Collaborating Within the Channel

When the going gets tough, the telecom and networking industries and their channel partners get … collaborative?

Perhaps the bottom is now behind us – time will tell. Regardless, the economy is still way off from where it was a couple of years ago. Sales cycles are still long. Businesses continue to take a “wait and see” approach to new telecom and other technology investments. Potential customers even are delaying projects with high ROIs or that will generate immediate cost savings.

Of course, this is putting the squeeze on service providers and the channel partners who represent them. Revenue growth has stalled and many are seeing dramatic revenue declines. This is forcing service providers and channel partners to look for new sources of revenue outside of their traditional businesses and relationships. And, these new sources of revenue are increasingly coming from collaborations – often brought about by enterprising channel partners – between service providers from different industries, but with potentially mutually supporting products and services.

For example, many interconnects and VARs tell us that their recommendations for network infrastructure and phone system upgrades – many of which would actually lower customers’ ongoing expenditures over time – are being met with, “We don’t have the budget right now.” If these providers (or their channel partners) are going to get these clients to move forward, they are going to have to help “find the money” for them. So, they are reaching out to telecom expense management providers, whose services then become the first part of now two-part proposal:

1. Let the TEM provider audit your existing telecom budget to find waste (billing errors, oversubscribed services, missing credits, etc.).
2. Use this “found money” to pay for the infrastructure or phone system upgrade that will further reduce ongoing expense over time.

At the same time, market forces are pushing the TEM providers toward these sorts of relationships, too. Their clients are asking them to find more than waste. They now also want telecom and networking infrastructure improvement recommendations. Therefore, some TEM providers are now offering moves/adds/changes management services and LAN/WAN improvement consulting – and developing relationships with other service providers that can implement these recommendations.

Another trend in partnering is between VARs and systems integrators – whose revenue traditionally is based on equipment sales and installation services – and managed service providers. They want to bring managed WAN, VoIP and other ongoing services to their clients, and share in the resulting recurring revenues.

When combined with the earlier TEM example, this can result in deals with as many as five different service providers in a single proposal:

1. A VAR (equipment sales)
2. A systems integrator (installation)
3. A managed services provider (aggregating the WAN and providing VoIP)
4. Underlying carriers (providing WAN connectivity and origination/termination)
5. A TEM provider (“finding” the money to pay for it all).

Of course, some providers might play more than one of the five roles, but deals with three or four service providers collaborating with each other are becoming common – often thanks to clever channel partner orchestration.

Collaboration vs. Conflict. Still, when times get tough, many companies think “compete” before they think “collaborate.” For example, managed services providers are reaching down into traditional telecom agent territory by brokering circuits and phone services themselves. And, they are reaching up into traditional VAR and systems integrator territory by selling and installing equipment and doing LAN/WAN improvements themselves. This is setting off some nasty turf battles.

However, we believe it is more profitable to “make love, not war” by choosing collaboration over conflict. We also believe channel partners can flourish by becoming service provider matchmakers, as we have. Among the keys to successful matching, you should:

1. Find service providers whose products are – or could be – complementary, not competitive. For example, companies that sell equipment might need partners to install it, provision circuits for it, or help find the money to pay for it.
2. Introduce the partnership idea using a real deal for motivation. Hypothetical discussions about combinations that might work in the future won’t get anyone’s attention. A real deal where you are asking one service provider to join in alongside another – and where both can see how they are going to profit – will get people’s attention, especially in these revenue-starved times.
3. Try to get the service providers “married” – as in, working directly with each other without having to involve you in every deal – but only after you have settled with both on how you, too, will profit from having created a mutually beneficial relationship between them. And, do so openly, so everyone trusts each other and knows who is making what for doing what, instead of wondering about hidden “kickbacks” and getting the short end of the deal.

In summary, the weak economy is driving service providers out of their traditional markets and into other service providers’ backyards. It also is forcing channel partners to do even more consultative selling, which includes creating multiservice provider consortiums to meet needs no single service provider can meet on its own. This requires diplomacy by channel partners and a willingness to collaborate by service providers. As the economy rebounds, the best of these multiservice provider solutions will lead to renewed prosperity for channel partners and service providers alike.

Drew Allgeier is co-founder and principal of Xponential Group LLC, a technology procurement and professional services firm headquartered in Louisville, Ky.