Becoming an Enabler

More and more agents are becoming enablers. No, not the kind Dr. Phil would be interested in yelling at. Rather, they are enabling customers to buy, use and upgrade the telephony services they are hocking by offering them the option to lease the equipment needed to make that purchase.

Many customers do not have the capital lying around to buy the equipment necessary to operate the types of communications platforms they crave. Whether they are a startup, a small shop, a company thats migrating to IP, or a company that simply doesnt want to keep using obsolete equipment which means, essentially, that its passed the ripe old age of two the desire for purchasing or upgrading telephony services is readily present, but the money to purchase the equipment to make that happen might not be. Coming to the rescue are carriers and service providers that have the financial wherewithal to provide discounts, payment plans and leasing options to enable customers to purchase or upgrade their communications platforms and of course, at the same time, this creates another revenue stream for the provider and its indirect channel partners.

For example, BandTel LLC, a SIP trunking service provider, has been offering an equipment-for-services program informally for approximately two years. If a customer decides they want BandTel services, they typically will need to put a gateway in place to make that purchase possible; and if the customer is not in the position to cover that gateway expense outright in the beginning, BandTel can supply the gateway and factor the cost into the customers cost per minute for telephony services.

BandTels Chris Dunk

There are some folks out there that dont want to pay out of pocket for a $20,000 gateway for VoIP, explains BandTel CEO Chris Dunk, noting that financing that equipment helps to make the sale. He adds channel partners are using the cost comparison between buying equipment outright and spreading the funding out over a three-year period as a differentiator for BandTel services.

Dunk clarified that this should not really be deemed as a lease. The customer is going to have a multiyear agreement with us for a certain fee, so its not really a leasing option, he says. Then, it goes to who owns the box at the end of the day. Do we still own the box? Does the customer? If he fulfills his agreement, does he take possession of the box? Dunk explained that sometimes the customer doesnt ever want to own the box, but instead, it chooses to pay a flat premium on all minutes charges just to be able to use BandTels equipment. These terms are decided on a case-by-case basis.

Broadview Networks Inc., a facilities-based carrier, offers a managed services option as an alternative to purchasing most of its CPE, including the Cisco Systems Inc. managed WAN product, its hosted key system (Broadspeed OfficeSuite) and its hosted PBX. Customers who choose the managed option pay for equipment and services together over the term of the service agreement without having to lease any equipment. In addition, customers who choose the managed option get administrative capabilities that allow them to track system performance and make certain system changes without committing resources to acquire, maintain and monitor separate applications.

Broadview Networks offers products such as the Nortel BCM50 and the accompanying phones and services all on one bill.

Mitel provides innovative financing for its core communications products, including the Mitel 5000 series.

Regardless of the hardware type, the more products/services a customer obtains from Broadview, the greater the overall value we can offer them, says Terri Drexler, senior director of marketing for Broadview. In addition to cost-savings, value is derived from our longstanding expertise in hardware and the advanced technology we use to deliver, support and bill all services in a unified fashion.

Drexler says when you factor in the convenience of sourcing all services and hardware from a single provider, its easy to understand why both customers and channel partners gravitate toward this approach.

Broadview has made it pretty simple to sell the system and the service all in one package, while giving the customer all of the benefits you would get in buying the stuff separately, except were basically able to have one point of contact for everything for the client, says Feliks Kiliski, owner of New York-based master agency Glacier Communications Inc. Kiliski says the client loves that the outlay cost for equipment is pretty much nothing since its bundled with the phone service, and he reports he has had great success rates with the managed option. For any new client, any client looking to upgrade their phone system, any client looking to move into a new office or looking to purchase a phone system, this bundle is unbeatable, he says.

With its acquisition of Inter-Tel, equipment maker Mitel Networks Corp. now is offering Inter-Tels 12-year-old managed CPE-service bundle. It includes financing for its core communications equipment, such as the Mitel 3300, 5000 and 300 products, as well as voice and data telephony services (local, long-distance, T1s, etc.) and applications, such as enterprise messaging and Web-based collaboration tools.

The program also provides automatic software upgrades as new releases become available and at no additional cost. Updates are one of the key elements of the program. Mitel offers an obsolescence provision that protects customers from the rapid pace of change. We give our customers the ability under the managed services program to disengage from that existing contractual agreement and put the newest technology in place with absolutely no penalty. And thats something thats really unheard of in our industry, explains Rick Dell, president of U.S. sales at Mitel. Dell further explains that in an effort to provide its clients with a way to manage the cash associated with the procurement and the long-term ownership of a communications platform, Mitel also provides guaranteed fixed pricing for add-ons.

Mitel offers services directly and through approximately 800 resellers. However, partners wanting to offer the managed services program must be certified from both a financial and sales standpoint, and undergo rigorous Mitel sales training. We are very selective in the partners that are able to offer this service, Dell says. They have to be very financially stable because were underwriting that paper, which means weve got an embedded obligation. We also are committed to the fact that we have at least two channel partners in any given market territory that have been certified to be able to market a product under this provision.

Mitels Rick Dell

While the concept is not new, the equipment-for-services programs are likely to persist in the IP world where logic dictates the adoption of SIP trunking and is driving IP PBX sales and visa versa. More and more agents are going to look for opportunities and alternatives as more and more companies ask how theyre going to go IP, BandTels Dunk says.

Its true. The number of companies with this sort of offering is growing thanks to IP migration. California-based CLEC TelePacific Communications announced it will be partnering with equipment vendors to offer customers such a lease option some time in 2008. At TelePacific, its something weve looked at for years, and we view 2008 as a good time to bring that out into the marketplace to help support our vendors and ultimately, its an offering that just makes the decision process easier for customers, says Ken Bisnoff, TelePacifics senior vice president, strategic opportunities. Bisnoff feels now is the right time to package the equipment and services together to help customers migrate to an all-IP-based platform. He says that by consolidating these items on one bill, the customer can more easily see the return on investment and the added value they are getting to help them justify such dramatic changes to their existing hardware environment.

Mitels managed services take rate also evidences a growing trend. As technology has changed, as weve moved into that IP arena, the current success rate on managed services is running at about 74.8 percent, says Mitels Dell. This rate is up from about only 45 percent to 48 percent of customers buying under the managed services program five years ago.

However, Dell says that while the concept makes sense, there will be holdouts on the supply side. I think the industry will buck this trend as long as they possibly can, says Mitels Dell. One reason for this, he says, is that a majority of manufacturers do not carry their own lease paper. Another is that the customer commitment is drastically increased; its no longer an equipment sale, but a service offering. When a customer procures equipment through Mitel, they are writing a check for their equipment and services every 30 days as opposed to one outright, upfront purchase. We have to earn that customers business every thirty days, says Dell.