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Carl Katz: TCG 'Not Beholden' to Private Equity

"... We're not using MDF as a profit center," Katz told Channel Futures. "Instead, we're spending it for the benefit of the partners."

James Anderson

January 13, 2022

8 Min Read
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TCG differs from its peers in the technology solutions brokerage (TSB) market with its approach to private equity and MDF.

So says Carl Katz, who recently moved to the Florida-based firm to work as its executive vice president of partner sales and chief operating officer. Katz explained that TCG’s decision to refuse outside funding and avoid using market development funds (MDF) as a profit center helps the company stand out among its rivals.

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TCG’s Carl Katz

“There are companies who started in technology, went to the large tech brokers and were nickeled and dimed to the point where they couldn’t even function,” Katz told Channel Futures. “That’s because it’s upward of six figures in sponsorship dollars to get any visibility with the channel managers and partners.”

Katz previously worked for Nextiva and ThreatProtector, which both partnered with TCG. He shared how his tenure at those companies will shape his mindset at TCG. He also spoke extensively about the relationship between private equity and MDF usage in an interview with Channel Futures.

We have edited the transcript for length and clarity.

Channel Futures: Why did you choose to move to TCG?

Carl Katz: I moved to TCG for several reasons. First, I’ve been friends with [TCG partner] Dan [Pirigyi] and [co-founder and CEO] Lew [Rubin] for about 24 years. I really like that they’re entrepreneurial, ethical and pragmatic in their approach to business. That’s hard to find these days. I also like that TCG is privately held and hasn’t accepted any private equity money, which gives us the ability to focus on the partner while not having to tailor every program for profitability. That’s huge. Other technology brokers are more beholden to these private equity companies, which really clouds their decision-making and how they approach the market and their partners.

TCG and national technology brokers as a whole have been experiencing tremendous growth during the past few years, and this is only the tip of the iceberg. TCG’s partner program is simple. We provide partners with high residuals. 100% SPIFF pass-through, local and regional channel managers, an excellent in-house support and order processing team, and the opportunity to sell over 230 suppliers providing various technology solutions. I like to say TCG is the right place at the right time.

CF: What are some examples of how your competitors are beholden to private equity in day-to-day processes?

CK: Some of our competitors are owned by publicly traded companies, and some of our competitors have recently received quite a bit of private equity money. This clouds judgment. Instead of looking out for the partner and creating programs to benefit the partner, these larger brokers are beholden to the bottom line and meeting operational goals and growth goals. TCG is not beholden to those goals. If we want to run programs and do projects with the partners that are unique in the marketplace, we don’t have to …

… consider the investors and the profitability of these programs from an external source perspective. We look in-house and say, “Is this good for the partner? How can we assist the partner in gaining additional market share, even though it could cost us a lot of money upfront?’

From an MDF perspective, pretty much every one of the other large technology brokers in our space has huge sponsorship dollar requests from their suppliers. TCG’s sponsorship from the suppliers is much lower. And the reason is that the MDF programs at the different suppliers are actually profit centers. TCG actually spends every dollar and sometimes more. A few months ago we took our top partners to Mallorca, Spain. That trip actually cost more than what we gained from the suppliers. We do not use MDF as a profit center like most of our competitors do. We actually use every dollar to facilitate partner training, supplier introductions, presidents clubs and our Channel Source event. The bottom line is; we’re not using MDF as a profit center and holding on to that money to pay for salaries and make profit. Instead, we’re spending it for the benefit of the partners.

CF: [TCG vice president of national sales] Kevin Zimmerman said on LinkedIn that it has become a pay-to-play system in many cases. And there’ are many partners I’ve spoken to that find it very concerning. It’s interesting to hear TCG is doing it in a different way.

CK: It’s unique in the market. Of course, we do have sponsorship, because we have expenses, but all of that money is passed through to the events and educational sessions that TCG offers, as opposed to hiring a supplier management team and using it as a profit center to make additional funds. That’s also where the private equity comes in as well, as it looks to increase profitability and supplier dollars while decreasing partner benefits.

CF: So do you see a link between PE involvement in the TSB space and pay-to-play revenue models?

CK: That’s absolutely correct. Private equity companies are looking for ways to maximize their investment when looking at the holistic profitability of any organization. Maximizing investment is a) about sales growth and b) about profitability. Supplier MDF is part of that profitability. So when making decisions, it’s going to be based on profitability. There are several organizations out there that have whole supplier departments. The supplier manager department provides suppliers with their own manager, and it’s all calculated into the mix to make it seem that the suppliers are getting the best bang for their buck, when in actuality there are companies who started in technology, went to the large tech brokers and were nickeled and dimed to the point where they couldn’t even function. That’s because it’s upward of six figures in sponsorship dollars to get any visibility with the channel managers and partners.

And truthfully, a lot of times these channel managers work with these higher sponsored suppliers because they’re told to, and often it’s smoke and mirrors. They’ll reach out and have a conversation with you just because you’re a platinum or diamond sponsor. At TCG we take a different approach. We actually get the suppliers visibility in the market. We use every dollar they provide us not for a supplier manager but for events, programs and educational investment. And we spend the MDF we receive.

CF: And you probably have firsthand experience with this, coming from the vendor side.

CK: Yes, I’ve been involved in a lot of different QBRs with the technology brokers. I’ve been involved many one-on-ones. For a good amount of time when I was at Nextiva, TCG was the largest seller for Nextiva while …

… having one of the lowest supplier rates. It just shows you that it’s all about relationships. It’s all about working together, the technology broker and suppliers working together out in the field. Creating local events, creating educational events and making introductions on both ends. At the end of the day, it comes down to the local people on both sides creating those partnerships.

CF: What experience and insight did you gain from working at Nextiva and ThreatProtector?

CK: What I bring to the table as a leader in the technology space is my 25 years of experience from both the supplier and technology broker perspective. I’ve been in the channel many years. I understand like competitors and the technology broker space. And I understand pretty much all of the suppliers, what they do well, and of course, what could be improved. I plan on implementing strong structure at TCG to help the partners gain superior support while giving them the ability to go deeper and wider within their customer base. Those partners do a great job at gaining the trust of the customer and making the first sale, but they can use assistance with understanding all the technologies and products available for them to sell in order to gain additional MRR.

One of my goals at TCG will be to provide partners with the knowledge and support to sell more new opportunities while going deeper within their existing base. Of course, creating a strong structure and programs with our suppliers’ assistance will be a top priority as well.

I have supplier experience in network, UCaaS and cybersecurity, which means that I can provide our partners with an understanding of how to sell and market these technologies to their customers. Coming directly from a cybersecurity company, I understand that every company of every size needs at least one cybersecurity product. Partners who are looking to gain access to the customer should use cybersecurity to land and expand within that customer. Even selling basic endpoint protection or security awareness training can facilitate a strong conversation and lead to other types of opportunities within that customer, such as UCaaS, SD-WAN, network, desktop as a service and much more.

CF: Is here anything else you want to share to TCG agents reading this?

CK: I’m very excited to work with every TCG partner to help them facilitate growth within their customer base and access new customers. I will make myself available to every TCG agent and supplier to conduct a business review on how we can increase our mutual business.

Want to contact the author directly about this story? Have ideas for a follow-up article? Email James Anderson or connect with him on LinkedIn.

 

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About the Author(s)

James Anderson

Senior News Editor, Channel Futures

James Anderson is a news editor for Channel Futures. He interned with Informa while working toward his degree in journalism from Arizona State University, then joined the company after graduating. He writes about SD-WAN, telecom and cablecos, technology services distributors and carriers. He has served as a moderator for multiple panels at Channel Partners events.

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