UC Vendor Giving Partners Heavy Up-Front Commissions, No Clawback

Partners are ecstatic about heavy up-front commissions at customer turn-up and a no-clawback clause offered to the channel by the unified communications and telecom vendor Teo Technologies.

"If a partner were to sell a 40- to 100-person system, they could make $10,000 at least in pure profit up front from setting up that contact, whereas, they wouldn't make $5,000 on gross profit if they bought a system, marked it up and resold it," said Thomas Beck, director of business and marketing at Teo. "Partners don't have to put anything in to make that money; it's all top-line growth without any bottom-line commitment or expense."

The 43-year-old Mukilteo, Wash.-based unified communications vendor develops and manufactures communications solutions for commercial, government, defense and intelligence markets, with a portfolio that includes UC Servers, business and military-grade VoIP, as well as contact-center services.

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"If you sell a Teo cloud system versus any other premise system with, let's say, a 35 to 45 percent gross profit margin, you will make 175 percent to 250 percent more selling a hosted contract and paid up front," said Beck.

Partners said the up-front commission payout for cloud services has been a huge boost for their business and has helped their company grow quickly.

"The up-front commissions on hosted solutions is great -- it's much higher than the traditional 8x8 and RingCentral, and other hosted solutions out there," said Eric Marcus, CEO of the Tempe, Ariz.-based company Marcus Networking, which partners with Teo. "You can sell a hosted solution, which a lot of people are moving to in the cloud, and being able to get paid one, three, five years in the first quarter, selling the deal up front is phenomenal. Not only are you getting paid on the entire package, but the profitability of it is about three or four times greater than your traditional on-premise solution profitability … It gets my salespeople excited."

Teo also does not have a clawback policy, which means that partners retain their commissions from whatever they close regardless of what happens next, according to Beck.

"The no clawback is fantastic," said Matthew Cooke, director of information technology for ARGroup, a McLean, Va.-based Teo partner. "We don’t want to be penalized financially for a customer failing their contract. With Teo, we are not. It is unique. Some of our other non-UC streams hold us accountable for the remaining balance in contract cancellations of customers."

Marcus said it's comforting to know that Teo is bearing the risk for his company with the no-clawback clause.

"So Teo actually bills the client for the length of the contract so you're never involved with that, and they actually then pay you out your commission after the first month payment," said Marcus. "I don't know of any manufacturer out there that is doing that."

When a partner's accounts expand, Teo also pays commissions on that as well. On average, 40 percent of their partners add 30 percent to 150 percent more services within 12 months, according to Beck.

Teo is able to offer partners a no-clawback clause and large up-front commissions based on total contract value because the company has a churn rate of only around just 1 percent, according to Beck.

"We know from the competition there's as high as 50 percent to 60 percent churn rates with our competitors, so they have to have a clawback because, frankly, their customers don’t really like their solutions, or they're oversold," said Beck. "It's very infrequent that we lose customers."

Partners said the low churn rate has much to do with the technology and products Teo offers. Teo's R3ND architecture solution can support single site, multisite and cloud deployments using the same software architecture. "The evolution of Teo’s hosted platform, cloud, [hybrid] and R3ND offers so much more than the traditional on-premise platform, or strictly hosted VoIP offered by so many other providers and systems," said Cooke.

Beck said Teo redesigned a new hosted model a few years ago based on its low churn rate and partner feedback in order to be able to pay the large up-front commission to partners.

"[Teo] saves money doing so as a company because we have less back-end systems to keep track of all these monthly payments," said Beck. "It was a lot of partner feedback that drove us to look at new ways of doing things … It really fills the gap of something that they've been looking for and haven’t been able to find it in the cloud space, and this is really meaningful for them and helps them get into the cloud service model a lot more smoothly."

A key sticking point for partners is Teo's treatment of its channel.

"They really treat their partners well compared to competitors out there, which we've been part of," said Marcus. "They really take the time to invest to help partners develop business, as opposed to just pushing a product. You're not a number to them every month -- not many people run a business that way anymore."