Channel Partners

SEP-OCT 2013

For 25 years, Channel Partners has been a resource for indirect sales channels, such as agents, VARs and dealers, that provide network-based communications and computing services, associated CPE and applications, and managed and professional services

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FEATURE said. "i think that speaks volumes to our commitment to this and all other aspects of our company, including wholesale VoiP and all cloud communications services." • NetWolves Network Services. "the reseller's true value in telecom, as in many industries, is its 'value-add,'" said President Peter Castle. "We will continue to deliver on our core value proposition as a reseller, maintain a strong financial position and invest in growth through profits, not debt." • Nitel. "to remain relevant, we have made a series of calculated investments to expand our model," said CEO Rick Stern. for instance, the company has installed infrastructure that allows it to provision MPLS services nationwide, a move that further allowed Nitel to launch cloud-based security. At the same time, Nitel said it has bolstered its engineering team, invested in systems development, brought its NOC in-house and improved its back office. All of that, Stern said, "gives us the ability to thrive in an increasingly competitive marketplace." AgenTS' Tepid confidence Of COuRSe, it makes sense that resellers, given the chance to talk about their companies to the channel, would send nothing but optimistic messages and, as most did in interviews with Channel Partners, tout their debt-free, profitable financials. So, for a reality check, Channel Partners also asked master agents, the key partners brokering many resellers' services, for their thoughts on the future of the reseller market. these frank responses, shared under condition of anonymity, indicate a somewhat tepid confidence. to wit, the traditional reseller model "is all but dead," said one master, with another echoing that statement almost word for word. Another said resellers are not defunct but added only those that bring more value and accountability to partners remain worthwhile. Even then, the master noted, there are stumbling blocks. "We have to sell past the fact that they have less brand." Another master agent told Channel Partners, "Resellers were always a race to zero and there are very few who are efficient DISCUSS enough to succeed there." ON TWITTER: #longdistance finally, one observer did dub #local the reseller model "alive and #m&a #resale well," but said this refers to providers that serve as more 38 ChaNNel paRTNeRs SEPt/OCt 2013 — AnonymouS mASTer AgenT than rebillers, offering products such as hosted voice and BC/DR. it appears resellers have some hesitant partners on their hands. indeed, one master pulled away from reseller sales five years ago. "We started selling more for the best quality channel carriers and that paid off. it paid off even more when the resellers went away, as we had little to no business with them," the agent said. two others also have cut back. "Our reseller business makes up less than 2 percent of our revenue," said one master agent. "At one time, it represented more than 30 percent." One factor in the move away from resellers, said one master agent, is "stickiness" or lack thereof. "Selling a commodity became less rewarding when you were constantly repricing or moving from one reseller to the next," the agent said. "Dealing with the type of subagents that traded in reseller traffic was exhausting. these are the least loyal customers, and the least loyal subagents." Another issue is shifting priorities. "Given the enormous opportunities in hosted voice, cloud, big bandwidth, wireless management, SiP, collaboration and colo, the niche addressed by resellers is not worth our attention," said one partner. Still, other masters voice support for their reseller suppliers. "We sell many resellers and they are a vital part of our portfolio," said one. "these companies have continued to expand their product set and keep up with technology evolution," said another. the takeaway is that the future of the reseller market remains an unknown. Sources agree that resellers refusing to branch out or specialize in a niche face trouble. "the straight reseller model is unsustainable," said Ben Bronston, head of Bronston Legal PLLC. But companies that offer POtS lines as an add-on service, rather than as the core product, might do fine, he said. And, fedor Smith, president of research firm AtLANtiC-ACM, said resellers that focus on vertical markets such as the financial services sector, which requires ultra low-latency networking, are finding success. "there really is a long tail," he said, noting it's just a matter of grabbing on and figuring out what works. As Smith put it, "telecom is no easy ride." Kelly Teal is senior editor of Channel Partners. @kellymteal

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