Ring Leaders: The Convergence Of VARs, Carriers And The Telco Channel

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Residual Reluctance

Why have so few VARs embraced telecom carrier sales in the past? Compensation isn’t the only reason, but it’s certainly a big one. With more VARs turning to services models -- managed or otherwise -- recurring revenue schemes are easier to swallow. But the model that dominates the carrier agent world -- a residual fee that’s paid out months after the sale, with bounties, spifs and other incentives as sweeteners -- is a tough pill to swallow for VARs used to making more of their money up front.

“VARs usually get it best when I compare it to maintenance contracts,” said Ken Mercer, senior vice president for master agent Telecom Brokerage Inc., Chicago. “It’s just gravy. It’s, ‘I can’t give you $500 today, but I will give you $50 for the next three years, every month. If you sell another order, it becomes $100 a month, and then it becomes $150 a month.’ It adds up.”

Mercer says he’s heard every excuse in the book for why more VARs don’t want to sell carrier services: They don’t want to be “phone companies,” perhaps, or they don’t want to get their sales teams up to speed on cumbersome carrier compensation schemes.

But with the changing nature of who sells what in the channel—and the cloud services model the dominant discussion point—many of those VARs won’t have a choice in the future, Mercer said.

“This is no longer a break-fix model. That’s not relevant,” he said. “You want to be the consultant, the champion, the trusted adviser. You want to be a solutions-selling person and build a long-term residual stream, which gives you more control over what’s presented to the customer. That’s a long-term goal, instead of just cramming one product down their throat.”

Some do get it. VAR powerhouse Carousel Industries, Exeter, R.I., partners with more than 30 carriers and has seen its carrier services business double over the past year. By offering everything from SIP, session management and VoIP to routing, switching, WAN optimization, data center design, virtualization and other technologies, Carousel owns that much more of the sale, said Stephen Forest, director of carrier solutions.

“Our biggest growth is going to come from guiding our clients from traditional TDM network architecture to a fully converged SIP-enabled architecture. We are uniquely positioned to deliver all of the elements required to realize the TCO benefits of the next generation of networking technologies,” Forest said. “Our expertise … brings a lot of valuable elements to our clients that they would traditionally need to source from many providers.”

Solution providers interviewed by CRN agreed that the carrier community lacks strong, VAR-centric channel programs but said the best of them often have IT channel veterans at the helm. Level 3’s Williams, a former Linksys channel chief and Cisco vice president, is one such executive.

Craig Schlagbaum, vice president of indirect channel sales, Business Class Services, at Philadelphia-based Comcast, is another. It’s Schlagbaum who in recent months has emerged as a champion for ITtelecom channel convergence and what it can do for channel business opportunities.

Comcast Business Services does about $1 billion in revenue and in March launched an aggressive channel program aimed at attracting VARs. According to Schlagbaum, it’s a natural extension for VARs who have built services business, understand annuity revenue streams and want to fatten their sales with residual compensation.

“The IT channel has always known the LAN side, not the WAN side, and that’s really where they thrive,” Schlagbaum said. “The advent of cloud has meant that a convergence of the two arenas is starting to be more prolific. We see it as critical to bridge the gap between the two. Customers are moving to cloud-based services, the price of bandwidth has gone down substantially from what it was 10 years ago, and concerns over security have also diminished.

“This all made sense 10 years ago,” he added, “but the stars just didn’t align.”

VARs can partner with Comcast in three ways. They can be a basic referral partner, meaning they throw a lead over the fence to Comcast’s direct-sales force and receive a one-time payment, or referral fee. One level up, they work with one of Comcast’s master agents -- Intellisys Communications, Telecom Brokerage Inc. or Telarus -- and secure a recurring fee under terms they negotiate with that master agent.

Partners that do a high volume of sales with Comcast—Schlagbaum pegs the likely solution providers as $400-million-plus VARs—work with the cable company directly. Currently the program is about 25 percent VARs and 75 percent more traditional telephony agents, he said.

NEXT: Service Providers Seeking VARs

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