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"We get to a certain point where we're like, 'How do we get bigger?'" Bret Hickenlooper said.
August 8, 2022
Technology advisory firm Sumo Communications founder Bret Hickenlooper started to envision his exit five years ago.
Hickenlooper, sitting in the lobby of the Great America hotel in Salt Lake City, seems at peace. He cracks a smile, happy to be back around colleagues and friends at the Telarus Partner Summit. It’s nice to be back in the business after his short retirement, he tells Channel Futures.
Hickenlooper launched the agency in 2002. Like many partners in the channel, he formed his agency after working in sales at a carrier. And like other agents, his firm rode a wave of growth as the advisory model gained traction over direct sales as the preferred way to buy technology. But the same generation is now facing a crossroads as they enter the twilight of their careers.
Sumo Communications’ Bret Hickenlooper
“There are a lot of people like me in the channel who started their business 20 years ago and are now thinking, ‘What’s my exit strategy?’ Hickenlooper told Channel Futures at last week’s Summit.
As many agents consider retiring, outside investors are entering the space en masse and offering a valid financial option. At the same time, many partners that remain are addressing the validity of the broker model and coming to the conclusion that they need more than recurring commissions to stay solvent. Moreover, those that want to grow their businesses feel pressure to add revenue streams and services.
“We get to a certain point where we’re like, ‘How do we get bigger?'” Hickenlooper said. “Scale is really difficult to do. You’re just trying to outpace churn and babysit your base, and no matter how much you sell every year, there’s still potential tucked in your base that’s eroding. It’s really a puzzle.”
In the meantime, the technology service distribution (TSD) market is consolidating at a breakneck pace. In the last three months, PlanetOne and TCG have joined forces with larger players. The leaders of these combined firms cast a vision of a procurement model that outperforms direct sales and also beats the world’s biggest systems integrators for enterprise customers.
Telarus’ Patrick Oborn
“That’s a lot of money for a lot of people out there,” Telarus chief product officer Patrick Oborn told Channel Futures. “We would prefer to pull that money away from Accenture and Deloitte and those folks, and put it in the hands of people that work with the big TSBs and work in this industry.”
But will this partner model achieve this vision, and what will victory require?
Jim Glackin, Nitel‘s executive vice president of channel sales, echoed a comment that leaders of some of the larger agencies have been saying: Partners need to position themselves as strategic business advisers.
Even though agents are adopting more advanced technologies, Glackin said many of them focus too much on transactional, product-based selling. And that’s also the case with traditional VARs, he said.
“How do you help the partners to go into their meetings thinking more broadly and not narrowly focused on selling UCaaS or circuits?” Glackin said.
Years ago, Glackin (who at the time worked for a large carrier) met with the CIO of a major retailer. A partner of his had already established a strong relationship with the CEO, and that had resulted in a $400,000 MPLS contract. But the CIO didn’t seem to feel the same way, Glackin said. They had been scheduled for an hourlong meeting, but when Glackin arrived, he learned it was now a 20-minute meeting. Network simply wasn’t important to them.
The disinterest from the CIO seemed to envelop the room in the opening minutes of the meeting. It was at that point Glackin, who owned some of the retailer’s consumer products, started asking about …
… the company’s technology initiatives. The CIO outlined a list of exciting digital products their company wanted to build and emphasized how much their employer was relying on technology.
It was at that point when Glackin asked who was handling the company’s traditional technology workload amidst all of its digital initiatives. At that point, Glackin said something clicked, and the CIO asked if Glackin’s carrier could take care of desktop management. That $400,000 turned into millions.
Glackin said the conversation wouldn’t have gone in a positive if he didn’t possess a substantial amount of knowledge about the customer. Partners, he said, will need to immerse themselves more closely in the verticals they serve.
“If we want to take it to the next level as a channel, and we want to truly start to change our value in the eyes of the customer, we’ve got to focus on business outcomes rather than products,” he said.
While the traditional broker model undoubtedly helped save customers’ time and money, Oborn said customers ultimately won’t view partners as strategic advisers if all they do is procure.
“We’re getting away from infrastructure and pricing and getting into the nuts and bolts of how companies operate and how they interact with their customers, and how they can take those interactions and turn them into strategic advantages to take market share away,” Oborn said.
Other partners, like Advantage Communications Group, have branded themselves as MSPs. The New York-based company still brings home the bacon through commissions, but it has set up a suite of predominantly free managed services that create sticky customers. President and CEO David Gardner said his team knew they needed to expand beyond the traditional agent model.
Advantage’s David Gardner
“Frankly, it’s a decision time,” Gardner told Channel Futures. “You either have to invest and have the willingness to push forward into the new world, or it’s time to close shop and and exit the business.”
Hickenlooper said five years ago he wrote down a list of goals. One included either selling Sumo or making it so that the firm could operate without him. On that day five years ago, Hickenlooper began assigning his accounts to other people and ceased running point on deals. And his sales team was up for the task. Hickenlooper said he felt comfortable talking to potential investors as a result of his employees’ self-sufficiency.
After engaging with multiple suitors, he eventually settled on a deal. On one hand, it allowed him to roll equity. But he also valued the business acumen of the investor as important to Sumo’s long-term success. Sumo Communications had performed very well, leading categories like colocation, cybersecurity and contact center for Telarus partners. But Hickenlooper said he still couldn’t answer the scale question.
“I know how to sell and manage a customer base,” he said. “It doesn’t bother me to admit that I don’t know how to scale.”
These conversations about adopting consulting and managed services often ignore the plight of …
… the smaller agencies, which simply lack the resources to make such pivots. For example, Helm Partners is big enough to launch its own contact center consulting practice, and Bluewave is building life cycle management services with institutional capital.
But now the TSDs say they can help the smaller partners bridge that gap.
“The brochure back in the day was, ‘Pay me commissions. Give me good pass-through. Give me access to providers that I don’t produce enough volume to work with directly,'” Oborn said. “Nowadays, it’s really helping people take a two, three, four-man shop and making them appear as if they’re a 40-man shop to the end user, just because of their depth and breadth of knowledge, because of the tools they bring to the table and everything else.”
These distributors are locked in a battle to deliver the best pre-sales and post-sales tools. Avant has hailed the combination of PlanetOne’s Sentient back office and life-cycle platform with the Pathfinder sales tool. Telarus recently unveiled a technology assessment suite executives say will save time on sourcing and position the partner as a consultant.
The channel has watched the number of national TSDs dwindle to a handful in 2022. Intelisys, Telarus, Avant, TBI, Sandler Partners, Jenne and AppSmart appear to be the largest players. However, most sources tell Channel Futures four or five national TSDs will remain standing.
AT&T’s Chris Jones
And while many members of the subagent community say consolidation takes away choice, the vendor community seems decidedly more open to it.
Chris Jones, who leads the AT&T Alliance Channel and ACC Business programs, said consolidation will force distributors to bring more value to agents. He compared the pre-consolidation world to riding a bull.
“When a rodeo rider rides a bull, you’re holding on for seven seconds, and you go where the bull goes. You’re not trying to control the bull; you’re just trying to stay on top of the bull,” Jones told Channel Futures. “The partner had a customer, and the distributor and the supplier were trying to win that customer.”
But in the future, Jones said, suppliers and distributors will bring more leads and opportunities to the partners.
“Rather than trying to hold on to the bull for seven seconds, we’re going to have an opportunity to help influence where the bull is going,” he said.
Selling Sumo Communications took Hickenlooper out of his day-to-day role. He provided some strategic advising, but otherwise, he took the opportunity to recharge and enjoy retirement. That routine last an entire year before he “couldn’t stand it” anymore.
Ultimately, Hickenlooper said he couldn’t ignore the urge to return to the channel. For now, he is interim CEO for Sumo. However, he’s searching for his replacement.
“I’m not the CEO that is going to reinvent my agent business that I ran for 20 years. That’s going to be somebody else,” he said.
But Hickenlooper wants to be part of that journey, in whatever role that happens to be and whatever the next evolution of his company looks like.
“The landscape is changing and we can all just stay the same, or figure out which bus we want to get on and go change the world together,” Hickenlooper said.
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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