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ScanSource, Intelisys Are Putting Channel Convergence To The Test

ScanSource's Intelisys is going to keep ‘throwing things’ at convergence because they believe the VAR and agent worlds are coming together, and that partners need help making the shift, executives for the companies told CRN.

Upon coming together, ScanSource and Intelisys thought that they had opened the door for IT channel convergence. But overall, there's been less crossover between the VAR and agent worlds than the companies anticipated.

Executives for the companies are confident that worlds are colliding, and they want to either help partners come together in partnership or arm VARs and agents with the know-how of the other side.

"We're seeing some partnerships -- not on a large scale at this point -- but enough sprinkled into the community where people are starting to get the idea it works," said Jay Bradley, president of Intelisys.

Structured Communication Systems, a Clackamas, Ore.-based VAR joined the Intelisys community through its relationship with ScanSource. In the early days of the acquisition, Intelisys and ScanSource pushed for convergence and tried to foster relationships between VARs and the agent channel, but the companies realized they to step back and develop a more strategic approach, said Gizzelle Akin, UC solutions advisor for the VAR.

To that end, Intelisys and ScanSource started a program called Ignite in 2019 to help ScanSource's top 250 VARs sell more monthly recurring revenue, in which Structured Communications participates. Ignite helps build a strategic plan for VARs, including new compensation models for reps, suggested suppliers, and training geared toward building a recurring revenue stream.

"We're really investing and doing a lot with the Ignite team. We are in that strategic planning phase, but business is increasing," Akin said. "This past year, I've personally closed a number of cloud deals through Intelisys."

[Related: Intelisys Adds Wireless, IoT Certification Track For Partners]

Structured Communication Systems is also no stranger to partnering. The firm has opened its arms to the agent community and partners today with about 7-8 different agents to help it close connectivity deals, Akin said.

"It's really great to be able to say [to the agents], we're willing to help and provide services," she said. "Some of those partnerships have gone well, some haven't necessarily gone well, but it's all about setting appropriate expectations and being a resource for each other."

Telecom services accounted for 95 percent of what Intelisys sold less than ten years ago. Today, that same 95 percent has dropped to 55 percent as emerging technologies and services, such as cloud, SD-WAN, and IoT, have increased in demand. At the same time, Intelisys has grown nearly 5 times its size within the same timeframe, Bradley said.

IT distributors, on the other hand, aren't seeing the double-digit growth that many in the master agent community are experiencing as hardware margins decrease. That's why Greenville, S.C.-based ScanSource acquired Intelisys in 2017 and since then has invested more than $100 million in its master agent arm.

Those investments, said Mike Baur, ScanSource's CEO, have centered on people, resources, and technology to help fill the gaps that agents and VARs need to grow.

"We're in a hurry right now," Baur told CRN. "We feel like we need to spend that money now instead of building out [an agency practice] over time."

In addition to the Ignite program, another way that ScanSource's Intelisys plans on encouraging convergence is by helping agents sell simple hardware that can complement the voice services they are already offering, like headsets, Baur said.  

"We are going to keep throwing things at [convergence] because what we think we know is if agents can sell something like headsets, either they'll understand it or decide they don't want to be in that business," he said. "We are going to pilot this and we're going to do it in a very easy way."

Just like connectivity services, ScanSource is going to ship gear to the partner and bill hardware sales on behalf of the agent, a model that's within the comfort zones of most agents, Baur said.

"This will at least validate if there is a demand for the two worlds coming together," he said.

Tricia Ward, founder and managing director of Onward Communications, a telecom and cloud consulting firm and Intelisys Platinum Partner isn't seeing convergence in the same way that Intelisys and ScanSource may have originally predicted, but instead is noticing more strategic partnerships in form of acquisitions.  

"It's not really about locking hands and Kumbaya-ing into an account," Ward said. "It's a different world for both sides and I think both Intelisys and ScanSource are now saying; 'Here's our communities and we'll help you identify who is there, but it is up to you to find out who you have synergies with and can create a unique contract with.'"

There's been several Intelisys agents that have bought VARs since the acquisition, Intelisys' Bradley said. The Intelisys Partner Investment Program -- now backed by the ScanSource balance sheet -- has even helped agents finance some of these purchases.

"We've got $10-$12 million dollars out to our partners to help them grow, and this has been one of the latest requests that we've had," he said.

Portland, Oregon-based Onward Communications isn't interested in selling hardware itself at the moment, but the company has considered buying a VAR business that would help it add more unique value in the eyes of its clients, Ward said.

"If I find the right opportunity, I'm going to be open to it."

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