is paying well.)

For several providers, there has been an increase in the head count of the channel  organization that has resulted in labor costs increasing – unjustified by the sales revenue generated.

A final factor is the TSB space, (formerly known as master agencies or brokers). In the last 16 months, the $650M in private equity money has fueled over 100 transactions, that are disrupting day to day sales. Partners are spending all their time either trying to sell the business or collect commissions. Not enough time on selling. So many musical chairs that it is disrupting the sales process and sales flow of partners.

While everyone thinks more partners equals more sales, let me point you to RNG which has the largest telcos as partners plus Mitel & Avaya (see image above) and its growth has been level.

One UCaaS Provider claims over 7000+ partners, yet has not surpassed $100M in UCaaS revenue.  Sandler Partners claims upwards of 9000+ partners, but Sandler is not one of the biggest TSBs.

The KPI shouldn’t be number of partners; it should be how many get a commission check. The whole point is to have Selling Partners, not count how many fog a mirror long enough to ink an agreement. The agreement doesn’t make you a Partner; the sales activity does.

How would any vendor even touch half of the partners a TSB claims? 

Every week the TSBs add more vendors. It is part of their business model, but how well does the TSB represent that vendor? Again, the wrong KPI. It isn’t the number of TSBs or aggregate number of partners, it is about Alignment.

It is about a Partner profile and a Target market. Then asking the TSB what partners fit that bill. (Very few TSBs have this knowledge of their umpteen partners.)

It isn’t getting more and more partners because then you need more and more staff to cater to those partners. I say cater to because the process doesn’t really seem like enablement or empower.

It is Aligned partners that sign, certify and sell. That have QBRs and mutually set goals or plans.

Otherwise you have 7000 people running around trying to get a deal at any price, not knowing the product or the hot button or anything. This can result in disgruntled customers who have been sold the wrong product and who may ultimately cost the provider money. How many support calls does it take to make a customer unprofitable? Just a few!

We are seeing it now with customers that purchased during the pandemic with their hair on fire (in 2020), taking whoever answered the phone and took the order. Now they are re-evaluating everything and the churn at some vendors will be noticeable.

Another vendor is looking to a VAD as the answer to more sales, considering the traditional master agencies (TSBs) sales funnel has slowed down. This move will be even more challenging than they realize. However, it does illustrate that the sales pipeline coming out of the TSBs is slowing down. Some of that is due to musical chairs at the TSBs; partners being acquired; TSBs being acquired; and partners retiring or semi-retiring.

Vendors and pundits alike have stated how the PE money demonstrates the success of the channel. No it doesn’t. Reaching 55% of all sales for a vendor demonstrates that. Vendors being 100% channel showcases that. PE money just means that the pitch deck was a great story that an exec at the PE firm liked enough to gamble some dollars into an MRR business that he did not understand. 

I would add that partners that have gone upmarket to enterprise are choosing different vendors than they had when selling into SMB, but that goes back to marketing (branding, messaging, target, value prop).

More UCaaS providers are going to have to be like Weave and pivot to two or three verticals that they heavily integrate into. There are several vendors that just target hotels. There are a few targeting healthcare. There are a few targeting dentists. You could say a few have targeted Enterprise but that isn’t the same as saying the best fit customer is manufacturing or pharma or oil.

The most efficient vendors will know who the best fit customers are and why; and has partners who can sell to them. (Not all partners can sell to all prospects – again a mismatch when just fogging mirrors.)

Red Oceans Strategy has one drawback: it needs a lot of demand for the pie to grow. 40% of the market is going to stick with on-premise PBX. Mitel pivoted to double down on on-premise PBX. NEC, 3CX, Sangoma (which owns a lot of hardware: VoIP Supply, E4, Asterisk, Digium, Fonality,  and FreePBX) and others are still happily cashing checks for new on-premise PBX every quarter.

There are a number of reasons that UCaaS isn’t growing for vendors. Much of it is market forces and the rest is marketing.

Need assistance with a strategy for channel sales? Or tactics to fuel your channel sales? Give us a call at RAD-INFO Inc at (813) 963-5884. We have helped over 100 service providers achieve their goals, we can help you too!

Most tech companies push product, well, not even product, an acronym like UCaaS, CCaaS, AI, SD-WAN.

They don’t have Positioning.

They think their Target Market is everyone, but that is neither a target nor a market.

They don’t explain Value. They don’t explain Why You over Everyone else (including status quo).

Positioning is where your advantage, uniqueness and value lies. Messaging is the story you tell to your market about that position.

An exercise in Positioning is to list features, then ask Who Cares about those features until you

When they are asking for a drill bit, find out why they are making the hole.

When they are asking for a quote, why are they shopping? What are they trying to achieve, improve, get to?

It isn’t selling unless you are helping. Help your customers with the outcomes they seek. Help them be competitive by leveraging the technology. Are you providing impact to your customers? What is it?

Know who your ideal customer is. Understand their Pain. Explain how you can help them and frame it about Them, not you.

The 5 steps to positioning:

1. Competitive Alternatives (including status quo or no decision)
2. Unique Attributes
3. Differentiated Value
4. Best-Fit Customers
5. Market Category

Two books on it:  Positioning by Ries & Trout; and Obviously Awesome by April Dunford.

It has become a real contest out there for SPIFFs. The SPIFF used to be to (a) draw attention to a company or service offering; or (b) to create some temporary demand by financial incentive. Car dealers live by this model.

SPIFFs have been used to help hardware-focused partners transition to selling cloud services. Moving from a CAPEX financial model to an OPEX or MRR model requires time and patience – and the SPIFF is a way to help ease the sales team’s financial hole that switching from a $25K price tag to a $750 price tag will create.

That said, if you sell based on the SPIFF, you suck! Don’t call yourself a Trusted Advisor if you have an eye on the SPIFF instead of what would be best for the customer. I saw this in an email, “If there’s no spiff, it’s not worth selling as a salesperson.”

I guess he doesn’t read the promotion rules much. In UCaaS, there is a whole page of rules with each SPIFF – what products and revenue is included; clawback verbiage; timeline for payouts; and so much more.

Granted there is a lot of Me-Too, same-same in UCaaS at first glance, but the customer counts on the partner being his advocate. It is the only looking out for the SPIFF that leads back to the time when no one trusted Agents.

I already see SPIFFs slowing down. This might be due to the economic headwinds or it might be due to the high SPIFFs didn’t exactly move the needle in growth that much. When the sector is seeing 12-15% growth YoY – with or without the highest SPIFF – some CFO will notice and adjust accordingly.

There are numerous ways to provide an incentive for sales but a provider is better off helping Aligned Partners financially instead of the partners just selling now because of the SPIFF. Alignment is how you win. Partners who sell to your target market; use your service themselves; have your services in their primary portfolio; and provide great outcomes to those customers.

You learn something from a partner who cares more about the compensation than the customer.