VoIP, Solution Providers and the Future of Telecom
TAG tracked down Craig Schlagbaum, the new channel head at Level 3 Communications Inc. This industry veteran has put in time at Qwest Communications International Inc. and NTT/Verio Inc., and offers insight to how the channel business is evolving in the age of convergence.
TAG: What’s new with Level 3’s VARs now that you’ve joined their channel management?
Craig Schlagbaum: We have had some informal indirect channel program elements in the past that were oriented around telecommunications agent partners, but we have revamped our overall program and enhanced our focused in channels. Our new program was launched at the Channel Partners Conference on March 22, and we named it the Level(3)Enabled partner program. The focus is on partners who resell and rebill, and can provide Tier 1 support to their customers — as well as provide CPE as needed, such as edge devices and IP phones. In this model, our partners own their customers and bill them and assume their credit risk as well. This is more like the high-technology channels in the market such as Cisco’s, where the model is very much the same — except ours is based on recurring services revenue. It’s really a solution provider partner model.
While we are going to offer our traditional services, such as IP, data (ATM, frame), private line and colocation, as well as voice origination/termination, the initial focus of the program is to find partners who want to sell our latest VoIP offering, [which] we call (3)Tone Business. It is a tremendous time to do business with Level 3 as a partner and we are excited about what the channel can do to help us mutually drive sales.
TAG: With VoIP taking the industry by storm, where do you see the most opportunity — residential or business?
CS: There is an opportunity for both, but in the channel, the larger focus will be on the business side. Initially our focus will be on [small and medium enterprise] customers, where the seats are less than 400 total. But later in Q3 we will be focusing additionally on enterprise customers in the Fortune 1,000 space as well.
TAG: Are convergence applications the end game for telecom?
CS: As traditional services become more commoditized, the future for the channel and telecom alike is to add more value to our end-user customers. As partners mature more in their ability to provide complete solutions with hardware (CPE), software, carrier services and their own professional services, we will be able to do more and more to support our customers. I think the age of data and voice convergence is now starting to rapidly accelerate, and this will provide a huge opportunity for partners and Level 3.
TAG: How does the Age of Convergence affect how a channel partner should sell?
Partners need to continue to enhance their skills to provide complete solutions to their customers that go beyond selling a carrier’s services as an agent or a reseller. The high-technology channel that has sold hardware and software for years had to make this transition long ago in the early 90s, when those hardware and software products in and of themselves became commoditized. The partner’s only future to secure acceptable margins from their customers was to start selling their own professional services. And Cisco, as an example, built an outstanding channel in this regard. I think the end game for the telecommunications partner channel will be the same, and we will need to help our channels of distribution, much like Cisco did by giving them the training and certifications they need to pivot their business models to a whole new level. And this is what the Level(3)Enabled partner program is all about. This is where partners can build margin-rich solutions using our core service offerings. We really are going to be all about building an extended sales force to our direct sales force through the channel.
TAG: Hosted vs. premise-based IP voice: Which has the better value proposition?
CS: Clearly we believe from a TCO [total cost of ownership] perspective that the hosted model has a much higher return. Given the large up-front costs to handle premise-based solutions, it only makes sense for companies to evaluate what hosted offerings can provide. When our partners and customers use our TCO tools and examine this, and they are not looking for the entire up-front capital costs to support, we believe their conclusion will be to support the hosted model.
TAG: What do you believe will be the trends for 2004 in channel sales?
CS: I think we will continue to see a huge focus on VoIP solutions, as well as IP VPNs and wireless WAN services as well. These are all areas where the channel can provide enormous value, and service providers such as Level 3 will need the channel to ensure our mutual success in the space. I also believe that more and more partners are going to increase their own services and skills capabilities to be successful and help ensure their spots in the value chain.
TAG: Where will telecom be standing at the end of 2004?
CS: We’ve had a rough three to four years to be sure, and I think now that we have stabilized in ’03 we will all look to be driving up sales in 2004. There will certainly be more consolidation in the industry as we are witnessing, but I think we are at an excellent point in our evolution now to mature and grow our offerings, services and channels. The focus with telecom providers relying on indirect channels will be one of the largest growth trends now and in the future.
