CRN Interview: Michael Capellas, MCI

Michael Capellas, chairman and CEO of MCI, recently spoke with CRN Senior Editor Christina Torode to outline the role the channel will play in the carrier's convergence and IP services strategy

CRN: You've talked many times about convergence and the IT and communications worlds coming together. Where does the channel fit in this convergence?

Capellas: I think in general the evolution of the channel has been more services and the ability to have that close touch [with] the customer, particularly reaching small and medium-size businesses, and particularly the medium businesses. As I look at what we have to deliver, we are actually building some of these products tailored for channel distribution. We have put in a new VAR organization with a few familiar faces in it for us, so we're really sort of saying what would be great for the channel is to have the ability to do what they do best, which is the ability to extend services. And our services have the installation package that is targeted and priced to the midtier market, and the implementation is clean, so they can be implemented quickly. I think our brand, our delivery, the way we're developing these products, the self-installs, are actually tailored just absolutely perfectly for the channel.

CRN: Where is your VAR program at this stage?

Capellas: We're gearing up. We're trying just as a question of policy to do it first and say it later, but we don't want to get ahead of ourselves. We are hiring people who know the channel. We're building these products to be very distribution-friendly. We do think that reaching the midtier market through VARs is natural for us. The key [for] them is having another category that they can add on top of what they already know. [VARs] have always been very good at industry-specific verticals. They've always been very good [at] fast response times and being able to do the implementation on-site, so extending out with these [IP services] is pretty much a natural.

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CRN: How committed is MCI to this channel strategy?

Capellas: Like I said, I'm not going to get ahead of myself, but we're going to go there. We're going to go there aggressively. We're going to build the products and design the products. One of the lessons I learned in the past is that you have to design the products and the price points to be distributable. So it's coming.

CRN: We haven't seen any formal channel program as far as terms and conditions.

Capellas: There are three stages. We are first making sure we develop the product set. Second, we are making sure we have an organization that can support it. And third, we'll actually get to the terms and conditions on specific products. We have dedicated people who do nothing but handle the VAR channel. I have a lot of confidence in them because I've worked with them before. So clearly our intent is to work with [VARs. We] know that world; it just makes sense for us to work with them.

CRN: Back in your days with Compaq there was channel conflict and some complaints about Compaq's direct strategy. With WorldCom now canceling agent contracts, do you think it's going to be difficult to gain the trust of the channel?

Capellas: I heard a few [complaints from VARs while at Compaq]. No, I don't think [gaining their trust] is an issue at all. I think while you can't make everyone happy all the time, the relationship [between Compaq and VARs] was pretty good.

The reality is this is consistent with where the channel is going--toward more value-added services. We have value-added services to provide. It's a natural evolution. The economics work, and at the end of the day, it's about economics. So I'm not concerned about [channel resistance] at all. I'm actually viewing the opportunity as a positive, not a negative, as far as understanding the economic model of the channel and moving right in with value-added services. The great thing about these services is that they don't depreciate 1 percent per week, so I think the VAR channel is a very normal, natural fit for us.

CRN: What about the agent channel?

Capellas: In terms of the agent work, we needed to restructure. I don't think anyone doubts that. It was a little bit confused. We're going to bring more certainty to that [program]. One thing I have learned about dealing with the channel is that the more certainty you bring the better. The second message is, 'Don't get ahead of yourself.' I don't want to make promises that we can't deliver. We want a very well-thought-out program, so that the communication is very clear. We're working on it as fast as we can, and you know I want to make it right and you know communication is hugely important.