Partners: ScanSource-Intelisys Deal Unlocks Recurring Revenue Bonanza

ScanSource’s unprecedented acquisition of a master agent will unlock lucrative cloud and telecom sales opportunities for VAR partners and access to communications hardware for telecom agent partners, solution providers say.

The Greenville, S.C.-based distributor’s blockbuster acquisition of Intelisys, of Petaluma, Calif., for $83.6 million plus earn-outs marks the next evolution of the distribution channel, turbo-charging the journey for ScanSource’s channel into recurring revenue services and making it possible for them to continue supporting clients as workloads move off-premise.

The acquisition marks the first time a distributor has scooped up a master agent, and it's already turning the channel on its ear. J.R. Vernick, co-founder of telecommunications solution provider and Intelisys Platinum Partner RDS Solutions, expects that the acquisition won’t be the last of it's kind, either.

’ScanSource is buying Intelisys because of their performance in the [telecom] space,’ Vernick said. ’It’s about bringing in that recurring revenue stream that Intelisys has been so successful with.’

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[Related: CRN Exclusive: ScanSource Storms Into Telecom-Cloud Services With Deal To Buy Recurring Revenue Powerhouse Intelisys]

As a large equipment distributor, ScanSource knows it must change its business to a recurring revenue model as capital expenditure purchases migrate to the cloud, said Charles Houser, executive vice president of marketing for Greenville, S.C.-based Green Cloud Technologies.

Green Cloud has relationships with both ScanSource and Intelisys, and Houser said bringing the companies together will put ScanSource in the best possible position to capture cloud deals from both its existing VAR base as well as telecom agents newly acquired from Intelisys.

"It is a wonderful deal from our perspective," Houser told CRN. "We love it."

ScanSource VARs and Intelisys agents are often selling to different people within the same end-user organization, Houser said, meaning that the combined company will also broaden the channel's reach and stickiness with clients.

TechCM, which sources barcodes, scanners, firewalls and access points from ScanSource warehouse management systems (WMS), has until now been unable to leverage ScanSource for the connectivity piece of the equation, according to Amit Waisserberg, CEO of the Hollywood, Fl.-based company.

"We were missing VoIP, and we were missing telecommunications to communicate with the cloud and with WMS," Waisserberg told CRN. "Now [with Intelisys], customers don't need to stop elsewhere. They can buy everything in one place."

WMS and accounting software have increasingly been migrating to the cloud, Waisserberg said, meaning that cloud-focused telecom services are necessary to provide clients with complete solutions. For legacy Intelisys partners, meanwhile, sourcing the barcoding or hardware piece of the equation through ScanSource means they too can provide clients with a fully-operational solution.

"They complete each other," Waisserberg said. "I think it can help them both a lot."

Houser praised the cloud training program built by Andrew Pryfogle, Intelisys's senior vice president of cloud transformation, that teaches VARs how to build and sell a recurring revenue business. Intelisys's team is very well-positioned to help those solution providers ready to make the move to cloud and recurring revenue, Pryfogle said.

"He [Pryfogle] has been working with early adopters, but this gives him an entire greenfield of partners that are looking for help," Houser said. "They want to build a cloud practice, but simply don't know how."

Clinton, N.J.-based RDS Solutions has been working with Intelisys since the solution provider got its start in 2005. According to Vernick, adding to the portfolio is always positive for solution provider partners, so long as other things don't change as a result, such as the contract Intelisys has in place with its supplier partners and carriers that channel partners rely on.

"In a business where the only thing we can control is doing the right thing for our customers, trust in our partners is paramount," he said. "We've always trusted Intelisys to look out for our best interests and that's going to continue."

Customers are increasingly looking to shift from on-premise to hybrid solutions depending on their business needs and the types of applications being used, said Chris Kennedy, chief technology officer at Knoxville, Tenn.-based The IT Company.

The IT Company already takes advantage of opportunities in emerging markets by partnering with a local telecom provider around voice and data solutions and building its own platform for private cloud hosting. Nonetheless, Kennedy encourages other ScanSource solution providers to take advantage of what Intelisys has to offer.

"For less developed partners of ScanSource, this could be a big opportunity for them," Kennedy said.

Change isn't unprecedented in the telecommunications industry. RDS Solutions has maintained a close relationship with Intelisys president Jay Bradley and co-founder Rick Dellar, and grew its business as Intelisys grew. While Vernick sees Intelisys’ decision to partner with ScanSource as an exciting opportunity, he hopes Intelisys will retain its "family atmosphere."

"Adding to the portfolio and having the ability to distribute other services that we didn't have before is a good thing, as long as [Intelisys] continues to protect us. That's what companies like ours look to Intelisys for." he said. "If they see this as a good move, then so do we."