Fresh off coming back from Microcorp’s annual partner event (and 30th Anniversary party), I am reflecting on conversations with the partners.

Some are wondering what vendors to look at. Who is real and who is not. Who will be around to pay commissions in three years?

Hint to one data center company: Don’t tell partners that you are owned by a private equity firm famous for cashing out. That isn’t a way to win our minds or orders. Also, do NOT tell partners at a master agency event that they can go direct with you. WTF?!

In the past month I have been asked numerous times if Microcorp is for sale. The answer: “As a member of the Microcorp Advisory Council, I can assure Microcorp is not for sale but actively looking to buy!

Since the ScanSource deal, a couple of master agencies have announced that they were investing in the business and want your business. (see HERE and HERE.) One sub-agent seemed upset by this and called in fear-mongering. Is it?

The VAD space is in turmoil. All of them are seeing revenue drop. All are trying to figure out how to take advantage of cloud and MRR to shore up revenue erosion. ScanSource gambled on an easy fix – buying Inteisys – except that their stock tumbled afterwards.

If you haven’t worked with a VAD, it isn’t exactly the same as what Agents know as a Master Agency. VADs are more automated and focus on logistics and distribution of licenses and hardware. Sales isn’t about co-selling, but product information. There isn’t a whole lot of need to order track a software license or a server. VADs run on co-marketing dollars and razor thin margins. Masters are labor intensive. The hand holding that the agents and VARs will need to navigate selling telecom, cloud and managed services will be a shocker for the likes of ScanSource.

The upset sub-agent must not understand what every Agent I have ever talked to does: Diversify your income streams because everyone gets screwed in this business. . If ScanSource held you to a firm partner contract with quota and activity requirements – or at some point stops paying your commission – what do you do? It will cost you almost a million dollars and years of your life.

It’s about mitigating risk. No one has a crystal ball, but you can take steps to give yourselves a safety net. You don’t have to, but it is sound business practice.

The other dilemma, which kind of caused all this, is the lack of new partners. The VAR segment has shrunk in the last 4 years. Too long to go into now, but with moves that Microsoft and Cisco made, some partners opted to pivot out of the VAR space. Others made the move to MRR as an MSP with a lot less emphasis on hardware sales.

At the same time, price erosion resulted in commission decline. Meanwhile, not many new faces are entering the channel. At every channel event – I have been to 4 in the last few months – the number of folks under 45 is a fraction of those partners over 45. This business is getting old.

At the same time, more vendors are entering the marketplace for cloud, managed services, IOT, analytics, blah, blah, blah. More vendors but not more salespeople. We are at a point where the channel is the cheaper option for sales for most vendors and carriers. In the UCaaS space half of new mid-market logos come from channel partners. The cost of sales via channel is lower than the cost of a direct sale. But without new blood in the channel, what happens in even 5 years?

More vendors coming into the space with even the same number of partners just doesn’t work out mathematically. Verizon is aware of the problem and is working on it with partners. But they seem to be the only one, because it seems many are looking globally for sales right now:

AVANT hires a UK channel manager.
Intelysis goes to Europe.
Tech Data is buying Avnet’s technology solutions group for $2.6 billion to expand into Asia.

Tags: agents, channel partners, commissions, master agency, microcorp, strategy, tech data, VAR, var
Related tags: cloud managed, managed services, master agency, hardware sales, partners, channel

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Sponsored by Apex Technology Services, a leading IT Services company

I have a lot of snippets on the UCAAS and UC&C space to share, in no certain order.

We have seen consolidation in the contact center space – ININ-Genesys and others. It isn’t over yet. There are too many players in the marketplace, and for right this moment money is still cheap. Better to buy your competition than try to beat them.

More predictions: “Global unified communication and collaboration market expected to grow at a CAGR of 12.3% from 2016-2020,” says a report by Technavio.

So 8×8 and Vonage are at 600K seats each. 8×8 has 45,000 Customers according to June 2016 investor prezo with ARPU at $399 now.

Windstream and BroadSoft team up to bring customized Virtual PBX to hospitality market. WIND is a confusing deal. They own Allworx which they never discuss. They push MITEL and Avaya – and they have a Broadsoft. That is a lot of platforms to know, sell, manage, support.

Comcast Business Services revenue increased 17.0% to $1.4Bn with small business accounting for ~75% of revenue and ~60% of growth. Voice makes up 7% of Biz Services Rev..

Megapath launched the latest Broadsoft offering called MegaPath One with the usual collection of bells and whistles. MegaPath also rolled out Skype for Biz integration.

ITSPs are so worried about Microsoft eating their lunch that they integrate with it or add some Microsoft to their offering, like MegaPath and Velis4. Even TelePacific is joining the Microsoft CSP program. WIth the DSCI deal approved at the federal level, there should be more news out of TelePacific.

RingCentral doesn’t break any stats out anymore as they just play with GAAP and performa stylized finance sheets. “In 2015, nearly 30% of RNG Office new bookings coming from up-market customers with at least 50 users, up from about 20% in the year ago period.” Now they are bringing in customers with 100+ seats. All the UCaaS players are going upmarket, where the ARPU is higher, to cover the cost of sales and support.

RingCentral (RC) did make one big change: previously RC distributed phones to customers by reselling third-party phones; maintaining inventory, handling A/R and warranty processing, etc. Now they made a deal with Westcon to distribute phones to RC customers with RC acting as an Agent of Westcon and getting a referral payment per order. Westcon will now maintain inventory, handle A/R and warranty processing.

Jabra Survey Finds Small/Medium Businesses Driving Productivity through Unified Communications. “Between a third and two-thirds of all small/medium businesses (SME) will either add unified communications (UC) or replace existing systems with UC within the two years, according to a recent survey by Jabra.”

Cisco Spark, Microsoft Skype4B and other services are putting pressure on the OTT VoIP players. “RingCentral and friends are now facing challenges from Microsoft and many other titan-sized technology experts. The proof is in the pudding, and these VoIP experts must continue to show that they can deliver healthy business results in head-to-head competition with true giants,” states this article. Because all the noise right now is about Skype (and Slack started doing TV commercials), the market is wondering if stand-alone VoIP can continue to afford to buy market share. VoIP players are giving free phones, SPIFFs, free months of service, just to get a customer. The cost of that acquisition is being questioned on the stock market. OR it may all be a fluke and stock speculation going awry.

There were a large number of service providers in the space of UC&C – from Fuze, RC, the Cloud Comm Alliance members to the LECs to the other numerous ITSPs. Then softswitch vendors decided to become service providers, too. Broadsoft BroadCloud; GenBand Nuvia; Alianza Cloud Voice Platform; and Metaswitch MetaSphere Cloud Services are all competing with their customers and making it easier for new entrants into the already bloody ocean of Hosted VoIP. (Now even enterprises can be an ITSP).

Everyone is pushing up-market, but Cisco recently did a study on small businesses. The study found “on the IT front, a majority of small companies (86 percent) are considering the use of cloud-based unified communications (UC) systems as a possible solution to their communications needs, replacing their more traditional premises-based counterparts.”

“Yet unified communications as a packaged service, despite its relative maturity, remains far less than universally adopted, particularly outside of larger enterprise accounts. A recent survey of more than 400 enterprise and SMB IT decision-makers, performed by UBM Tech for XO Communications, found that only one-third of organizations had fully embraced UC. On the other side of the spectrum, a separate survey performed by Osterman Research for ConnectSolutions found that about as many IT decision-makers (26 percent) and business deci-sion makers (39 percent) are either “somewhat” or “very fearful” of migrating to UC. Nearly half of those surveyed admitted that they don’t fully understand the full impact UC would have on their organizations. These fears and trepidations come despite the fact that 71 percent of those surveyed by Osterman believe there are “significant” or even “enormous” benefits that can be realized from the deployment of UC.” [from ChannelVision magazine].

Mobile UC is going to be another segment of the UCaaS pie. Mast Mobile, Apple, Google and now Verizon’s One Talk. You know that Sprint could have driven this years ago when it first announced integration into the Broadsoft switch for 4-digit dialing to cellphones. But Sprint just couldn’t get out of their own way. It would take months to deal with them for quotes, sales sheets, etc. It would be scary to think how long deployment would take. But now VZW is doing it – all in-house – with their Broadsoft.

Tags: 8×8, broadsoft, metaswitch, mobile, UC, voip, vonage, windstream
Related tags: unified communications, decision makers, makers percent, service providers, medium businesses, market

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One of the early adopters of WebRTC is an ITSP with 45,000 customers out of NYC called OnSIP. OnSIP recently launched a Freemium model for UCaaS for businesses. I got to speak with the CTO and Co-founder, John Riordan, about that in this podcast.

You can get some more detail about the service in the PR HERE.

SAAS companies frequently use the Freemium model (like Dropbox), but UCaaS providers usually forget that Voice is just an app in the bucket of UC. So this was an interesting marketing move by a pretty progressive company.

If you are having trouble seeing the flash mp3 player, you can listen at Soundcloud or download the mp3.

Tags: podcast, SAAS, saas, UC, voip
Related tags: freemium model, ucaas, onsip, freemium

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Skype is Taking Share – Sep 12, 2016

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Microsoft beat Salesforce in the enterprise SaaS market in Q2, according to Synergy Research Group. “Microsoft was only number two with 7.9% market share of the global enterprise Software-as-a-Service industry in H1 2015.” Now in “Q2 2016 resulted in Microsoft taking 15% of the enterprise SaaS market, beating Salesforce’s 14% share.”

NoJitter did a reader survey about Skype4B. Gary Kim has the break down HERE. “Of the 224 respondents that say they are using Skype for Business on-premises, 33 percent said they are using Enterprise Voice as a PBX replacement.”

Office365 is taking the business market by storm – and S4B comes with it. How many will use it for a full PBX replacement? No one knows yet.

If they release a version of Sharepoint that resembles Slack, that penetration could go up. We will be back in the days of a Microsoft monopoly, which if you remember correctly sucked.

This includes ALL Microsoft packages, including Win10. Salesforce had 2016 Full Year Revenue of $6.67 Billion, up 24% Year-Over-Year. In fiscal 4Q16, Microsoft’s cloud offerings – Microsoft’s core cloud offerings: Office 365, Dynamics CRM, and Azure – grew to reach an annualized revenue run rate of $12.1 billion.

SRG’s survey begs the question where are the competitors? Google for one is not on the list. There are a number of UC&C providers – and none of them made the list. It is all the big names in enterprise software – IBM, Oracle, SAP, Citrix, Adobe, Workday and NetSuite.

“As long as Microsoft can offer $5/month SharePoint and $8.25/month (per business user) Office 365 subscriptions, Microsoft will continue its dominance in the fast-growing online Collaboration software segment.” And when I read that sentence, I realize why agetns are selling SAAS. At $13.25 and 10 points, it is $1.32 per user per month – even with 100 users it is $132 per month. Yet you have to project manage a migration that is challenging even for the experts. Too much to go wrong for too little pay out. And if that is supplanting your data backup or even your conferencing revenue, why?

That is the dilemma facing cloud: the giants own the market; the channel can’t wrap a business model around it yet; and the giants will take more of the pie.

Tags: apps, commissions, financials, ibm, microsoft, SAAS, saas, skype
Related tags: cloud offerings, enterprise software, microsoft, enterprise, market, business

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The Struggle of the Channel Managers – Jun 23, 2016

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Can You Say More M&A? – Apr 07, 2016

And Who Else Got Acquired? – Feb 18, 2016

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