DLT Solutions Expands Into Telecom Networking With XO Agreement

It's a move that gives XO a broader reach into the federal space, and also finds DLT -- one of the country's fastest-growing solution providers and a VAR 500 staple -- expanding into sales of communications and networking services solutions for the first time.

DLT, based in Herndon, Va. and No. 96 on the CRN's 2010 VAR 500 ranking of the top solution providers in the country, has had four straight years of more than 20 percent annual sales growth. The company hit $790 million in revenue for 2010, a 29 percent increase from 2009, and focuses primarily on the federal government, partnering with Oracle, Autodesk, Symantec, Google, NetApp, Red Hat and other major enterprise software, security, IT management, data center, virtualization and cloud computing vendors.

Networking and IP communications, however, are a new sales frontier for DLT. Under the agreement with XO, DLT will sell XO's enterprise VoIP, SIP trunking, managed MPLS and Ethernet VPLS wide area networking services to federal agencies, as well as high-performance data center and network connectivity solutions.

According to Ed Jones, senior vice president, business development for DLT, DLT sought an exclusive relationship with XO as part of its growth strategy.

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"We're not a GTSI, or a CDW-G, or a WWT that will sell a broad range," Jones told CRN. "We're more focused on selling the IT vertical, and selling the No. 1 or No. 2 players in their fields, because we want to be their No. 1 or No. 2 VAR. We really credit a lot of our growth to that strategy."

The VAR doesn't plan to pursue relationships with any of XO's competitors.

"We don't compete in our line card," Jones said. "That's getting harder to do with all of the acquisitions going on, but strategically we don't. When we come to work in the morning, we're going to be selling Oracle, and selling Symantec, and so forth."

DLT decided to look at communications as an adjacent vertical as part of its 2010 strategic planning meetings, especially for the role telecommunications plays in cloud infrastructure and cloud computing services.

It's a crowded market, Jones readily admits, and many of the big players have what he described as "vast and complex channel strategies."

"We came down to XO, and what really made them stand out in the beginning of the process was that they do not have a consumer business -- they are focused 100 percent on enterprise, and Fortune 500 -- and are unique in the telecoms field," Jones said. "The government is a big enterprise. We told them, 'We would like to be your exclusive VAR.'"

XO, said Jones, did not have a big presence in the federal government space previously, and its state and local government-facing business is part of its commercial operation.

"While they had an excellent outside sales team, they really didn't have a federally-focused inside sales team," Jones said. "Their federal business isn't very big, so they were motivated to come on here."

The relationship with DLT will put XO on DLT's General Services Administration (GSA) schedule as well as DLT's other contracting vehicles -- an "enormous aperture" to the federal government for XO, Jones said -- and provide DLT a full complement of communications services.

"We've got a full plate," Jones said. "We don't want to get into a consumer business or distracted by a consumer business."

Discussions between DLT and XO began about 10 months ago, Jones said. XO is responsible for its existing federal contracts -- including the $45 million managed network services contract with the U.S. Postal Service it announced in February -- but DLT will handle all of XO's federal transactions going forward.

DLT has a full sales team dedicated to the XO business, and the back-office support DLT needed to transact subscription-based sales with XO is up and running.

It's not unlike subscription service processes that DLT has in place with partners like Akamai and Red Hat, Jones said, but it is telecommunications solutions instead of software licenses.

"It's established GSA pricing and established GSA SKUs," Jones said. "We will have negotiated a reasonable discount but no outrageous margins. It's not a get-rich-quick scheme, it's a profitable business based on established GSA rates."

XO has undergone significant management changes in recent months, including the resignations of President and CEO Carl Grivner and Vice President, Indirect Services Brian Law in April. Mike Toplisek, chief marketing officer for XO Business Services, is the current manager for XO's channel organization. Jones said DLT was assured that nothing about its relationship with XO will change.

Jones declined to comment on other potential markets DLT might enter, but said the company is actively looking at its options.