Seeking New Telecom Ties: Agents Acquiring VARs To Expand Customer Base

When distributor ScanSource acquired Intelisys in 2016, Michael Ketchum, vice president of finance for the master agent, thought there would be a wave of VARs partnering with the agent community or even trying to buy up agent organizations. But, he said, it's been the other way around.

"I've seen traditional agent partners buying small VARs and taking the base of those VARs and mining them," Ketchum said. "Some small VARs are really struggling to transform, and the agent model isn't an easy sell."

At first, Intelisys thought that VARs, the primary partner base of IT distributors, would follow ScanSource's lead and seek to aquire partners that specialize in services-based solutions that generate recurring revenue. Instead, agent partners who already have robust recurring revenue streams are trying something new. That trend, according to Intelisys co-founder Rick Dellar, is a positive one.

"We are seeing agents buying VARs, and we think it's a dynamite [model],” he said.

[Related: Intelisys To Partners: The Whole Customer Experience Means Including CRM In The Conversation]

RealCom Solutions is a Plano, Texas-based telecom agent that in 2017 stepped into unfamiliar territory when it acquired a hospitality-focused VAR.

"I might have not known what I was getting into, but it was the best decision I've ever made," Charlie Bogart, RealCom's founder and CEO, said of the deal.

Bogart came across the opportunity to scoop up the VAR and believed the deal would give RealCom access to strategic relationships with a new customer base. RealCom was able to buy the VAR via the ScanSource-backed Intelisys Partner Investment Program, which offers financing secured by the partner's existing or future commissions, and effectively quintupled its customer base overnight.

Acquiring a VAR has proven to have a steep learning curve that Bogart said the company is still climbing. That's because there's a lot to learn about the equipment business and operating a company that handles installations and sends out invoices rather than only collecting checks, he said.

Bogart has also been able to help the VAR shift from a transactional sales model to selling services that offer recurring revenue.

"It's been a great strategic purchase and one year in, I'm looking for others," Bogart said.

VARs should determine whether they are looking to grow and expand their business, or whether they are or will eventually be for sale, Intelisys’ Deller said.

"There's a difference between a company that is sustainable, but not necessarily carving out budget for growth strategies, and builders looking to make investments that may have not achieved what they wanted through organic growth alone," he said. "That part is important to understand because there's a lot to learn about becoming a buyer."

OnCall Telecom International, like RealCom, was looking for a way to make more money and bring on new customers. OnCall bought a VAR that had a team of sales executives looking to land big, one-time sales related to legacy phone systems.

One of the most important factors leading into the deal, according to Lucas Salvage, vice president of business development and cloud specialist for OnCall, was that this VAR wasn't selling anything in the OnCall portfolio, which included cloud and connectivity services.

"We found a great marriage between two companies that can, from time to time, sell more phone solutions, but 99 percent of the time, it's going to be time to talk to customers about SIP, cloud and internet," Salvage explained.

"They were buying connectivity from someone else—not the company that sold them their phone system," Salvage said. "We've won some incredible deals."

Although the sales team will require training, it will come to enjoy the additional recurring revenue that services-based solutions provide, he said.

"If [an agent] thinks there is an opportunity with a company that is dwindling in terms of their technology reach, they can really realize some incredibly quick hits if they pursue the opportunity," Salvage said.