Peter Radizeski is Founder and President of RAD-INFO INC. He is an accomplished blogalyst, speaker, author and consultant. He has helped many service providers with sales training, marketing, channel development and business strategy. He is a trusted source of knowledge about the telecom sector. His honest and direct approach make him a refreshing speaker.

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Why UCaaS?

During a discussions at Cloud Connections 25, how do we migrate people to cloud comms quickly?

After 20 years of pushing the concept of IP-PBX, Hosted PBX, UCaaS, Cloud Phone and other variations on this, there is no magic bullet to get customers to move.

For some, the on-premise PBX is not only the best bargain, but it is the most secure and one they have the most control over. It is also status quo. And the biggest problem is getting businesses to buy CHANGE! That is really what technology sales is about: selling Change.

Often we just sell a replacement product for less money: POTS Replacement, SIP Trunks, broadband, etc. This doesn’t require any change, but moving from a familiar desktop phone to an app is a big deal.

To sell UCaaS, you really have to be Efficient. Efficient at selling and implementing. For very small business (under 10 employees), self-service is key. Along with self-service must come Internet sales, SEO and online ads (Google Adwords, Bing, LinkedIn or similar). And the provider has to not only get efficient at the marketing piece (although that CAN be outsourced), but efficient at handling the leads.

BTW, these folks don’t search for keyword “UCaaS”!

As you move up the employee count, say 20-75, there may be an IT guy involved as a part-timer, freelancer or IT shop. From 75-150 employees, there is usually at least one IT employee. Different segments of the market have different Buyers and different Buyer Influencers.

When you consider that 26M businesses with payroll in the US are under 500 employees and 15M of those are under 10 employees, this is the largest segment of the SMB.

There are outside companies coming into the phone service business like Podium and FlipCX. These are software companies that can easily add voice to their AI assistant or AI Voice Receptionist.

In fact, so many companies are adding voice – Zoho (CRM), ServiceNow (ticketing), Freshworks (accounting) – and if they add AI chatbots and AI assistants, that will squeeze UCaaS providers even more.

Not everyone thinks AI and receptionist are phone system functions.

Selling PBX Replacement seems like a great opportunity due to the 80M-100M PBX seats still standing, but NEC, Mitel and Avaya are great showcases for how freaking hard that is to do!!!!

BTW, an article from 8×8 on why businesses moved off PBX HERE!

 

A Cautionary Tale

Analyst Joe Rittenhouse has a post on LinkedIn about Mitel’s current situation. He references a UC Today story about the debt service being $130M per quarter!

Comments on the LI post blame the wasted acquisitions and the CEO. The difference between Avaya and Mitel is the C-Suite. The same thinking that got you into a mess is NOT the same thinking that will get you out. Avaya got a new CEO. Alan designed a new strategy and like a great coach and General Manager starting putting players into position to execute the plan.

This is what is lacking from most service providers.

You cannot get to where the puck is going with the same team that is staring at the puck going in the net. The leadership has to embrace the new strategy, then sell the workforce on that plan. Then you have to get buy in on the plan from everyone. Not head nodding, but actual buy-in. The employees have to clear the cache on the old ideas (like PBX on-premise head) and embrace the new idea (like cloud).

The “new” idea at Mitel is to chase Avaya cast-offs. Mitel has been trying to do that for years. Now they have tired and angry partners.

Small business still likes the on-premise PBX, especially inexpensive units and a SIP Trunk. However, as the business size grows, so too does the demands of any technology. AI and CX are buzz words but they do make any business owner think if they are positioned for the future, especially before they make another purchase.

Many new service offerings for the VSB (very small business) that include a single pane of glass, omni-channel, web chat, AI and texting are available reasonably for VSB. HELIOS, Net2Phone and a few others already have live clients and use cases. That isn’t the market Mitel partners are in, yet that could displace some of their smaller clients with functions that Mitel can’t fulfill.

Zeus says what I hear often: “a massive on-premises user base still present in the mid-market”. That’s what Avaya and NEC said, too. Look, the on-premise hardware business is declining. It dovetails with the telecom copper market – or wireline as a whole. It make take a while till it isn’t a viable business model anymore. The industry knows that any long-in-the-tooth partners of NEC-Mitel-Avaya are not about to embrace cloud comms now. They will ride out the PBX business plan of the last 20-30 years until sunset. That doesn’t mean Buyers will though.

Bankruptcy always makes customers and partners nervous. Avaya getting 2 of them in short order makes many if one will work for Mitel.

Massive debt and a lack of cash are what killed all the early fiber companies, AT&T, Lumen (CenturyLink/Level3), and many VoIP companies. It may be what kills the TSB/TSD players.

One super agency has at least $30M in debt at 13% and one TSB has at least $15M in debt at 13%. The interest payments alone eat up much of the 20% they keep. Payroll eats up a lot more than that. Many of the TSBs are top heavy. They are constantly updating their portal software. These things eat cash.

The TSBs keep telling the Trusted Advisors to get more wallet share, sell other services, land-and expand, sell solutions from multiple vendors. They yell all this at TAs because network sales are 80%+ of the sales and on every renewal it declines a little bit.

There is a reason network is 80% – it is easy and reliable and quote to cash is fast. Everything else that is in the catalog: software, cybersec, AI, etc., is a longer sales cycle, has many moving parts, has unknown vendors, and the commissions aren’t so great that partners are going to chase them.

Any sales rep will look at a comp plan and discover how to get the most pay for the least friction. The least friction is the point!

The long-in-the-tooth partners will likely stick with what has worked for 15-25 years. Why change now in the dusk of the career?

The funny thing is that many people used to refer to this business as a lifestyle business – and yet vendors and TSBs want the partners to change their lifestyles now. Maybe the next wave of partners.

Since I got into tech in 1996 as a VAR, then in 1999 as a telecom agent and in 2002 as a consultant, bankruptcies have piled up in this business. Caruso’s book highlights about a dozen of them, but there were many others. There were also several vendors who left the channel or oscillated in the channel (VZ!).

Over the last 30 years, it has been a wild ride. For the most part, I wouldn’t suggest partners take advice from vendors or TSBs on how to run their business – unless they invest in you, then I suggest you get a good lawyer to review that contract. Talk to other partners. Talk to customers. What do they want? My journey has not been sketched out. I was just watching where the puck was going and trying to help my clients get there sooner than if they didn’t hire me.

We are at a strange place in time. Businesses need Advisors at a time when the TSBs are in flux, partners are retiring, the technology hype is huge and the next step seems uncertain. The economy and the political environ are not helping.

The analysts and the media tend to offer hope and a positive outlook on every turn. I don’t think they have ever uttered a cautionary note. Caruso, in his book, Bandwidth, mentions an analyst often. That analyst pumped up numerous companies that mostly ended up liquidated, but he and his employer stood to gain from the positive reviews. To keep the party going (the dinners, the free travel, the invites), you have to go along. That tends to mean that most CEOs in telecom don’t often get criticized or questioned. The quarterly mentality and eyeballing the stock price are not necessarily proven indicators of long term success.

I think that is how we get stuck with these vendors going BK. No real criticism. Every product, press release and event is met with applause. What a fake feedback loop.

Well, one thing is for certain: businesses need telecom services and Trusted Advisors will be available to fulfill that demand.

 

 

The Channel Opportunity 2025

When they have the TSD talking heads on keynotes, it would be nice to have a deep dive into their cliche responses.

“”I think what we’re seeing is … there are more opportunities for advisors, and ultimately, that’s what creates a better market for customers,” Edwards said.”  [source] Word salad. How would he know what my customer wants or thinks?

The channel is historically centered on SMB. It was designed that way by the Big Channel Vendors who wanted the big clients for themselves. Avaya is kind of highlighting that now, but back when there was a BellSouth, there were many protected accounts. But also the funding for the channel came from the Small Business division, so they didn’t get credit for selling to Government, Enterprise, etc.

Microsoft, Cisco, IBM, AT&T, Verizon – have all had protected accounts.

The whole idea of channel conflict is a partner chasing an account that is in Siebel.

Also, most channel orders are transactional with shorter sales cycles.

When AppDirect buys 3 companies that only offer services to large companies, I realize that (A) they don’t understand the channel any better today than in 2020 when they acquired MicroCorp; and (B) they don’t examine their own data to realize that 85-90% of the customers are SMB.

There are maybe 60 agencies servicing Enterprise accounts. Heck, even in the MSP segment only 15% service mid-market and above! It’s about 400 MSPs that service large business.

To sell to a large business requires (A) great follow up; (B) Long sales cycles; (C) selling to multiple decision makers; and (D) great discovery questions.

Most salespeople do not have great follow up skills. They do not get motivated by a long sales cycle. The lady that sells Bombardier CRJ700 jets is not going to be able to sell DIA. Different skill sets. Different motivations.

If a TSD could in fact look at their data, they would see that at least 80% of sales are still network and simple voice (SIP trunks, POTS replacement, cell phones, digital voice).

These are packaged products familiar to the Buyer. AI, IoT, IIoT, cyber-security are not packaged products. They also are NOT replacement services nor are they bundles that could carry a SKU. That means that at least 80% of the salespeople in the industry struggle with a sale.

AI companies have been hammering me for six months about getting in the channel. But they can’t tell me who the Buyer is; what the product is; what the outcome is.

Most people in telecom probably don’t know the stories about all the booms and busts — maybe they should read Caruso’s book. Putting fiber in the ground sounds an awful lot like AI and CyberSec. Lots of opportunity, lots of investor dollars, but very little actual sales revenue.

You would think after Katrina it would have been easy to sell Disaster Recovery services like backup. No. Most businesses thought it was a once in a lifetime act and since they survived, no worries. Yet many SMBs closed because they only had paper files that were lost to flooding and had no business data to go back to. But it was still hard to sell DR in NOLA!

I also think that some TSDs only talk to their top 20 partners and consider that “the market”.

I have been thinking about this quote from Intelisys’ Ken Mills:

“And I think that is really important to have the advisor play a more strategic role their customers, bring more services their customers, and leverage organizations to help them deliver [the right solutions]. … We want to bring different value propositions to customers and have our advisors start to play bigger roles in those opportunities.”

Some customers have a PBX guy, an MSP, a network guy, etc. They aren’t going to shut out one “guy” over another.

“We’re just going to continue to sell new things,” said Bridgepointe’s Evars. “There’s a huge opportunity there.”

There is a huge opportunity to sell new things, but by a tired audience of sellers who are on a treadmill, running as fast as they can to sell stuff to maintain commissions as each renewal results in less commission. They want to sell new stuff IF it is packaged to sell fast and pay fast. Is it? No.

Well, actually Net2Phone’s new AI assistant is.

The TSD answer is to sell more to each customer. That means spend more cycles with each customer to get more wallet share.

This goes against the lesson of UCaaS. One reason UCaaS isn’t every partner’s first choice to sell is because it has a longer sales cycle than just replacing dial-tone or the PBX. Also, the compensation (without SPIFFs) is not worth the sales cycle, the service delivery or the headache after.

And once again, partners don’t create demand; we supply it. There is still demand for key systems, side cars, and paging systems. Not every business – especially small business – has a desire to consume technology. They don’t have a technology team. They don’t want to slow down production while the staff learns (and fights) new tech. That’s reality even if it doesn’t fit in with the industry singing OPPORTUNITY! That’s what Frontier, Fusion, GTT, Airspan, Cyxtera, Starry, Windstream, Sungard, Covad, Focal Communications, McLeod, Northpoint, Winstar, AboveNet, MCI, 360networks and so many more said before they filed for BK.

There was a cable company that hired me to train the sales reps on selling Hosted PBX/UCaaS. The sales leader asked why sales were still slow. I asked if the comp plan had changed. No it hadn’t. So there was no penalty for not selling UCaaS. So the sales team sold what was easy.

I have managed sales teams for ISPs and MSPs and every time there isn’t a mandate to sell HPBX, the sales reps ignore it. Get quota fast and furious selling network and voice replacement.

Everyone confuses the Partner as a business genius, but in so many cases, they are just sales people who now work for themselves – not entrepreneurs. they are solopreneurs or freelancers. You know how I know they aren’t business people? The number of partners who did business with TNCI and the number that sold to private equity. We get to hear those horror stories every month on our partner call.

There are sound business people in this channel, no doubt. There are partners selling to Enterprise – Scott Levy, Dyson, ACT, Acuity – but these are not the majority. They are a niche. It takes a different set of skills to land and handle an Enterprise account. [BTW, if it was easy to land Enterprise accounts, don’t you think the vendors would do it without the channel?!]

“All of us are going to continue to invest in the growth opportunity,” said Evars. “We’re just scratching the surface. … It doesn’t matter what the technology changes to; we’re going to figure out a way to solve customers’ problems and monetize that.”  This could be a quote from BANDWIDTH, the book by Dan Caruso about the fiber players in the late 1990s to the early 2000s.

EC25 – AI and CX

Went to Enterprise Connect yesterday. Had some meetings and walked the show floor. Two terms showed up at most booths: CX and AI. Not a surprise, but really boring. The same thing over and over.

At one meeting I was asked about the future of cloud comms. I don’t think the 5% CAGR puts it in growth mode. As I have said previously, Enterprise Communications is for 44K companies, which does not represent most of the addressable market. The addressable market is SMB, which represents 99% of your customers.

The major problem for most cloud comm providers is that they want to sell to Enterprise and Big Business without the ability to actually do that. They won’t hire a sales and marketing team. They won’t put in the work. Partners can’t do that work for you. They supply demand; not create it.

RingCentral spent years and a couple of billion dollars going after to mid-size and large accounts. SDR, sales teams and tools, every aspect of marketing, R&D, user design, and M&A. It made deals with Mitel and Avaya to get into large accounts. It partnered with VZ, AT&T, Spectrum and other telcos for more opportunities, but had to suffer through the piles of smaller deals that came with it.

And even with all that Microsoft Teams and Zoom have taken all the oxygen out of the UC&C room. The CCaaS space is hyper-competitive with most of those providers also chasing Enterprise because who else has call centers with at least 200 agents?

What has your company done to win enterprise?

I sat through a TSD’s partner workshop last week where they paraded vendors that only sell to enterprise in front of us. And the whole time, I am thinking: “What a waste of our time and theirs.”  Historically, the channel handles the SMB space. There are partners who sell to Enterprise, but that is a small subset of partners.

The SMB market is 33M businesses in the US with less than 500 employees. 15.7M have between 1-49 employees.

SMB is most of the accounts. Most partners (85%+) sell to SMB. SMB does not buy like enterprise nor do they have the organization or staff of enterprise. Small business lacks the technical skill and the staff to run a POC (proof of concept trial); play with SDKs; try to get integrations to work. They need reliable solutions that are turn-key with a specific ROI.

If you notice lately, some Enterprise vendors want to move down market. They have been fighting for 44K largest accounts and they are tired and bloody. It is very hard to displace Microsoft, Cisco, IBM, and Google.

Let’s talk AI for a minute.

AI for the most part (at this time) is a cost savings and productivity tool for large business. Does it save so much productivity that each employee should pay $30 per month for it? Probably not. Does it save a call center agent or two? Probably.

Chatbots, assistants, AI agents – they don’t work in a vacuum. They require data. Where are they going to get that data?

Freshworks surveyed 600 businesses in 2024 and found 71% of small businesses use CRM. I think that is high, but also begs the question: What CRM? There are over 800 CRM platforms out there. Stripe and Quickbooks could be the CRM. Really hard to extract data from either of those platforms for your GenAI chatbot. MSPs use ConnectWise for CRM, billing and ticketing. Really hard to extract data from that platform as well. So where does a small business get usable data to feed into the ML/AI?

Is the data in your SaaS applications available to your AI? Is it only available to YOUR AI or to everyone’s AI?

Most examples of AI are writing assist – emails, business plans, marketing copy, blogs. (Great! We are replacing humans writing!) Or chatbots. In some cases, the AI is just fancy IVR.

These are Enterprise uses. That’s who CX and AI are built for. That’s what EC targets: Enterprise Comms. Just remember that Enterprise buys different things and in different ways from SMB.

That’s why it is important to know who your Buyer is and what benefit they get from your services. Otherwise you are chasing a market that

Businesses with Under 99 employees will continue to leverage PBX – from Asterisk, 3CX, Freeswitch, Yeastar, Zultys and others. The on-premise phone system is still affordable and a solid tool. Ask VoIP Supply or 888VoIP.

Very small business (under 10 employees) buy UCaaS – and that is a large portion of businesses in Europe, Canada and the US. Yet not many providers want to target that market. It requires efficiency and has high support costs. And they may not buy YOUR UCaaS because they may want one integrated into the software that runs their business. Or one designed for VSB.

We are on the cusp of seeing more verticalization, specialization and platforms designed for the VSB. Weave has done well in the SMB healthcare space. Others have done well with law, hospitality, retail. This will be the trend.

With the Avaya/Mitel/NEC issues; Zoom/MS Teams dominance; Broadsoft/Metaswitch EOL; BEAD billions; and other factors, I think Voice will go back to being Voice for most businesses and Collab/Video/Messaging will be a separate thing. There is a growing problem with robocalls, scam calls, scam texts. The $4.5M fine on Telnyx for robocalls will also ripple. The mess that is SMS/MMS, 10DLC and the Campaign Registry will also cause headaches for businesses and providers. There are just too many moving parts in telecom for cloud comms right now.

Many CSPs are about to decide of a voice platform for FTTH. That will swing focus, sales, and attention to digital voice, not a full stack CP+UC+CCaaS. That will shift things further for many UCaaS players who are already struggling.

Meanwhile, on the sales front, due to macro-economics, the political environ, the hype of AI and CX (without concrete outcomes), sales are taking longer. Status Quo is winning. That isn’t good for the industry.

Side facts:

ServiceNow is now a CRM and agentic AI company.

50% of CRM projects fail because of a lack of cross-functional coordination. [source]

Mitel Goes BK

LinkedIn this morning is buzzing with news that Mitel is going to file bankruptcy to deal with $1.15B in debt. Mitel has accumulated this debt, largely due to financial commitments to its owners, Searchlight Capital, with high interest payments to service the debt. [The telecom universe has many companies that are PE owned and weighted down with high interest debt.]

This financial crisis explains why Mitel wasn’t the winner in buying the NEC assets. Instead the NEC on-premise and private hosting assets went to an NEC dealer, Forerunner. And Forerunner probably has some PE debt as well now.

Some view this move as doom, others feel it is like Avaya who uses BK as a tool.

This does create uncertainty in the market – and uncertainty stalls sales.

Like Avaya, Mitel announced deals with both RingCentral and Zoom. Like Avaya I don’t think this was much more than buzz … for Zoom. Probably the only winner in both deals was Zoom.

Like Avaya, Mitel is focused on UC in on-premise and private hosted. Development is out the door. It is mainly about working with the largest customers to keep them happy. Hence, why Avaya is just working with its Global 1500 customers and all customers with less than 200 CC seats are dismissed. Avaya has presented its competitors with new opportunities. I think Mitel will too.

Will buyers not make parallels between Avaya and Mitel?

SMB prefers on-premise PBX due to a fixed cost. It also doesn’t have personnel to constantly hone and experiment with the communications systems. Out of the box, the comms package has to produce results. A small business doesn’t always get the outcomes they think with SaaS. That is what Mitel and Avaya are banking on, but they don’t want to serve SMB. Avaya has come out and said so. Mitel hasn’t yet.

The Global 1500 Avaya customers are kind of stuck because to migrate off their current duct-taped comms platform would require an interior godfather to evangelize and bet his ass on a new comms platform. That isn’t happening in today’s business environment.