“Security, cloud and contact center are on fire,” says Amy Bailey, VP of marketing for Telarus. “Our numbers have exploded as partners are selling more services into their current customers. SD-WAN has gone from something people were just starting to discover 18 months ago to a conversation in every sales meeting.”

As marketing lead for master agent Telarus and a member of the Channel Partners & Channel Futures advisory board, Bailey has a bird’s-eye view into how agents are stretching their wings well past traditional telecom and positioning themselves as full digital services providers. Most have no choice — sales of circuits and other telecom products that once yielded big residuals have flattened or are in decline. PwC says that over-the-top (OTT) players have increased their dominance in core communication services such as messaging and voice. WhatsApp, Viber and Apple iMessage represent more than 80 percent of all messaging traffic, and Microsoft Skype accounts for more than one-third of international voice-traffic minutes, the consultancy reports. ARPU for North American telecom providers dropped from about $41 in 2006 to $36 in 2016. That translates into less revenue for agents.

To compensate, agents are acting as digital-service aggregators, sourcing what customers need, in a pay-as-you-go subscription model, from suppliers you might not expect. It’s the ultimate way to “land and expand”  — leveraging an anchor application like UCaaS and expanding the relationship with the customer.

For example, Cylance VP of worldwide channels and alliances Didi Dayton says the company has a dedicated cloud partner program, where digital or connected-services providers can deliver the company’s next-gen endpoint security offering to customers on a subscription basis.

“We designed some things that would be easy for partners to offer as a services solution,” Dayton told Channel Partners. Cylance offers deal registration, sales incentives and spiffs, proposal-based MDFs to enable demand and lead generation, and volume incentives and eligibility for rebate plans. Sound familiar?

Or consider Nutanix. The company’s hyperconverged infrastructure systems are more and more being sold as software under the Nutanix Enterprise Cloud model.

“As we transform to a software company and look to broaden our customer base, the channel becomes even more critical to establish new connections for us,” Rodney Foreman, the company’s newly appointed VP of global channel sales, tells Channel Partners. “I will lead Nutanix’s channel organization to have an advantage when working with resellers, system integrators and service providers.”

Scott Mohr, director for data center and cloud with Cisco’s global partner organization, says there’s an increased focus on “land and expand.“

“All of the various pieces build on top of one another for a cloud-like infrastructure that continues to lead to another service,” said Mohr, adding that recurring revenue streams, new consumption models, multicloud cross selling, and containerized programmability add up to even more partner opportunities.

In fact, technology solutions provider Carrier Access recently added the full suite of Cisco products. Shane Stark, director of operations, says the Cisco practice will give Carrier Access entrée to larger clients. But it’s not stopping there.

“We’re working to add more security services,” says Stark. “It’s the hot topic right now, and the time is right.”

The list of suppliers courting digital services providers goes on: Liquidware wants agents out there selling desktops as a service, while Effortless Office has been on a growth path with its melded virtual desktop and security bundles. Talkdesk delivers advanced cloud-based, contact-center-as-a-service technology and has raised $25 million in funding from Salesforce Ventures. Through its AppConnect contact center app store, partners can offer one-click installations, 30-day free trials and pay-as-you-go on a variety of business applications. Customers need disaster recovery? Carbonite, Datto, Veeam, Zerto and others provide as-a-service options with fulfillment by the supplier.

IoT bundles from AT&T, CenturyLink, Verizon and other familiar providers let digital services providers sell what WTG CEO Vince Bradley calls “probably the most important initiative for our industry today.” SD-WAN has exploded, with cloud-first and channel-focused providers like Bigleaf Networks working closely with partners to facilitate the “X-as-a-service” trend.

“It’s not SD-WAN to replace or augment MPLS networks,” says Bigleaf co-founder Jeff Burchett. “Rather, it’s SD-WAN specifically purpose-built for connectivity to public-facing cloud and SaaS applications. It’s less about building a more resilient hub-and-spoke private WAN. It’s more about ensuring that the voice in your UCaaS service is crystal clear and your desktop-as-a-service application and all your SaaS applications are available and performing the way you want.”

In other words, DSPs sell business outcomes leading to digital transformation, not just speeds and feeds. Distributor Tech Data even offers “Tech as a Service,” allowing partners to bundle endpoint hardware, software and services into a single monthly subscription. Everything from raw CPU cycles to wireless LANs, security, business continuity, storage, desktops and enterprise mobility management can be delivered in a subscription model — which is exactly how customer CFOs want to pay for IT.

IDC expects spending on public-cloud services and infrastructure to grow 23 percent this year, to $160 billion, on the way to $266 billion in 2021, reflecting the ongoing shift from capex to opex among enterprises. The analyst firm also says that by mid-2020, SD-WAN will be a mainstream technology — one that represents more than $6 billion in spending.

“Midmarket and enterprise customers are now running to the cloud at an accelerated rate; the question is, are they running to it with you or away from you?” says Patrick Sheehan, director of channel development at 8×8. “Partners that embrace this shift and proactively lead their customers to it are the ones that are retaining and growing their customer base while increasing revenues.”

Battle of the Business Mods

Conventional wisdom is that the VAR financial model, built around selling premises-based solutions in a capex model where revenue is received and commissions to reps are paid upfront when the job is complete, isn’t sustainable. Larger VARs also draw significant revenue from selling maintenance contracts for those premises-based systems, and as customers move rapidly to the cloud for a variety of IT needs, this cash stream is also declining. It’s a perfect storm.

“The shift to selling cloud services, thus moving to annuity model, is a challenge for these VARs,” says 8×8’s Sheehan.

But which way should they go? Some are pursuing an MSP model predicated on remotely managing a full slate of customer IT assets from a limited number of vendor partners. MSPs face headwinds around the cost of hiring talent to manage customers’ complex on-premises and hybrid systems, maintaining mandated certifications for multiple vendors, and the tendency to sell on price, not value. For small MSPs, a successful ransomware attack can put a major dent in razor-thin margins. Despite a number of DRaaS offerings that promise easy recovery, in our recent Business Continuity & Disaster Recovery Survey, most channel-pro respondents say fewer than half of their customers have effective BC/DR plans.

For other VARs, the DSP model of being essentially a cloud broker, assembling and selling bundles of services that vendors or a specialized partner then fulfill, is more attractive. However, that shift comes with a formidable problem: bridging a move from big-bang sales to an annuity and MRR (monthly recurring revenue) payment scheme. 8×8 is one provider building programs and adding expertise to help its VAR partners through this transition, says Sheehan. It also has an enablement program specifically for agents, including digital marketing for lead gen and sales and sales engineering resources.

Partners are also worried about losing control of the customer relationship. While DSPs may sell on their own paper, they don’t fulfill IT needs day-to-day.

“VARs and MSPs have traditionally invested in technical certifications that have afforded them complete control, and associated revenues, of end-customer solution design, deployment and support,” says Sheehan. “They’ve built a business and reputation leveraging this expertise to ensure customer satisfaction and differentiate in the market. 8×8 gets it, and [that’s] why we’ve invested in a new enablement program that allows partners to continue to be the trusted adviser and provide white-glove support that increases customer stickiness.”

He sees traditional agents adding new resources, like pre-sales engineers and project managers, that enable them to differentiate and add value.

“I call them ‘hybrid agents’ that are starting to morph into something closer to a VAR/MSP,” he says.

An Agent by Any Other Name

Why not just jump directly to a DSP model? In part, it’s the prevailing wisdom that partners who don’t offer their own home-grown services will lack “stickiness.” But the digital-service providers we spoke with for this story say their consultative expertise is every bit as sticky-making as racking and stacking servers, provisioning desktops or anything else a VAR or MSP offers. Pulling the right cloud offerings into a comprehensive, tailored solutions bundle demands a full discovery-and-needs analysis at the customer site, a deep bench of suppliers and the confidence to reach out to other partners for services like Microsoft 365 migrations. From discovery to RFP, that needs analysis process can take months; some DSPs charge for it, some don’t.

“We’re laser-focused on the process with our customers,” says Michael Bremmer, CEO at technology consultant TelecomQuotes.com. “I’m asking more questions about how they use technology and, for key customers, spending ‘a day in the life’ working in their businesses to better understand how to increase productivity. We’re also asking questions like, ‘Want to see the new stuff?’ I’m purchasing IoT gear to use in my home and business to understand how it’s going to be a game changer for my customers.”

While traditional telecom and UC excel as the “landing” part of “land and expand,” Jennifer Gallego, EVP, channel sales at Avant, and a Channel Partners editorial adviser, says the the biggest roadblock for partners looking to offer customers a broad and comprehensive slate of cloud solutions is the accelerating pace of the technology revolution. One consultant we spoke with has 170 suppliers in his portfolio and does business with 20 percent of them regularly.

“It seems like a wave of new service providers are hitting the market every day,” says Gallego. “Agents and VARs can’t do it alone. They need to be committed to rigorous education on the trends that are shaping technology. They need to trust someone that can find the needle in the technology haystack.”

Avant’s position is that partners should not limit supplier choice, arguing that this is where master agents that invest the time to be upstream experts come in.

Bailey also cites the challenge of becoming familiar with new techs and says Telarus is constantly signing on new provider partners.

“We think having specialists that partners can access for complex deals will set them apart from direct reps as well as their competition,” says Bailey. “For partners, becoming an ‘expert generalist’ is key. This takes time. But knowing what questions to ask in a sales meeting can be the difference between a single-solution salesperson and a technology consultant. Our challenge is synthesizing the wealth of information for our partners into digestible chunks.”

Another challenge is staffing up.

“What’s our biggest business challenge?” said Stark. “Hiring talent. Actually, finding it is the hard part.” And, sales people sell what they are comfortable with — and make money at. Slinging circuits is lucrative, and there are only so many hours in a day. Channel leaders need to properly train and incentivize their sales teams.

Bremmer says to avoid getting distracted by all the shiny tech. “Focus on actual business problems,” he says. “Nobody cares how Alexa works. They care what it does to make their lives easier and help them sell.”

On the plus side, agents tend to be naturals at sales and building and nurturing relationships.

“People sell to people,” says one consultant. “If you do a good job, when that person moves to a new company, they take your business card with them. Customers rarely have just one MSP or VAR, so digital service providers have landing space.”

People skills matter. A recent survey by InsightSquared (above right) shows that 62 percent of respondents spend more after they have a positive customer experience. Solve a problem and they’ll keep coming back. But be careful about which providers you work with for post-sale fulfillment, because 64 percent of B2B customers will drop a vendor after bad service, says the consultancy, and half of them will avoid that business for two or more years.

And finally, think about how you position your channel firm. Branding is critical.

“There’s plenty of work to go around,” said one partner. “Don’t paint yourself into a corner by calling yourself ‘the circuit person.'”