Channels On a Collision Course

By Craig Schlagbaum, Level 3 Communications Inc., Vice President of Indirect Channels

In July, I attended the 2007 Microsoft Annual Partner Conference. The conference brings together, in one venue, nearly 7,300 Microsoft channel partners from around the country, making it one of the largest indirect channel programs in the world.

Microsofts unified communication strategy is set to begin this fall with the launch of Office Communication Server 2007, weaving together e-mail, instant messaging, mobile and VoIP telephony, and video conferencing. The correlation to the telecom industry is obvious; services all hinge on IP communications technology. This convergence of solutions sets the stage for a collision between telecommunications agents and high-technology VArs.

There was a time in the 90s when VAr partners sold high volumes of PCs or boxes at low prices, but those days are long gone. Today, the key focus of Microsoft VAr partners, and high-tech channels in general, is to add value beyond selling on low price. VArs provide total solutions to technology problems.

However, many of these same companies traditionally have not sold telecom services. rather, they have left telecom purchases to their customers discretion, choosing to focus instead on the sale of software, hardware and professional services that are required for service implementation, but not the network those services ride. This historical gap validates my belief that there is an enormous opportunity for telecommunications services growth in the high-technology partner channel. Customers will demand total solutions, and because customers already depend on VArs, I believe that the VArs, more often than not, likely will control technology decisions ranging from SMB to larger enterprise customer segments.

On the flip side, I also believe there is an outstanding opportunity for telecom indirect channel partners (so called classic agents) to move further upstream and sell high-technology elements like software and equipment with their solution packages. This already is happening today.

Todays technology solutions are supporting applications that require the use of larger broadband networks and services. End customers needs span both telecom and high-technology service portfolios. This demand comes at a time when VArs also need and want to incorporate recurring revenue into their software and professional service sales. By adding telecommunications services to their solution sales, VArs can provide more comprehensive and more valuable solutions while also benefiting from the recurring telecom revenue stream. Similarly, telecommunications partners (agents) increasingly encounter customers with IT problems, looking for total solutions rather than solely a telecom circuit. Traditional agent partners are becoming more consultative in their approach to maintain their value in the supply chain. If both the high-tech and telecom channels embrace the opportunity at hand, over time, the two once very separate channels certainly will collide.

The telecom industry needs to recognize the convergence of high-tech and telecom channels for delivery of software as a service (SaaS) and managed services that are sold on a per-user, per-month basis. The direct sales forces will not be scalable enough to tap into this market alone.

As a result, I believe that the indirect channel must be embraced more by telecom providers and incorporated as a primary route to market, not a secondary consideration. The fact that Steve Ballmer personally spoke at the Microsoft Partner Event or that Cisco Chairman and CEO John Chambers is regularly the keynote speaker at the Cisco Partner Summit illustrates their respective commitments to their partners and their partners importance to their overall market strategies. The telecom industry should take a cue from the high-tech companies commitments to the indirect channel and follow their lead.

For example, carriers should train their indirect partners to build solutions for end users like they prepare their own direct sales forces. Like IT vendors, carriers could create certification for indirect partners to sell their services. In the IT world, such certifications are recognized and valued by end users as credentials supported by skilled sales engineers and sales representatives with advanced technical knowledge. To encourage participation and completion of certification programs, IT vendors provide rewards to partners.

Telecom companies could emulate this proven model by providing partners the motivation to participate in training or certification programs. These could include higher commission rates, marketing funds, participation in carrierled demand-generation activities or even higher priority positions in partner locater tools used to provide end-user referrals to indirect partners.

The collision course between IT and telecom channels is happening today, and I expect it will continue to accelerate in the years to come. This is a great development for the future of telecom indirect channel organizations and the channels increasing value as an avenue to increase sales for the telecommunications industry.