VARs Cluing Into Cloud, But Cautious of Carrier Competition, Panel Says

By Khali Henderson

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While VARs may be slow to “get” cloud, carriers may be slow to “get” VARs, according to solutions providers that spoke during a panel discussion Thursday at Channel Connect 2012, master agency Intelisys‘  partner meeting in San Francisco this week.

“We have been very resistant to cloud because we see it threatening our revenue stream with respect to margins we are making, especially on computer/IT side of the house,” said Greg Persky, a communications practice solutions consultant for inhouseIT, an IT managed services provider that also sells cloud and carrier services. “We also were protecting our base of ShoreTel until the end of last year [when we] realized we lost a good chunk of clients because we didn’t offer a cloud solution.”

Having long-held customers “leaving in the night” caught the attention of inhouseIT’s CEO, who determined the company needed to change its stance on cloud. “The bottom line is if you don’t adapt, you won’t be in business in five years,” Persky said.

Persky was joined in the  panel discussion by two other VARs — Jessica Mayo-Pike, business development leader for IPLogic, and Jason Kraft, telecom sales team leader for FusionStorm — and telecom agent Patrick Wefers, president of Infinium Communications. The conversation was moderated by CRN Editor-at-Large Chad Berndtson.

FusionStorm’s Kraft commiserated with Persky on the loss of customers to competitors offering cloud. “It’s happened to all of us,” he said. “We start missing stuff and we try to find out why.”

The “why” is that customers increasingly are demanding more flexible solutions. “The customers are forcing some of the traditional VARs to have more cloud options,” Kraft said.

But that’s easier said than done.

“One of the biggest challenges that we have in the VAR space is that we have a sales force accustomed to selling boxes, switches and routers,” said Mayo-Pike. “How do we change that sales methodology to selling services, which is so significantly different than the hardware sale. It’s a different conversation.”

A twin challenge is incenting the sales force, she noted. “They don’t feel the comp is good enough for the risk. How do we change that mentality?,” Mayo-Pike said, adding that if sales reps are not willing to shift, is a new sales force needed to bring the business into a service-based future.

Wefers, whose agency supports VARs selling carrier and cloud services, said some of his VARs are beginning to get cloud and recommending it in situations where there traditional solution is not a great fit. For example, a PBX customer with a small contact center (e.g. 15 seats) can benefit from hosted contact center while unable to afford an on-premises solution.  At the same time, the VAR still earn commissions and professional services and managed services revenue around network readiness, moves/adds/changes, etc.

As suppliers of cloud services to VARs, carriers may have their work cut out since their track record with VARs selling their core carrier services is mixed.

Panelists agreed VARs’ No. 1 complaint about working with carriers is channel conflict. “The biggest challenge in the VAR community is the direct sales force and indirect sales force competition,” said Mayo-Pike, explaining that VARs are used to manufacturers that sell exclusively through the channel and devote resources to help them close business, not compete head to head for customer accounts. “At the end of the day, the customer suffers, the direct sales force suffers and we, as agents, suffer.”

Similarly, FusionStorm’s Kraft said allowing a carrier into a large account only to have them assign it as a house account two years later because it’s a high-revenue customer is another fear. “That’s what everyone is afraid of  [the carrier] is now telling you you can’t sell to a client you brought to them. That is a model that will never work,” he said.

Telecom agent Wefers is not surprised by these concerns; he has built his business in part on protecting account ownership for VARs from carrier direct sales efforts. “My [VAR] partners are tired of quoting a Cisco System and then bringing in a carrier that offers ShoreTel,” he said. “That is one of the major reasons that they bring me in, to protect them from competition on their deals. It’s worked out really well.”

That said, all the VARs on the panel said that there are carriers that will engage in collaborative relationships with VARs with expectations that VARs maintain control of the customer relationships. “We have been able to find people that understood our business, understood what we need from a trust perspective  account ownership etc.,” Kraft said.