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Telco Agents verses Solution Providers & VAR’ - who has a better chance in the Cloud?

January 5, 2018

 

I’ve been doing a great deal of work lately guiding Solution Providers and VAR’ into to the cloud and as you can imagine it’s a difficult and tedious process that can be gut wrenching for many organizations.  In addition, my eyes were just opened a little wider when I attended Channel Partners (@Chanel_Online) recent Channel Partners Expo (@CloudPartners) in Boston.  I’ve been in the channel for over twenty-five (25) years and had never attended an event that was primarily focused on telecom agents and the providers who are looking to bring them quickly into the cloud services world.

 

Essentially, I had an epiphany – “these guys might actually be better positioned than most to drive cloud services sales quickly at least in the short run”.  My quick back of the napkin approach to arriving at this dramatic revelation is outlined below.

 

Think about the degree of change a traditional Solution Provider or VAR has to make going from a transactional based business to a true recurring revenue model.  I’m a Gemini, so the conversation I’d have with myself about this conundrum might go something like this:

 

·       Why change, it’s hard and things look pretty good right now…

·       I’m not sure the Cloud is affecting my business – Amazon Web Services and Microsoft Azure’s business is coming from someone else’s customers – right, right…

·       I don’t know where to start and no one can really tell me what the Cloud is…

·       In the short-term recurring revenue will hurt my top line revenue growth and cash flow…

·       I like the sugar fix of a transactional business provides – sell something, deliver it and get paid now…

·       My Sales Team won’t sell something that doesn’t have a big pay day associated with it…

·       I don’t want to screw up my deal flow by bringing up the Cloud – maybe I’m leaking deals to the Cloud, but it’s not serious…

·       I’m not sure the time is right for us, our customers aren’t bring it up so we don’t think they’re interested.

 

These and many more thoughts are shared with me on a weekly basis and as a former executive in the Solution Provider space - I can certainly understand the fear folks have in altering their business.  But there are three (3) things I’m convinced are happening that the community needs to think about at this time and telecommunications agents entering the fray only increases the pressure.  The factors include:

 

1.     Customers want to buy and consume IT Services in a different way than they have in the past and the Cloud is where they’re going to consume these services moving forward – no upgrade or refresh coming your way…

2.     If they’re not talking to you it’s because they don’t think you play in the Cloud and they’re not talking to you – they are researching the Cloud on their own or talking to someone else…

3.     Telco Agents are becoming much more focused on the Cloud and they have several innate built-in advantages over a Solution Provider or VAR…

 

Consider Telecom Master Agents & Agents a Threat in the Cloud

 

 I’d like to focus on the last item from above as my epiphany occurred as I toured the show floor and counted over eight-five (85) vendor (telecommunications vendors, traditional IT vendors and cloud service providers) booths and witnessed the seriousness of the threat to the Solution Provider / VAR community. 

 

I mean have you heard of or met with either Intelisys (@IntelisysCorp) or DSCI (@dscicorp) - they are coming hard into the Managed Cloud Services space and are making a huge dent.  

 

Where it truly hit home was when I began to think about those inherent advantages that telecom agents have that most of us with a legacy business don’t.  Those advantages include:

 

·       Their businesses typically have a much lower cost basis – they don’t need nearly the margin you do…

·       Their business models are totally built around monthly recurring revenue (MRR)…

·       Their sales models and plans are already geared to annuity streams and monthly recurring revenue (MRR) is essentially what they’ve always sold…

·       So their sales professionals need product training and don’t require re-programming to sell 12 – 24 or 36 month deals and get paid upfront…

·       They already have the systems and imbedded processes to deal, at scale, with high volume MRR deal flow…

·       They are already well Intune to the metrics that drive a successful Managed Cloud Services business – customer acquisition costs (CAC), customer life time value (LTV), churn, net-new customer, month-over-month (MoM) revenue gain / loss and all the other ratios that are key to driving a solid annuity business…

 

The good news is that even with all these inherent advantages telecom agents still have to, like you, determine - where they play in the cloud, why they’ll play there and what they have of value that will command a customer’s attention and dollars.

 

Conclusion  

 

The good news is that now’s the time to enter the game and Solution Providers and VAR’ have unique advantages of their own and a cloud-based annuity business is one of life’s rare gifts that keeps on giving, even when your sleeping.  This of course only occurs if an organization is willing to invest the time, energy and money necessary to build a solid annuity business.  Some high-level prescriptions and advantages include;

 

·       Create a strategy that will get you into the Cloud Services business over the next twelve (12) months.

·       Look at your business model, it will have to be altered.

·       Look at your sales model and plan, it most likely won’t map to a cloud-based annuity business.

·       Keep your current sales performers focused on your core, it is your business today and will be for the next thirty-six (36) months. 

·       Also, most won’t make the transition as well as you think – they’re talented, but your moving their cheese and don’t want to wait for the money.

·       Ensure you take a look at what will happen in the short-run to your margins and cash flow.

·       Create cloud services that leverage your current core value and wrapper high margin services around cloud delivery options – you still need your blended gross margin mix to make your business produce.

·       Make sure your systems can truly deal with and track recurring revenue and the sales plan changes that are sure to come.

 

The biggest thing you have is your current skills in serving the client and a talent pool of people that are well known to your customers.  Leverage your current solution-sets and then look for opportunities to place high-value services around cloud services that will allow you to imbed the blended gross margins you need to drive your business.

 

Also, you have strong vendor relationships that most of the telco agents don’t with the likes of Cisco (@CiscoCloud), VMware (@VMwarevSphere)and others like cloud up and comer Veeam (@veeam) that have great solutions that fit well with many Solution Provider approaches and margin models.

 

Stay Calm and Subscription-on!

 

Hope you found this brief insightful and as always I’d be interested in your feedback.  Please stay tuned for my next brief on the importance of decision making and using alternate approaches to making solid decisions.

 

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