The Communications Service Provider industry is in the midst of massive consolidation, creating instability and a fair amount of fear, uncertainty and doubt (FUD) among partners about what is going to come next. Mergers and acquisitions are nothing new to our industry; certainly, most of the big players in the market today are a result of consolidation over time.
M&A activity in our industry isn’t all that different from what has taken place in other industries, particularly the IT space, which has experienced its own disproportionate share of consolidation. But what makes the current Service Provider consolidation particularly significant, and nerve-wracking to partners, is a couple of unique factors.
First, consolidation is touching most of the industry’s biggest players. Currently Charter/Time Warner Cable, CenturyLink/Level 3, Verizon/XO Communications, Windstream/ Earthlink and Zayo/Integra are all merging their companies and their channel programs.
Imagine, however, if HP, Cisco, Microsoft, Dell, IBM, Apple and Google were in the midst of buying each other up all at the same time? IT channel players would be just as apprehensive about it as their peers on the Service Provider side are about their largest vendors consolidating. And if that weren’t enough, changes are also taking place with many Master Agents, with consolidation also taking place at that level and forcing partners to make choices about their suppliers going forward.
The second factor that makes this consolidation disruptive and concerning is that it’s occurring in the midst of massive change in the IT and Service Provider channels--changes that I’ve been addressing in my blogs over the past several months. Technologies such as SD-WAN, Internet of Things (IoT) and artificial intelligence (AI) are all going to spur new business models and service delivery methods, potentially creating a lot of instability in the channel as different players are forced to redefine their roles in a deeply transformed industry.
The Service Provider M&A activity adds to the overall sense of instability. Those of us who’ve been around the industry for a while know how painful Service Provider consolidation can be. As a partner, you stand on the sidelines hoping for the best as the merging entities go about integrating their people, systems and processes.
Already there have been some workforce reductions as a result of the mergers. Now, your key contact at your principal Service Provider partner could change, which means having to adjust to someone new with a different personality and possibly a different set of skills, knowledge and understanding of your business.
There are also potential back office integration issues. Even if the integration goes smoothly, which isn’t always the case, your ease of doing business experience can change for the worse. Different companies run different systems to place and track orders and for billing and service deployments. The system you’re used to could be replaced by one that you’re not familiar with--and might not even be as easy to use.
As systems get integrated, or replaced, there could be problems with billing accuracy and provisioning timelines. An implementation that was supposed to be completed in a week could stretch much longer post-M&A. Some customers could get bills for work that wasn’t completed or for the wrong amount. Channel partners are unfortunately the ones that take the brunt of the customer dissonance when this occurs if they sold the customer on that particular Service Provider pre-merger.
Another side effect of mergers with Service Providers is the potential for changes in contractual partnership terms and conditions. As a partner, you may have liked one company’s policies because the commission structure was more desirable by you. But as the company merges with another, there’s no guarantee those terms and conditions will remain unchanged. A lot of times they don’t, and vendors tend to rewrite partner contracts once they complete an integration. But it can take a long time for companies finalize their decisions and tell you how things will change, which leaves you in limbo wondering what your strategy should be.
All this uncertainty is a challenge for partners. It is often mostly about how the M&A process is handled that determines how the channel will react. We have had some in the past and we may have some in future -- and we will need to consider the same issues as well. While mergers are a fact of life in dynamic industries, partners seek stability by finding known Service Providers who work with you to help you drive more business and create the best customer experience possible.
That’s what we offer at Comcast Business and our Solutions Provider Program. You can count on us being the rock of stability during these changing times, all the while offering new service offerings to help your customers make the transition to the digital services world. We’re there for you to help your business grow into the new world as your trusted supplier!
Craig Schlagbaum is Vice President of Indirect Channels at Comcast Business.
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