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Many networking and VoIP solution providers have been paying close attention to the recent round of telecom mergers, hoping that consolidation would lead the major carriers to realize what to them is a clear, obvious fact: New programs specifically tailored for the channel could help these huge service providers more effectively tap the lucrative SMB market for telecom equipment and services in North America, which, according to Compass Intelligence, reached $89 billion last year.
But evidence that the carriers are prepared to reach out to solution providers remains scarce.
Last week, Verizon Business—the global communications giant created by the merger of Verizon and MCI, and the third leg of Verizon’s Consumer and Wireless business units—announced its formation and made its priorities immediately clear. Executives said Basking Ridge, N.J.-based Verizon Business is mainly about direct sales and professional services to high-end global enterprises and government accounts.
Also last week, AT&T—itself a new company and now the largest U.S. carrier following its recently completed merger with SBC Communications—unveiled a partnership with Avaya to drive a comprehensive, single-source VoIP solution to enterprise customers. Will Harvey, director of AT&T Network Integration Services, San Antonio, said that selling hosted, turnkey IP-based voice and data solutions direct to enterprise customers is a major part of the new AT&T.
Next month, Atlanta-based BellSouth, now a target of merger speculation, plans to expand its voice footprint nationwide through a partnership with Sprint, and has plans for the second quarter to sell a fully managed VoIP solution through its direct sales force and agents, said Jeff Lewis, director of advanced voice service.
Carriers such as Verizon, AT&T, Sprint, Qwest Communications International, BellSouth and Pac West may be making all the right moves to push next-generation IP-based voice and data services, but their reseller partners say the agent models they use to give incentives for account referrals are outdated. They simply don’t leverage, or adequately reward, the influence solution providers now have over customer decisions such as VoIP.
The newly merged Bells appear to have shunned the SMB market, instead setting their sights on direct sales efforts to woo global, enterprise accounts with tightly controlled, hosted and managed services. The months of transition as the consolidation of the Bells took place seem only to have thrown agent programs into disarray. And solution providers—barely part of the language of carrier programs—are still without the flexible financing programs that might allow them to commit more sales and engineering resources to jobs with significant telecom components.
Solution providers with strong ties to SMBs argue that telecoms sacrifice market share by failing to look past the traditional agent model to the VAR channel. If carriers want to play exclusively in the enterprise, fine. Just give VARs a program that lets them engage carriers early enough in a sales cycle to avoid Quality of Service problems without worrying that they’ll have to wait on a carrier’s incremental billing cycle to recoup expenses (see sidebar).
“I think carriers are missing the boat,” said Victor Kellan, president and CEO of LAN Solutions, McLean, Va. “I don’t know why they don’t see the value-add of [VARs].”
Kellan said VARs like himself could easily drive more revenue to carriers if the right programs were in place. It all comes back to finding a feasible financial model that works for the VAR, something Kellan is now hashing out with a nemesis of the telecoms—a local cable company. The plan calls for Kellan to deploy and manage the on-site components of business VoIP deployments, while the cable company hosts the solution and handles escalated service calls. When complete, the net result will be a shared profit from the individual markups, an arrangement Kellan doesn’t think can be achieved with a larger carrier.
It’s all take and no give with carriers, said Kellan. “Carriers are willing for you to come to them with customers who want bandwidth and services, and they’ll compensate you for that, but they will not open up their customer base to you, or extend the relationship much further,” he said.
What Channel Plans?
The carriers are simply playing defense, some experts say. With traditional telecom services (i.e., the phone call) now commoditized, carriers have to take a major stake in next-generation voice/data services, which include storage, application hosting and other network-dependent technologies, said Paris Burstyn, director of telecommunication strategies at research firm Yankee Group. In an effort to survive, carriers prefer to keep these solutions close, hosting them themselves whenever possible, said Judy Reed Smith, CEO of Atlantic ACM, a telecommunication research and consulting firm. Putting their name brand on a VoIP solution without controlling the deployment is not something a Bell wants to do, and this fear, along with the need to have next-generation data services as a vital new revenue stream, could be slowing any plans the Bells have for VAR partner programs, she said.
In at least one case, a merger derailed a carrier’s channel plans. In February 2005, less than a week before Verizon said its approximate $7 billion deal to acquire MCI was all but closed, MCI unveiled plans for a new channel program designed to triple indirect sales volume, according to then-MCI senior vice president of solution providers Todd Gerdes. What happened just after that was channel mayhem for Verizon and MCI, according to several agents for both companies. Channel conflict issues arose, commissions were delayed, and for MCI, control of its master agent program changed hands four times. Verizon has yet to activate some accounts that were supposed to go live last year, a Verizon agent said.
Now, instead of tripling indirect sales volume, Verizon Business plans to work with “fewer than 100” select, enterprise partners that will assist the company in serving its enterprise and government customer rolls, said Bruce Walt, the newly appointed director of channel support. Verizon Business will push further into directly sold managed IP-based services ranging from security to network management and will triple its VoIP capacity this year as it moves to combine its billing operations by 2007, according to executives. A separate sales organization to sell VoIP direct to enterprise customers will also emerge, creating less opportunity for both agents and VARs, said a master agent and reseller who requested anonymity.
No new midmarket program for either agents or VARs is in the works, said Walt. The existing referral agent program left over from “core Verizon” will stay on autopilot, he said, adding, “The traditional agent model will continue.”
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