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Agent Roundtable 2009

Channel Partners

May 1, 2009

1h 8m Read
Agent Roundtable 2009

The independent agents and subagents are the heart and soul of the carrier channel. And, this year is testing them on both counts. PHONE+ Editor in Chief Khali Henderson assembled a group of six agency owners to discuss the challenges and opportunities they are experiencing in selling carrier services and diversifying their offers. The two-hour conversation took place March 27, 2009, via conference call with the results of an advance poll to facilitate the discussion. What follows is an edited transcript.

Independent agents Ben Stiegler, Dan Vidal, Jack Zoblin (front row, left to right), Debbie Clavadetscher, Bill Leutzinger and James Lockhart (back row, left to right)

Meet the Agents

Debbie Clavadetscher, Founder, Spiritel

Years as an agent: 9
Average monthly customer spend: $50,000
Percentage of revenue from carrier services: 100
Number of carriers: 5
Number of master agents: 0
Referral Agents/Subagents: No/No
Employees: 0

William Leutzinger, President, TelecomMedic

Years as an agent: 6
Average monthly customer spend: $2,000 to $3,000
Percentage of revenue from carrier services: 80
Number of carriers: 7
Number of master agents: 3
Referral Agents/Subagents: Yes/Yes
Employees: 4

James Lockhart, President, Telecom Management Inc.

Years as an agent: 19
Average monthly customer spend: $3,000
Percentage of revenue from carrier services: 70
Number of carriers: 5
Number of master agents: 1
Referral Agents/Subagents: Yes/Yes
Employees: 3

Ben Stiegler, CEO, Synertel

Years as an agent: 16
Average monthly customer spend: $800
Percentage of revenue from carrier services: 19
Number of carriers: 10
Number of master agents: 4
Referral Agents/Subagents: Yes/Yes
Employees: 10

Dan Vidal, Managing Director, TELECOM ADVISORS

Years as an agent: 7
Average monthly customer spend: $10,000
Percentage of revenue from carrier services: 98
Number of carriers: 3
Number of master agents: 2
Referral Agents/Subagents: Yes/No
Employees: 0

Jack Zoblin, President, Cory Communications Inc.

Years as an agent: 8
Average monthly customer spend: $500
Percentage of revenue from carrier services: 98
Number of carriers: 40
Number of master agents: 2
Referral Agents/Subagents: Yes/Yes
Employees: 6

REVENUE STREAMS

In the advance survey, several of you said the majority of your revenue comes from carrier services. Are you looking at diversification?

James Lockhart: Your article the other day about charging for consulting for projects you don’t get is what I do. I charge. I go into the customer and I flat tell them that I am going to charge them a percentage of what I can save them or I’m going to charge them by the hour in addition to whether or not I get the business for the particular carrier or not. I’ve never had a problem getting that either.

Bill, is that where you are getting your other revenue as well?

Bill Leutzinger: Through one of my different companies I do some consulting and RFP writing for municipalities and things. I also have another division that also does a little bit of recruiting. I used to be a recruiter a long time ago. It’s not a big part, but I might place two or three people a year.

Ben, how about you?

Ben Stiegler: This is a number that has changed a lot in the last nine months! Prior to June 2008, carrier revenues were about 15 percent of our revenue, and other managed services (virtual backup services, hosted Exchange, cloud-based spam filtering, and managed IT monitoring) were 2 to 3 percent. In early first quarter ‘09, there were months where carrier and managed services were close to 30 percent because our project revenue had dropped precipitously. In March, the percentages began fighting back to the 15 to 20 percent level we’d seen consistently in past years.

What makes up the rest?

Stiegler: VoIP and traditional PBX, voice mail, call center system sales; network and security — firewall, unified threat management — infrastructure; video conferencing; cabling; support agreements, T&M maintenance and lifecycle support; access control systems and video surveillance systems.

For the rest of you that had near 100 percent of revenue from carrier services, are you looking at diversification?

Jack Zoblin: I was one who answered about 98 percent. We are looking to make 5 percent of that in equipment.

Dan Vidal: Similarly, I will probably look to take a few points. I’d be looking to diversify but not more than 5 to 10 percent. I would be looking to diversify into managed services, consulting and/or software as a service or any combination thereof.

Debbie Clavadetscher: I answered 100 percent of my revenue comes from carrier business. A small percentage comes from TEM right now. I see that segment growing significantly this year along with adding other things like equipment, but, specifically on 3G routers. That’s really where my focus is going to be this year.

In general, is there an imperative for agents to start looking more at diversifying revenue away from carriers? Anyone?

Clavadetscher: I think that’s a good question. I guess it really depends on how they currently contract their business. If they have some direct agreements with the carriers, then I think anyone who has a direct agreement is vulnerable right now considering the nature of the industry and what’s happening with every carrier looking at each of their agents and how they are fulfilling their contract commitments. They are ready to cancel those agreements. I think everybody who is in this business really needs to take the time and go through their base and determine how safe their revenue is based on the creditworthiness of the client itself and the relationship with the carrier they’ve contracted under. I think to diversify is a smart move for everybody who is in this business.

Leutzinger: I agree. I would take that a step further and say, take a look at the carrier and whether or not they are going to be around down the road.

So you are saying that you need to be evaluating your carrier relationships, not just your own revenue streams?

Clavadetscher: Every contract you have.

Vidal: I would answer that it sort of depends on the agent business model. If he is most comfortable in the carrier revenue space, there does exist a diversification opportunity within the carriers. It might not necessarily be strategic for an agent who does not have that skill set to sell equipment, software as a service, managed services. For that agent, the opportunity may be better to diverse within different carriers, so as to not have all their eggs in one basket.

Leutzinger: I definitely agree with that. I like to think of it as an octopus. I want to have as many arms as I can in case one gets chopped off.

Zoblin: I agree with that also.

Clavadetscher: It’s a critical thing to be successful and not to have a situation where your revenue stream gets terminated.

Stiegler: While diversification is a good thing, we’ve become very concentrated with one excellent regional carrier in recent years. Why? We had a lot of “how can you run the railroad while blindfolded and drunk?” experiences with carriers moving into challenging ILECs. When we found one that really had it together, we organically began to sell more and more of that carrier — because they could hit their due dates, because they had real project managers who practiced “measure twice, cut once” so that complex cutovers went smoothly — time after time, because the billing error rate was low and customer service was pretty good. Over time, as our volume grew, so did our commission percentage … and that created a positive feedback loop — generate more volume, keep growing commission percentage. So we may be more at risk to see change at this one carrier, but we’ve been diligent about cultivating relationships at many levels and in many departments — so that a single personnel change would not be fatal to our relationship.

When you are looking at diversifying your carriers, is there some risk in not being able to meet the quotas now that you’ve got five, six or 10 quotas you are trying to meet?

Clavadetscher: I’m just thinking for myself because I am a direct agent and I don’t have any subs at all. I have been doing this for nine years and I’ve never had an issue in the past about meeting the monthly requirement as far as sales go, but I think that is getting a lot of attention now. I think all the carriers are looking at every agent to make sure that they are meeting every requirement on their contract where that never used to be a problem in the past because the base of business in the past was large, it was flying under the radar. Now, even though the large base just sits there, if you are not meeting the $5,000 in the sales quota, you are at risk.

SUBAGENTS/REFERRAL AGENTS

You bring up a good point. In the advance survey, everyone except Debbie indicated they had referral agents and subagents that are getting residuals. Is the reason that you have those is to meet quotas with your stable of carriers?

Leutzinger: I would say yes, but it’s also the revenue stream those subs bring as well.

Lockhart: I think there is a difference between subs and referral agents. I have subs that I’ve just met through the years where I sub through them and they sub through me not really to help us meet commitments, but just so that we can maximize commissions with each other, but not necessarily have to meet a commitment because of it.

What do you mean maximize commissions?

Lockhart: If I know John Smith and say, “Look, you can run your XYZ carrier business through me because I have a master agent contract or master agent percentage levels and I’ve already met my commitments.” I’ll let him do that because he is a friend in the business.

So they are optimizing their commission without having to have the revenue levels you did to get that commission?

Lockhart: Correct.

Zoblin: I’ve done the same exact thing. To take it one step further, a couple of the new contracts I’ve taken were with partners. We’ve executed two separate contracts where our two contracts go together to meet a commitment.

You had a carrier that did that for you?

Zoblin: Actually, there were two — mostly smaller, regional carriers.

That’s an interesting idea instead of swapping the business.

Zoblin: The one guy I did it with was tired of everything rolling through me and me getting a piece of it.

That’s an interesting resolution. I wonder how attractive it would be to carriers, though?

Lockhart: There are a lot of agents out there right now who have signed, for example, Qwest agreements who are out there saying, “If you run the business through me, I will give you 100 percent of the revenue, just so I can meet my commitment.”

Zoblin: I wouldn’t do that. I guess it’s different for me because I came from the carrier end of the channel. I knew right from the beginning there was no way I would sign a direct agreement with a Qwest. It wasn’t going to happen. I would go through a master through that.

Leutzinger: Exactly. That’s what I was going to say, too.

So some of you would say going through a master is the other way instead of swapping with a peer?

Zoblin: Without a doubt, going through a good master.

Lockhart: I think you have to in certain situations, Qwest being one of them.

Leutzinger: Your Qwests and AT&Ts. I don’t want to bite that off.

Lockhart: We can’t. I can’t.

Why is that?

Lockhart: I would have to put all my eggs there to meet that commitment level.

Leutzinger: I am not going to go after a $500,000 commit level.

Lockhart: Not with one carrier. You can’t do it.

Leutzinger: You see (from the survey) that we are small shops. We are not going to do $500,000 with AT&T. If we were, we might as well be an AT&T exclusive house at that point.

I assume that carriers have set the commitments high so that agents will roll under the masters.

Lockhart: I don’t know that they’ve done it for that reason because they all still let us work directly with their channel sales managers and all that other stuff.

So, your point is that they are not eliminating the support requirements that are cost centers for them?

Lockhart: Probably so.

That’s interesting. I wonder why their commit levels are so high then.

Zoblin: I can tell you why the commitment levels are so high. Because 10 years ago when the carriers started to go to a model like an Ingram Micro or a Cisco, the big carriers like the Qwests of the world, said, “Listen, we are going to drive to huge distributors, i.e., in our terms master agents. We don’t care about the little guys. Let the master agents deal with them. We can’t manage thousands of individual agents. So, if you want to play with Qwest and you can’t do a contract with us directly, then you have to go to one of our masters.”

That’s the conclusion I came to, but James is saying they are still supporting him and other agents directly.

Zoblin: But he also has a number to hit.

Lockhart: No, not with a Qwest or with AT&T, but maybe I’m a big enough agent that they know I am helping a master agent hit their number. Maybe that’s why they will work with me directly.

Zoblin: We all can work with the carrier and their reps directly. You always have direct access to the channel, to the support based on your relationship with the master.

Lockhart: What Khali is saying and I agree with, is there are probably some agents that the carrier will not pick up the phone for.

What’s the point of rolling you under a master if they still support you directly? They want to eliminate that cost.

Lockhart: I think they realize that we are helping a master agent meet their commit. They know that Ken Mercer (TBI) doesn’t sell directly. They’ve got to listen to Bill when he calls directly.

Clavadetscher: In some situations, depending on who is a master, it’s the volume they have directly with the carrier. They have made arrangement with the carrier that will allow their subagents to work directly with the carriers. The more work the sub does, the more commission they earn. If the master takes on the responsibility for working directly with the carrier, in some cases they take more commission. There is every option available with subs working with masters. Every master is defining their own model. I’m sure if you ask every master how they operate, they are going to let their top subs work in different way than someone new coming in who hasn’t a proven track record.

Zoblin: Agreed.

Vidal: I agree with what Debbie just said. I’ve seen it in action with a master agent, where a James may have closed a sale or two with a carrier through a master agent. That sort of opens up and let James work directly with the carrier because they know he’s closed business. They might not invite all subagents to have access to the carrier channel. It’s an arrangement behind the scenes.

The other factor to look at for why carriers have high commit levels is simply IMO and it may be skeptical, if they have high commitment levels and folks are not meeting them, they have cause to terminate those contracts. They want to make sure the folks that are committing at that high level are continual producing otherwise they have cause to end the agreement and possibly cut off commissions.

I think that’s definitely another area where even though the cost center expense is still there by supporting a lot of subs under the masters, they are probably only supporting the better subs and more importantly from a financial perspective, they are limited. They are saying if they are not producing their $500,000, we have grounds to cut them off. So we know they will produce or roll up under someone else.

Stiegler: And even if they are providing sales support, they don’t have to deal with commission payouts and resolving commission errors, etc. That work is offloaded to the masters.

Let’s talk a little about your own downlines. In the advance survey, some of you said you have subagents and referral agents. Are you looking at getting more?

Zoblin: I constantly recruit subagents. Half of my revenue goes out to pay agent commissions.

Why do you want to grow your subagent base, Jack?

Zoblin: It’s just another way of adding revenue to the business. I’ve built a model to support that.

Lockhart: I am working on growing referral agents, doing more with the equipment vendors that need to make a network sale to sell their equipment. That way, I’m brought in with a warm lead and basically then I’m not paying out full subagent commissions. I’m paying out a quarter or a third.

Zoblin: I do the same thing. I have a tiered contract for what James said. So, for instance, for the integrator, he has three choices. One is to call me on the phone and say, “Jack, call this guy.” That pays the lowest commission. Option two is, “Hey, Jack I want to take you to one of my customers.” He’ll come on the initial appointment and maybe come back when I present, but that’s about it. I pay him a little bit higher. Then, there’s the regular sub where he pushes the paper and all I’m doing is a proposal. I find that’s working out very well.

Leutzinger: I do that exact same thing.

So if you look at the partnerships that you have been able to develop, is it mostly the first level or is it the subagent level?

Zoblin: I’m a little unique. Remember how we were talking about [swapping], we basically pass back not 100 percent, but from 85 to 90 percent back and forth. Then, I have regular agents that I pay a percentage to, but all the new agents that I’m trying to attract are the ones where I don’t have to pay as much, just like James said.

So, both James and Jack have the same strategy. Is anyone else trying to attract agents that are lower cost?

Clavadetscher: I don’t have any subagents and that’s not part of my model at all.

Are you planning to add them?

Clavadetscher: No.

Why?

Lockhart: Because your minimum account size is $50,000.

Zoblin: I gotta find out what I’m doing wrong.

Clavadetscher: There isn’t enough time in the day to respond to anyone else’s needs. The client base I work with is very demanding. It wouldn’t serve the subagent well to work with me in that regard. I usually refer them to other places to start business.

EMPLOYEES

Debbie, you are the only one in the group that has no employees yet you have a demanding base. Are you thinking of getting employees at any point?

Clavadetscher: No, not yet. It’s part of my consideration for the year, but this is something that … I don’t know if everyone knows that Dan and I started talking, in that our models are the same. We have no desire to become a master agent and how to best grow the business. That is one of my challenges for this year — determining how to take my business to the next step and what responsibility I want to take on. I don’t want to be complacent in managing the base that I have and thinking that this revenue stream is going to continue indefinitely considering what’s happening in our industry. I am in a time of deep evaluation across my carrier relationships, along with making sure that my clients are financially stable. So, I don’t know. I’m at the point of trying to determine the best way to go about my next level of growth.

Employees may or may not be part of that?

Clavadetscher: Right. And a real office — move out of my house.

Lockhart: I evaluate those same questions on a daily basis.

Leutzinger: I actually this year hired a direct sales rep because we are doing so much more subagent business and it’s taking up more and more of my time. I’ve got myself to a place where I am comfortable, but I had to hire someone to bring in the new business.

So you are spending time managing the downline while the new person is creating new business?

Leutzinger: Exactly.

Lockhart: I’ve hired a few new guys too. Their sole responsibility is to prospect for me. I have not found sales reps that I would want to make direct reps. I hire them to find the lead for me and I go in and finish everything from there.

When did you start that?

Lockhart: Probably last year.

How’s that going?

Lockhart: It’s produced. It’s definitely more profitable than some of my subagents. Some subagents take up a lot of time and they require answers and quotes and all this stuff and sometimes answers and quotes don’t turn into business. What I’ve found is that I am directly involved from most of the get-go, then the closing rate is a lot better. Just like Bill said, I don’t have time to prospect.

Jack also has quite a number of employees at six. What do those people do, Jack?

Zoblin: I made a conscious effort … one of the things that I learned from when I was a channel manager and then a director at Qwest, there were a few things I learned that took me a long time to figure out. One of them was I could never figure out how you could bring an agent on and they would come out of the gate well. Their base would go from $5 to $10, $20, $30, $40, $50, $60 [thousand]. Then it would peak at $60,000 or $70,000. What I learned from experience is these are people that went out and wrote business and never decided to grow their business. Then the service takes over. They are good people and they want to serve their customers so they can’t write more business.

The second thing was that these were big agents and you couldn’t get hold of them anytime from Thursday through Monday. The owners were making so much money they didn’t’ care anymore and they had staff to do it and they went and did their own thing.

I do a lot of business on service. I do a lot of small to midsize companies and I also do the agent business, which is half of our business. You need to have support people to manage that. I have an operations director, who manages the order process and customers services. I have one full-time person who processes orders and MACDs. I have a customer service person who answers the phone. And, I have a part-time account manager whose sole responsibility is to make sure the hour accounts are happy and re-termed. And, I have a person that helps me with commissions one day a week that works RPM for me.

I had a full-time salesperson. I really like what James was saying because I spent a lot of money on a full-time person with experience and I thought they were going to knock it out of the park. After 15 months, I let the person go last week. I am going to do what James said, get a good hunter and just bring me in there and I’m going to help her close it up. I like what James said. It took me 15 months and $60,000 to find out I made a mistake.

Lockhart: I tired hiring a direct sales rep and I was initially in on all the deals and those are the only ones we closed. Once I sent him on his own, he wasn’t — in my estimation — following the sales process and wasn’t doing the steps right to get to the end result. Therefore, it wasn’t getting done. For me to go back in at that point and try and redo some of the steps he missed, you can’t really do that in front of the customer, so you have to do it right from the beginning. The guy I hired last May has fizzled out. But, I’ve kept him on. Now, his job is just to [generate leads] …it’s almost like telemarketing, but it’s a walk-in and personal interview.

Is he one of your prospectors?

Lockhart: Yes. He just moved to that type of a role, and I’ve cut his commission percentage down. He was always really good about getting the lead. Beyond that, he didn’t do it right and he couldn’t get to the close. This way works out best for everybody. They’ve met him, and if they are comfortable with him, I can bring him in while I work the process.

Dan, you also have no employees.

Vidal: I’m like Debbie. I have no employees. I think what’s interesting is on this call, we are hearing quite a variance in terms of business models. I’m answering two questions with one here. Also, like Debbie, I don’t like the subagent approach. It’s nothing I set out to do nor am I going to. I like the approach of do what you do best, partner with the rest. I apply that not only with the core skills and competencies, but also in terms of how I work with a company.

I don’t think anyone is going to deliver as high a value in terms of the sale or the account management as me. So, what I’ve tried to do is outsource all the different functions of the company to accomplish all that. I have a part-time bookkeeper. I have a part-time person that helps me with other tasks on the back end in the paperwork side. I try to do that in order to maximize my time.

Now, I am getting to a plateau. Jack mentioned before you do get to a plateau where you are spending all your time managing the accounts. I am trying to get up to the enterprise level. I would be spending the same amount of time it takes me to work 10 accounts generating $20,000 in commission to generate $100,000. I’m trying to go up the food chain in terms of customer size. That also has its set of challenges. I am definitely subagent averse and employee averse until I reach the point that it makes sense. It might not be the fastest way to grow a company, but I find it works for me.

It seems that the scale issue is going to be a continuing problem, which is why some agents have gone the other way.

Zoblin: When you were a channel manager — and I was for some many years before starting to go out on my own — it’s in your blood. I didn’t set out to be what I’ve become. I call myself a mini-master. People gravitated toward me. One, I had some good deals. Second, I had good relationships with people.

Like James said, now I am a lot more selective about the agents and partners that I bring on. I like the integrators. I like the phone system vendors — the guys that were so used to making so much money on equipment and gear — and now are looking for money. So, you give them a referral fee or a small residual, they’re happy. Those are the guys I go after.

Leutzinger: With my employee, the way I set it up was a little different. Once he gets to $5,000 a month in residual income, he goes off salary and becomes straight commission, so I can take that money and start over with someone else. I know the business he brings in at least pays for him. If he were to leave, with all the commission he brought in, I will make money in the long run. How you set it up and how creative you can be with that type of person and not just say this person is going to be an employee forever.

Vidal: I’d like to add something else, which presents an opportunity for carriers or master agents out there. I am personally interested when a carrier or agent offers anything that helps an agent in their back office. That potentially eliminates the need for hiring employees. I know I’ve seen masters offer software or tools to help agents with processes and back office support. I think that is going to be the way to recruit some of the higher level folks in the future. I’d like to see more folks doing that in this space because everyone is trying to do more with less money at this point.

Would you ever get a carrier or master agent to provide a tool to manage all the accounts whether or not the business was on them?

Vidal: I think it depends. If it is done right, where certain information is legally protected and there is a sound contract. I wouldn’t do it without checking with my attorney first. If it’s done right, I think you’d be surprised that a lot of folks would be interested in something like that. A critical part of the business is managing accounts when you hit critical mass. There is definitely demand for that. It’s just a matter of who is going to do it right, first and attract the people who are willing to give that a shot.

PRODUCT MIX

Based on the advance survey, I compared products you sold in 2008 (see chart, Products Sold in 2008) and products you are adding in 2009 (see chart, Products Added in 2009). Only two of you were doing mobile wireless in ‘08. Three are adding at least mobile data in ‘09. It might be an area where you are looking at some diversification or potential growth. The people already doing mobile were Bill and James. And, the people who are planning to add it are Jack, Dan and Debbie. So, maybe some of you can talk about how you feel about the wireless addition and why you’ve chosen to take the plunge there.

Clavadetscher: One of my large clients is an ISP. They currently offer DSL, so 3G wireless as a product offering for them is the next transition step. So, I found it necessary to go out and find a wholesale provider in that space for them. That was one part. Once I got into that, I realized that 3G was going to be huge for lots of my clients as a backup solution for their existing networks. So, to be able to find carriers who would do 3G as a backup with the monthly solutions where they are not paying minutes, but a metered service was ideal for my client base. It’s a perfect transition and something new to talk about right now.

The proposition Debbie is describing is mobile data. Mobile voice is another animal. I am interested in hearing from the people with experience with mobile voice and how that’s going. Bill or James?

Lockhart: I take those opportunities when they arise. They are worth doing. I suppose that’s why.

Leutzinger: Why not have another arrow in your quiver? I sell conferencing too. It’s not a high volume thing, but if you are getting the voice and data, why not get the conferencing and cellular while I am there?

Zoblin: I’ll do the data card. I won’t do phones or BlackBerry devices.

Why?

Zoblin: I tried it in the beginning and it’s a really frustrating hard sell especially if you can’t carry inventory. And, the second thing is people tend to get frustrated with their wireless providers. There’s no way I am going to jeopardize a good residual commission because they are aggravated because their two or three cell phones are having a problem.

Stiegler: We tried many years ago, when NexTel was just starting out, to be a wireless reseller. They were pioneering products like push-to-talk with cellular. But the quotas rose quickly, and there was no recurring revenue stream, and we found it wasn’t something we were good enough at as a VAR without a retail storefront. So we dropped it. We’re getting back into wireless voice and data in two ways now — as a BlackBerry VAR and using a master agency that has a wireless team. BlackBerry server software is wickedly complex and endlessly touchy, which creates a need for a VAR who is willing to do battle with the dragons. Expectation management for customers is important, too. This stuff is incredibly fickle and flaky compared to Exchange/Outlook on your LAN, for example.

Lockhart: If the customer realizes that you are not responsible for that and that you are just there to find the bet possible provider, you are providing a serve as a telecom consult.

Zoblin: Dan said, when I partner, I partner. That’s one thing I partner for. Don’t ask me to configure a router either. I partner with someone to do that. Like one of the masters sell Sprint. I’ll do the air card and router, and it drop ships to the customer. You make about $150 one time. That I will do. If they need a cell phone, I’ll forget it. I’ll call in a partner on it.

I’ve heard the mobile voice is really tough. It has to do with the operator’s abilities to support agents. It sounds like James and Bill have not had a hard experience with it.

Leutzinger: I don’t have problems at all. I work with a great company. I bring my agent manager in and ask them to finish the deal up for me.

Are you using a reseller or a direct?

Leutzinger: Someone who resells Sprint, T-Mobile and Verizon.

Are they a master agent or a reseller?

Leutzinger: Master agent.

Lockhart: I’ve done the same. I’ve partnered with the maser agent who does wireless. They tend to do it very well if they have AT&T, Verizon and Sprint. And, like Jack said, I am not going to sell one air card or one phone. I’ll direct them to the Sprint store for that. I don’t need the $150 in commission. But if it’s 10 or 20, that’s where I get involved and that’s when the master becomes — in this case — very, very useful because they will do all the work for us.

Dan, you are getting into it this year. What is your approach going to be?

Vidal: I think it comes down to being strategic. I think the wireless and wireline worlds are converging quite a bit and overlapping. If you as an agent don’t have a play there, I think it could cost you. I think I am almost being forced into having a play, which is not necessarily a bad thing. Like someone said before, it’s an additional revenue opportunity because you are already talking to those folks. The key is to have a good partner.

Part of what I am looking for is with the agent mixer … I have had a bad experience on the voice wireless side with a master agent. I’d like to hear who is doing a good job on the voice as well as the data side, to seek out new partnerships to deliver that. The reason I selected mobile data over voice is if I am going to get into wireless, I’d rather get in on the data side because it’s more strategic and applies more to my base of accounts. I think the mobile voice will come into the mix. I am more interested in starting with data.

The overall point that I am trying to make is that we are all thinking of this as agents. It’s key for us to be able to compare notes and see who is doing a good job and who isn’t. Most of us who don’t want to get into it have probably had bad experiences. And most of us who are doing well with it are probably having good experiences.

Lockhart: I’ve had bad experiences with the wireless. I’ve had bad experiences with everything related to telecom. Just because you have a bad experience with a provider or a master agent, does that mean you stop doing business with them or you are going to stop doing wireless all together?

Vidal: I agree with you 100 percent. For me personally, what I did was put it on the shelf. I need to get into the space, but right now it costs me more time and money than it’s worth. I set it aside and will revisit it this year and really look for the best person or company to partner with to deliver that. I agree with you. Just because I have a bad experience doesn’t mean I am not going to do it. I just had to put it on the shelf for the time being.

Lockhart: I look at it like Bill does, as another arrow in the quiver. Unless you go out and prospect for wireless customers, usually they just don’t pop up unless you are working with them on data and BTW, they have 50 cell phones. So, I’ve been involved in situations where I’ve done … I know it was a 24 phone office and never got paid a dime on it from the carrier. Who knows why? I eventually got over it and moved on, but that customer is still a customer and I still handle all the Sprint service that they need. Anything they need, I will still do for them. Maybe I’m naïve.

Based on the advance survey, only one of you offered UC in ‘08 — not surprisingly, that was Ben. He has a sizable gear business. Ben, how is that going? I assume it’s CPE-related.

Stiegler: With the exception of the recession dip, quite well! We are very good at finding both fiscal and business process drivers which drive UC deployment. We offer both CPE-based solutions and hosted VoIP/UC. Over 90 percent of our customers elect on-premise CPE, but hosted is starting to catch on more. There’s less control and a higher “woops-per-month” quotient with hosted because you are almost always pulling dial tone and hosting connectivity over the unmanaged Internet.

The recession has put some prospects into decision paralysis. It’s very frustrating to present a solid case for improving communications with a 10- to 14-month payback (driven from carrier optimization, elimination of legacy system support costs, etc.) and not be able to get green-lighted because the executive either isn’t sure they will be in business in 12 months, or is just afraid to change anything. The good news is that when confidence starts to build back up, we have a very nice pipeline of cost-justified projects ready to go!

Three of you said you would be adding UC in ‘09. Those people were Bill, Jack and James. How will you approach it — a traditional CPE offer or a service-based UC?

Zoblin: I am offering it through the hardware-based solutions and the hosted solutions that I am selling.

Leutzinger: I am looking at it from the hosted side. I have to get more into that. It’s something I am dreading getting into.

Zoblin: I have two good contracts if you are interested.

Leutzinger: I do need someone good for it.

Why are you dreading it, Bill?

Leutzinger: I am an old PBX guy from when I started in this industry. I just think you should keep your equipment on-site. I don’t trust somebody else to do that from their garage.

So why don’t you go with a hardware-based solution?

Leutzinger: I do have a very good business partner who owns a PBX house, but people are really wanting to buy the hosted product. They are asking for it more and more and more. Why try to talk them into something when they want to buy something I can provide?

Stiegler: We find that there are two places where we need to be careful about telling prospects what they don’t want to hear: One is that hosted, Internet-based UC is going to have some good days and some bad days and they should be prepared for both. Two is that there are often hidden costs to deploying IP-based endpoints on their campus (cabling upgrades, power over Ethernet switches, making the LAN QoS-aware) and that digital endpoints are not necessarily the buggy whip that some manufacturers that make only IP endpoints paint them to be.

I think we’ve lost a few projects by telling the truth instead of saying, “Fine, we’ll be glad to write up your order that way.” But our sense of professional responsibility, plus not wanting to be blamed for post-install unhappiness, leads us to make those unpopular statements from time to time.

James?

Lockhart: Basically through partners. It’s just CPE. Like Bill said, I try to avoid the newest technology until it’s just absolutely demanded.

Another result of the advance survey that was interesting and surprising to me was that two of you were offering TEM in 2008, but three more are adding it in ‘09. Clearly that’s a popular one. For those that are adding it, why you didn’t have it before and why you are adding it now. Jack?

Zoblin: I am adding it because a lot of my peers are doing it. They are just telling me I’m leaving way too much money on the table. They said, “You are doing this stuff anyway and you could charge for it.” In my sales model, I am convinced I could charge for it. When I explain my value proposition, they ask, “What do I charge?” They are expecting me to charge.

Dan?

Vidal: I did add it in the sense that I have suppliers I could access in ‘08. I haven’t sold an opportunity. For me it’s the same reason from last year. I think the good thing is that space is maturing. I think there are some TEM players doing better than others. I think it’s just such a natural fit, more than anything else I’ve seen outside of wireline agency services. You have eyes and ears into everything in an account with a TEM play. It’s a no-brainer to add it. It’s a matter of doing it a few times before it’s part of the routine.

Ben?

Stiegler: We have been giving it away for years as part of our “consultative sales” approach. In 2008, we began to formalize [by saying,] “There’s a charge for upfront bill analysis, which we’ll waive if you follow our carrier recommendations.” As a next step, we’re looking at being the ongoing first-receiver of every bill, month after month. We haven’t decided if we should do that in-house, or partner with a more TEM-centric agent to be our back office.

For years, though, we were happy to volunteer the upfront analysis as a way to lead to a CPE sale, and there are still many sales where doing that makes sense.

James and Debbie had TEM already. James, can you speak to how TEM service is working for you with our base?

Lockhart: I’ve probably done it for a long time before all the newest technology and software out there to help people manage it. Again, it’s not something I’ve pursued; it’s just something I do. …It’s one of those opportunities where it’s a piece of their business or their entire telecommunications. You can go in there. Every customer is receptive to it. It’s a way to get in the door and prospect — “Let me look over what you have and see if I can save you some money or find errors and correct them. I’ll charge you a percentage thereof or per-hour — however you want me to do it.”

Have you seen TEM service picking up or has it been steady through the downturn?

Lockhart: I think there are more companies out there that are just flat specializing in it. So, obviously, if they are out there stirring things up, then there are more people asking about it.

Moving on to managed services, four of you already offer something you describe as a managed service, and two are adding it. For those of you already offering it — Bill, Ben, James and Debbie — could you describe what you are offering?

Leutzinger: Pretty much the only time I do managed services is with managed Internet.

Are you looking at expanding that into other managed services?

Leutzinger: As I say in one breath, it’s another arrow in the quiver — you also can do so many things. It’s not something that I know that much about or have the desire to learn more about.

James, what about you? Are you getting more aggressive about managed services?

Lockhart: It’s the same as Bill’s. I’ve actually seen a downturn in the amount of clients that want to have managed services. I think there for a while everyone was talking about managed Internet, managed network, managed MPLS. “We want someone to take care of that for us.” Now, they say: “We have no control over this network anymore. We want to have our in-house guy do it.” You can’t if you are getting the routers from AT&T or whoever else. Things have actually gone the other direction and people have said they want to control the routers.

Debbie, are you seeing the similar change in attitude about managed services?

Clavadetscher: I think the space I work in is slightly different because it’s larger accounts. I don’t do managed services all the time. I only do it on an individual case basis. I don’t have a large percentage of my clients asking for managed services. I simply have one or two who will continue to utilize it.

Ben, how about you?

Stiegler: We have four managed services offerings now, five if you count our fixed price — “We’re responsible for keeping your voice systems running today like they were yesterday” — offering, which we’ve had for 15 years. Three years ago, we started adding services, such as Synertel Efolder, which is a virtual managed backup service. Synertel Mail Defense is a cloud-based protection for two kinds of e-mail threats — malware that hurts your PC or steals your data and dumb stuff that steals your employees’ time and attention. Synertel Hosted Exchange provides full Microsoft Exchange service with Outlook licenses, BlackBerry integration, etc. without any upfront investment.

Our newest offering, Synertel Managed Workplace, either makes us the proactive IT resource for a client or allows us to put monitoring in place (servers, workstations, printers, circuits, PRI drops, Web sites, firewall exceptions — even low toner) and hand the in-house IT team a beautiful dashboard, ticketing system and alerting hierarchy. It helps them be more proactive and less reactive. So far we have large client with seven sites and about 150 devices under management, and they are loving it!

After hearing that, Jack and Dan, what are your thoughts about getting into it now?

Zoblin: When you talk about managed to me, that’s something that I definitely outsource to my agents who are IT folks. Half of them are gung-ho crazy on managed services. The other half are completely against it. I always throw it out there to a customer, but my customers tend to be on the small to midsize and they don’t find value in flat-rate IT service. They’d rather have an IT professional and pay them when they need them as opposed to paying per month for a “what if.”

Dan?

Vidal: Similarly, managed services is defined by many people in a lot of different ways. I similarly seem to have some referral agents that are in the IT/VAR data space. They have managed services offerings. In an attempt at collaboration and partnering with each other, I do see a potential fit there for some of my clients to offer some of their services. Again, it’s another arrow in the quiver or whatever.

Lockhart: Bill are you a bow hunter?

Leutzinger: Someone told me that years ago, and I’ve always said it.

Lockhart: Bill, have you seen a downturn in managed services, too?

Leutzinger: Yeah, definitely.

What professional services you are offering? In the advance survey, all of you except Bill said you were doing it.

Leutzinger: I didn’t understand what that means.

That would be consulting, installation, things like that. Jack, you want to start?

Zoblin: We do all the consulting and we do layout and design. The problem is that we are not getting paid for it. That’s one of the reasons I want to go to a TEM or a fee-based offer.

Vidal: What I’ve been offering for professional services is anytime a customer has a specific or detailed need above or beyond the transactional agent model. I go in with a statement of work. It’s typical consulting by the hour or by the project. I do more toward a TEM play in that arena, so as not to take up so much of my time by the hour. I don’t want to be a consultant. I play a consultant when I have to. I also like the model James suggested in terms of having some type of initial engagement letter or statement of work that we are going to offer you our telecom agency services, you are going to pay a fee or if you execute the contract, I will waive that fee to protect the time and investment upfront. I would consider that a potion of professional services as well.

Lockhart: I learned a long time ago and live by the theory that I don’t mow lawns for free. A lot of times your direct reps will come in and — not to pick on them — they will give advice on how to set up the network and lay out the proposals and sit back and cross their fingers. Since we offer all the different carriers, we can come in with as much or more experience than the direct reps. We can tell them how to set up the network and the carriers that work best in each area and do that for them. I don’t want to be the guy that sits back and crosses my fingers and hope I get the deal.

I don’t know when I started this. I think Gallup hired me. They said, “We will not give you any telecommunications services. We can’t go through you. We have to go through MCI because they are a major partner of ours. What we want you to do is come in and give us a proposal from all the other carriers and we are going to throw it in the face of MCI.” I said, “Fine, this is what I will charge you to do that.”

Believe it or not, it works very, very effectively. I had a situation where an equipment vendor brought me in on a deal, redoing a network, moving everything to MPLS. A lot of times when they do that, they send me the info, I run the quotes and let them try to sell it or I will jump in. In this case, they were trying to sell it. It was August a couple of years ago. I never heard. The following August, they wanted me to rerun the quotes and go out with them. I said, “No, no, no. I will rerun the quotes and go out there with you, but it’s going to cost you $5,000 a month.” They were going to save $6,000 a month by redoing their network. And, sure enough, I drove an hour away and showed them the quotes and they had a check waiting for me at the door when I got there. It’s just a matter of setting that expectation that this is what I do and this is what I charge. If they trust you and trust your opinion and advice, they are willing to pay for that.

Leutzinger: Did you get the deal on top of that?

Lockhart: I did. On top of the MPLS, which was six sites, it’s now 12 sites plus the local, long distance, wireless, Internet, everything. It’s not huge. It’s not Debbie-sized.

Is that new terminology?

Lockhart: It’s my new goal. It’s a $20,000 a month customer. I’m a mini-Debbie.

Little Debbie!

Lockhart: A Little Debbie!

Zoblin: Oh, they are so fattening!

Debbie, do you have anything to add to the professional services discussion?

Clavadetscher: The way that I looked at is that I have a friend in the colocation moves business and office moves business. I partner with people who have a specialty. I have a friend in the security business. So, usually my income will come from the referral fee rather than me doing the work. But the way it’s different is that I have such a good understanding of what the clients wants to do that when I talk to the partners, they are prepared with the info they need to work with the client so it really streamlines the process.

Lockhart: Can I add one more thing? The other thing I tell people right up front like Dan was saying is a scope of work type thing. I just tell people that I’m charging $100 an hour on anything I do that I don’t get commissioned on. If they want me to correct a billing issue so they don’t have to deal with it, it’s $100 bucks an hour.

Ben?

Stiegler: A lot of our revenue is professional services. We charge for project management, remote and on-site adds/moves/changes to CPE, cabling, office relocations (move PBX, servers, reconfigure at the new place), etc. We also do consulting — but a lot of it is no-charge in the service of consultative selling. We need to learn how to turn more of that initial time into revenue.

In the advance survey, three of you are already offering hosted IP; two more are adding it in ‘09. Debbie is the only one who said she’s not going that direction. Is this one of those situations where you all feel that you need to offer this even though you don’t want to or are some of you more enthusiastic about it?

Zoblin: I am very enthusiastic about it. I think that’s where a lot of this is going. The only problem with the sale — I’ve spent a lot of time and money on this over the past couple of years, and I’ve been burned a lot already too — the stars really have to align to make it a good sale. What I mean by that is that the customer has to be moving, or need a huge phone system and can’t afford it, has multiple locations and remote workers, is out of contract. If that’s the case, it works great. The features are phenomenal. The unified messaging is phenomenal. The remote worker is phenomenal. The desktop phone is phenomenal.

You told me in a previous conversation, you’ve been through a few vendors, so it’s not been simple.

Zoblin: On the low end. I monkeyed around. I was burned by two different providers. It’s really coming of age now.

Anyone else with experience selling it?

Zoblin: We have a couple in place and it’s gone well.

What about you, Dan?

Vidal: I have access to sell it now. I have proposed it a couple of times. I haven’t sold it yet. I’m still a little bit on the fence, much like the wireless. It’s something that I know I need to have in my bag of tricks, but I’m sort of waiting to see which of the better players emerge out of this. Actually, I take that back. I did just make the first sale on it. It was a small customer last month. It hasn’t installed yet.

Ben?

Stiegler: We’ve been burned a number of times here. We’re working with a provider now that has some glitches, but also has workarounds for most of them. I don’t want to drive most of my base to hosted — at least under the agent model, for two reasons: One is consistent quality isn’t there — talking over the Internet is intermittently flaky. Two is the commission earned with typical hosting plans isn’t nearly enough to pay our sales reps, run our help desk, keep our field engineers at the ready to roll to a site if there’s a problem. So I worry a bit about cannibalizing the rest of our business if we push too much business to hosted.

Often what we do is help a client create an environment where they are their OWN hosting provider. An IP PBX goes in at headquarters, or one in each region — and the smaller offices and home-shored or mobile workers are “hosted” off those platforms. That’s a win-win arrangement for many clients. And, economically we find that above 15 to 20 seats, and often even at smaller head counts, the five-year cost of ownership is way less with owning CPE than going hosted.

Bill and James are the other two looking at it this year. What are your reasons for getting into it?

Leutzinger: I think it’s because you almost have to. I’ve seen so many companies come and go. I’d love to know the names of the couple Jack is working with that actually do a good job and are going to be around for a while. That’s the biggest issue.

Zoblin: The one thing I can tell you guys is don’t put VoIP into any customer unless the relationship that you have with the provider can give you a direct T1 or a MPLS T1 to their network. Anything hosted over the public Internet connection, I won’t sell. What that means is that the customer that you want to give this to has to be spending at least $600 to $1,000 per month or it’s not worth it.

CARRIER RELATIONS

In the advance survery, some of you checked every single one of the options offered for challenges with carriers contracts, pricing, commissions, support, provisioning, service, billing, etc. So apparently you have lots of problems with your carriers. The first one being contracts.

Leutzinger: I am seeing that a lot of the carriers signing contracts these days are trying to not give you an evergreen. I won’t even look at a contract unless it has an evergreen in it. If they are not going to do it, then I am not going to do business with that provider. You have to protect your base and that’s the No. 1 way to do it. They are all just trying to get away from it. They are saying if you fall below this amount, we can cut you off and this and that. That’s when you have to go to a master if you want to use that provider and make sure that master agent has an evergreen, which most do. That’s why I love [TBI’s Geoff] Shepstone; I know he doesn’t have a contract without an evergreen in it.

Vidal: I think in this economy a lot of folks are relooking at their contracts or looking at the new ones. One of the things I try to measure a potential carrier or master agent with is how their first contract they send to me looks. If it’s already ridiculously stacked against me, that’s typically a red flag with me. Even though they may be willing to negotiate and they have the attitude for not requesting what you want. I just don’t even bother to do business with someone who has a contract like that. It’s sad, but most carrier contracts are not favorable to you until you ask for what you want. I use that as a screening mechanism to get by the ones I don’t like.

Once I’ve got someone I want to do business with, obviously there is a legal cost there associated with putting together the right terms for you. That is a challenge. You have to be selective with your financial resources and you want to make sure that you are putting together a contract that makes sense for you. Even still you are not necessarily protected. If you are with a master, you don’t know the quality of their agreements. They may be able to show you. You may not know their stability because they are privately held. There’s a bunch of challenges behind it.

If you are with a wholesaler or reseller, what mechanisms do they have in place for survivability? If it’s one key person driving the organization, what happens if they get hit by a bus? There are a whole slew of challenges there. That’s probably the biggest exposure or risk that we have. It’s a constant challenge and it never goes away. You do what you can to minimize the risk.

Leutzinger: I love what my business partner said to a carrier the other day. There was a line in [a contract] he wanted to take out. They said, “We never enforce that anyway.” So he said, “Then what’s the issue with taking it out? What if you are not here two years from now? What if you sell the company and this contract survives that?” I agree exactly with that. If a contract comes across one-sided, it’s a huge red flag. What’s going to happen if the shit really does hit the fan? You already know just by reading their contract a lot of the time.

The other thing most of you cited as a problem was support with quotes or trouble tickets. Hand in hand with that was provisioning.

Vidal: I don’t mind jumping on this. What’s frustrating and it’s probably just common business practice is that when you are dealing with the top folks at a carrier channel or master agency or reseller, they know what they are doing and are sharp. When you are dealing with them, you are getting good support. When you are dealing with their $8 to $10 an hour employee with no vested interest and no real business acumen, it becomes frustrating because it’s a holdup that costs you revenue — whether it’s a delay or hampering the deal. Everybody is promising better technology and better support, but it’s a constant ongoing point of frustration because you are reliant on how good their team is in order to deliver a quick and accurate quote, quick and accurate provisioning, quick and accurate billing, etc. We are constantly relying on other folks. If we have a high standard of excellence of our own company, we are really completely reliant on the carrier or the master for theirs. It’s not to say you expect everyone to be perfect and not make mistakes, but it seems to be a pretty repetitive issue in the industry from my point of view.

Anyone else on that one? (Silence) No one else has problems with support from their carriers?

Lockhart: Not at all (laughing).

Leutzinger: It’s the nature of the beast. It’s just something you have to deal with.

Lockhart: Like Bill said it’s the nature of the beast. You either do business with a carrier or you don’t. I am slow to try a carrier and when I try them, if they don’t perform, I’m done. I’m out. I am not interested. I am not interested in dealing with service issues and $8 an hour people that don’t perform and don’t get the job done when you need it done.

Vidal: What happens when they perform well in the beginning and they start to deteriorate?

Leutzinger: They go on the shelf.

Lockhart: Exactly. You don’t’ have to do business with them. I found it interesting that there was a blog about having trouble with commissions. Why? Why would you put up with that? I’m sure it happens with everyone. It’s happened to me. Yell once or twice and then move on.

James has agreements with five suppliers directly, so he’s serious about not servicing carries that don’t do a good job. I assume that the rest of your business runs through master agents.

Lockhart: Correct.

At one point agents were concerned about bankruptcies. Are you concerned about that now in the current economic climate?

Zoblin: Oh yeah.

Lockhart: You can be concerned, but there’s nothing you can do about it but balance your basket.

Leutzinger: The octopus.

Lockhart: And also, be ready to quickly move that business if something does happen.

Leutzinger: Last time McLeod went bankrupt, they paid everyone through it. They wouldn’t let the customers out of contracts, so you could not move them.

Lockhart: MCI did not pay.

Leutzinger: Did they allow you to move the customers?

Lockhart: Not in contract.

One of the issues Dan brought up is the systems not being automated enough. Could you elaborate on that?

Vidal: If you take a look at your process from A to Z, from the first contact with a customer all the way through to a successful installation, billing and getting paid, there are a lot of steps that have to happen and a lot of steps that you have to deal with the supplier on. A lot of those steps in 2009 are automated behind the scenes — carrier quotes and information flowing from one step to the other. It just doesn’t seem — at least that I’ve encountered — in the agent world that anything addresses it for a company. I know there is RPM and MasterStream and some master agents that say that’s what they do best. You get to the point that you ask, “Do I do all my business with that one master or carrier that has a great tool?” I think there is a challenge in waiting for quotes from carriers that rely on a channel rep or a master relying on a channel rep and piecing together the information. I think there’s an opportunity there for the agents for some type of a system to take A to Z quicker and smoother and more accurately. I’m not sure what that is. Maybe I am dreaming pie in the sky here. I just think it’s an unmet need.

Leutzinger: Do you worry though that when you get your prices from an automated thing that it’s not always the best price, that you are getting a rack rate and not taking advantage of a promotion? And, you aren’t beating them up to get your customer a better deal. That’s why I stay away from the automated systems.

Vidal: That’s a good point. Garbage in; garbage out. So it has to be a carrier that’s either automatically applying promotions or giving you the best rate already. If you are dealing with a wholesaler, for instance, and you are adding a margin. It depends on the carrier. That obviously is a concern, but that’s a concern I think can be addressed if it’s done correctly.

Leutzinger: The last thing I want to do is give someone an XO quote and then have someone walk in behind me with a better price because I took it from an automated system.

Vidal: That’s exactly right. That’s one of those things that you cannot afford to happen. Or you are given a price from the channel side and the direct side is getting a better price. That’s a whole other question for this panel. That just happened to me with a client. That’s definitely a concern. It has to do with the quality of the system and if everyone is on an even playing field. I personally don’t like the carriers that have regular pricing, management level pricing, director level pricing and VP level pricing and 14 days for ICB pricing. I don’t have time to deal with that garbage. I try to source with those who have an aggressive price and I’m not going to get undercut by a direct rep or another agent.

Leutzinger: What I do a lot of times to solve that issue is say to the customer, “Here’s two or three quotes. We can talk about differences in the carriers and you can choose what you want. You tell me what you want and I’ll go back and get the best price.” I don’t get caught with the direct rep underselling me or someone coming in with the better price. If you set the expectation, you save yourself from getting into that trouble.

Vidal: I like that approach. I do something similar. I present multiple quotes and once they decide, I finalize the contract and the price terms. That gives the opportunity if another quotes comes in for them to say, “Hey, Dan, look at this.” From a technology standpoint, it’s frustrating not to have the ability to do that as quickly as possible. The quicker we can deliver a quote and execute a contract, the quicker we are going to generate revenue for us and the carrier or supplier.

Lockhart: I like the automated processes to check availability and who is in the ballpark pricewise before I go beat anybody up.

Leutzinger: And what carriers are there. I use [online tools] to find out who is there.

Lockhart: Exactly. [There are] network maps and everything.

MASTER AGENT RELATIONS

According to the advance survey, your problems with master agents seem to be less, which is a result of their businesses being less complicated, but it still seems you have issues with master agents.

Zoblin: Some of the master agents who claim to be master agents really aren’t. They are trying to be master agents. It’s not until you get in bed with them that you realize their back office and support are no better than yours.

So you think that really what you are looking for from a master agent isn’t just a contract, you are looking for them to facilitate some of your back office functions for you then?

Zoblin: Without a doubt.

Leutzinger: One of the reasons I like suing them, I can take it off my plate and throw it at them.

Lockhart: I will say that if you have a master agent that doesn’t have a big base with a particular carrier, though and you throw it at them, a lot of times, they won’t or can’t do anything. I’ve had that issue with a master agent that we share, Bill.

Leutzinger: Oh yeah.

Lockhart: Again, I don’t think I marked that there were issues with agents.

Leutzinger: I yell at them at least once a month.

Lockhart: You’ve got to — on principle. (Laughing)

Stiegler: We have walked away from several master agents over the past 15 years who talked a good game but managed to generate wrong quotes, didn’t meet timelines, forgot to pay commissions or turned out to not really know the products they were representing. It seems that at times, there’s a really low bar to leap to call yourself a “master.”

Can we spend a minute talking about channel conflict and how much that plays into your daily business?

Vidal: It’s not a problem that happens often, but when it does, it’s typically ugly. And, it’s typically from the direct side. It’s very rare that I encounter other agents in competition in the exact same account at the same time. It’s a direct rep and they are over-promising all kinds of things. They are doing something unethical — whether it’s badmouthing the agent channel and saying they are not going to get the support. I just had it happen on a sizable deal, but we were able to navigate around it. It’s a point of frustration when it happens. Thankfully, it doesn’t happen all that often.

Does anyone have a different experience than Dan?

Leutzinger: I agree. When it does happen, it’s ugly.

Stiegler: We find this (direct vs. channel conflict) occurs in maybe 20 percent of the deals we compete for.

Lockhart: Did you ask about conflict with master agents?

No one indicated that it was a problem with master agents.

Lockhart: The only issue with channel conflict with the master agent is if you are introduced to a carrier through a master agent or you try them under their contract and decide, “Hey I like these guys and I want to do a lot of business with them and I’m going to get my own contract.” And the carrier doesn’t want you to or the master doesn’t want you to. They are either trying to protect the relationship or keep you as a sub.

Legally, do they have the right to do that?

Leutzinger: I think that turns into an ethical dilemma.

Lockhart: I think it’s a relationship issue. The carrier says, “We’ll let you do a direct contract if so-and-so say you can.” After that, I’m like, “No, if you don’t’ want me as a direct rep, I won’t do business with you through them, either.” They are trying to protect their relationship with the master, but if I’m the agent that’s driving the majority of the business through that master for that carrier, why do I split my commissions with them?

Leutzinger: You are right. That’s when you go back and renegotiate a percentage before you get the contract, but you don’t piss that master off.

Lockhart: Across the board , if you do your own deals on the ones you have the biggest percentage of business with, a 100 percent vs. 80 percent vs. 90 percent.

Leutzinger: You get your money 30 to 60 days sooner.

Lockhart: That’s not all bad. I’ve always laughed at that when they came up and say, “I introduced you to so and so.” I say, “You know I would have found them eventually.”

What about on the renewal side? We posted several blogs that said the renewal problem was major. Was that an exception to the statements you were saying?

Leutzinger: If they are getting paid, you are getting paid. I don’t see it as a problem.

What I heard is the carriers renew and cut you out of the deal.

Leutzinger: That’s the one that gets me, especially with AT&T. You go in and sell a three-year MPLS deal and they say, “BTW, we are not paying you on the renewal.”

Is it rampant or isolated?

Vidal: I think some carriers do it rampantly. They are the carriers that are going to cost themselves. I look at it as part of my red flag system in terms of who I park my business with. I won’t park business with anyone … I look at the renewal terms of my contract very carefully. I have to know I’m going to get paid in the long run — whether it’s a simple renewal or we move them to new services or a technology upgrade. I’m not in it for two or three years of residual commission. I am in it for a longer term than that. If I am asleep at the wheel, shame on me. If I am actively account managing, I fully expect to get paid on it. If they are changing the terms of the deal in the middle of the deal, that’s another major problem. Luckily, I haven’t had that happen to me.

2009 PLANS

As far as 2009 plans, there weren’t a lot of surprises in the advance survey. Most of you are focused on new customer acquisition and renewals as priorities. A few put product lines and geographic expansion fairly high up. Jack, I am interested in your plan about geo graphic expansion.

Zoblin: Some of the regional providers are building network into some areas that traditionally didn’t have a lot of service, so I am going to strategically try to go into some of those areas.

One thing that Debbie said was a priority was re-evaluating carrier relationships. Anyone else thinking this is a priority this year?

Vidal: I think so. When I looked at the survey questions, it was more on the customer. But on the internal end and operations, absolutely that’s a major initiative for me and a lot of the agents I spoke to at the conference — same thing.

Leutzinger: I just moved two of my contracts that I had directly under a master agent simply because they were carriers that I used to use a lot more than I am using now and I didn’t want to lose the revenue. I am looking at more of those that I am not hitting numbers with to make sure I don’t lose the revenue.

Is this just a normal thing agents need to be doing all the time, or are you finding that this year it’s more of a priority?

Leutzinger: I am looking for people that want to partner with me. I mean that from a customer point of view. I don’t care if it’s my dry cleaner. I want those two POTS lines or I’m using a different dry cleaner. I am doing the same thing with my carriers this year and saying, “Listen, what are you going to invest in me?” I have things spread the way I like. Now, I want to concentrate on how to maximize commissions with three or four carriers.

Is this something you do every year?

Leutzinger: I am putting more emphasis on it his year.

Vidal: I think it’s something we should all normally do, but I think we are looking at it more carefully this year because of the economic conditions. But I think it’s a good opportunity to fine tune what we are doing. Even though there is a lot of paranoia and negativity in terms of “the sky is falling,” I think there is actually quite a bit of opportunity if you do things right and strategically. I think there is more emphasis this year.

James, you have been in the business longer than all of the agents. Is this a different year or business as usual?

Lockhart: For me, it’s business as usual. Like I said, I’ve gone through the Qwest selling to Touch America and the MCI bankruptcy and the Global Crossing bankruptcy. I only evaluate those things on a daily basis.

OPPORTUNITIES IN 2009

What are the hot opportunities for yourselves or agents in general?

Zoblin: Definitely hosted.

Leutzinger: And, SIP trunking.

Lockhart: Ditto on SIP.

Vidal: I’m looking at the survey. I like all the answers. I don’t know which one I put.

CHALLENGES IN 2009

What are the challenges for agents in 2009? In the advance survey, Bill said getting people to part with their money. Are you all seeing that as an issue?

Zoblin: Yeah, it’s tight. …We have bought down a lot of customers — not by moving them, but by going back to the carrier and saying, “These guys are having problems. Their contracts are up.” We have re-termed a lot of our base, but a lot of it we bought down. My feeling is it’s so hard to get a new customer; I’d rather make less on an existing customer and move forward. I didn’t have the growth that I had first quarter last year, but I did have growth and I’m satisfied with that.

Lockhart: I agree there are X amount of clients out there that are in a no-spend mode and stuff like that, but I also believe in any economic downturn, good companies are looking to expand and grow. They are going to be more cautious, but they are still going to be looking to grow. And that means more of our stuff — more technology, more everything.

Vidal: It’s a two-edge sword. In a down economy, you are going to have some customers in your base shrinking — whether they close an office or consolidate. But you are going to have more new customers looking to save that you are going to be able to bring on board with a good portion of their telecom services, which will, I believe, far outweigh the ones that are shrinking a little bit. In general, it seems like the agent community is doing relatively well compared to other industries. I think there is more opportunity than loss.

Zoblin: I’ve found opportunity too, but I’ve found it a lot harder to sell even though people want to save money. One of the things that I found in trying to win business from other providers is that as these companies have gotten in a lot worse financial situation, the carriers that they are on have allowed them to push from current invoice to 30 to 60 to 90 days. Yes, they are paying a finance fee. I’ve gone to a few places where I’ve shown a savings [and not gotten the deal] and the reason is that they were out 90 days with these people. “How do I know that the company you bring me to will not want me to pay on invoice? I’m afraid to leave this guy, so even if you can save me X, it’s not going to help me if I am going to have my phone service shut off because I’m not going to pay in 30 days.

Leutzinger: That’s exactly true.

Zoblin: That’s something I’ve experienced a lot of.

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