September 16, 2019
By Allison Francis
Seven years ago, ARG saw the writing on the wall for unified communications as a service as a major disrupter to its business. Mike Shonholz, ARG’s (No. 82 on the 2019 MSP 501) chief revenue officer, saw numbers start to swing cloud-ward, and decided to act.
The company went through a significant shift, during which many technological or operational developments occurred to support this evolved business model.
ARG’s Mike Shonholz
Here, Shonholz talks about those shifts, and the growth in UCaaS and CCaaS.
Channel Futures: Please describe your business model prior to six years ago when you were a pure-play telco agency. Why did that model work then? What were the industry dynamics, customer needs, emerging tech trends and so on?
Mike Shonholz: Growing is easy when you consistently deliver value to clients. ARG started out in the D.C. metro market. The business environment in the Washington metro area is heavily shaped by the government, so D.C. is a three-quote town. As a founding member of the Agent Alliance, ARG could easily facilitate those three quotes with a quick call to a single number. We leveraged our buying power to get “best and final” off the bat and save our customers from extraneous fees and charges through the best contracts in the industry. Couple the ease of a one-stop shop with our engineering, onsite installation support and [around the clock] onshore customer service and we were a no-brainer for companies.
Since most businesses don’t change providers often, we were typically finding 30% savings for clients when they moved to procuring services through ARG — this ability to find savings helped us stay recession proof as we helped businesses weather financial booms and busts. Our clients could count on us to bring renewal options along with new technology options and they appreciated a proactive approach with options served up. With the trifecta of service, savings and ease of doing business, we grew steadily through customer and vendor referrals.
CF: When did you begin seeing a need to evolve your business model? What trends prompted and supported this decision?
MS: Seven years ago, we saw the writing on the wall for UCaaS as a major disrupter to our business. We were promoting SIP and PRI-supported systems and regularly running ROI analyses for clients comparing premises-based systems to cloud communications and saw the numbers start to point to the cloud. In addition to the emerging cost benefit, the maturing UCaaS players offered protection from obsolescence with evolving product offerings.
We also saw Cisco building cloud-based services such as HCS. We saw that Microsoft was moving strongly to the cloud, and AWS was gaining traction — and the proliferation of data centers gave a strong indication where the market was headed. We did not see the similar investments being made in equipment. Any equipment announcements were clearly aimed at the carrier-class — or more specifically, cloud provider marketplace.
CF: What were your first steps (for example: customer discovery, financial analysis, competitive analysis and so on)? What were you surprised to learn during this stage?
MS: Our first step was a deep technical dive on all things UCaaS, creating a 145 questionnaire that addressed the major areas of the technology. We took the top providers we saw in the market through a thorough vetting process to ensure that we knew the benefits and limitations of each providers product.
We began with the assumption that …
… not every provider was created equal. We needed to identify the strengths, weaknesses and key features of each provider so that we could best consult with our clients. We needed to understand the gaps in service delivery so that we knew where we could make a difference.
CF: Once you decided on a course of action and started down the CSP road, what mistakes did you make in the course of this pivot?
MS: Probably our biggest mistake was thinking that our past experience in the telco space was sufficient to provide the level of value we wanted to deliver to our clients. It quickly became apparent that the cloud-based services were being brought to market with only a minimum quality assurance. This resulted in unanticipated conflicts and interoperability issues. We quickly learned that we needed to add another level of experience to our team to effectively manage those gaps.
Another mistake we made was that after our deep evaluations, the cost/benefit was more obvious to us than it was to our clients. We needed to patiently educate and walk a client through the entire evaluation process before they were able to decide and commit to new technology.
We also underestimated the level of concern around change management. IT teams that have implemented solutions that impact all users in a company have been beaten down over the years. It never goes as smoothly as promised. Eventually, we had to build out a new team that would work alongside the client and the provider to reassure our clients that it was OK to make the move into cloud services.
CF: Did this pivot cost you customers? If so, why?
MS: We did not lose customers, but we did lose referral partners who felt we were encroaching into their areas of business. In the past, these partners relied on us to provide connectivity and cost savings to complement their equipment sales. We respected the referral agreement and did not pitch cloud solutions to clients referred by these partners.
However, we had become a competitor, so these partners didn’t feel comfortable continuing to refer business to us. Overall, if we had not made the change, we would have only a fraction of the business we have today. The past seven years have successively been our largest sales years ever — by a considerable amount.
CF: What operational shifts were you required to make in order to support this evolved business model?
MS: We’ve learned that for our consultants to be effective and maintain the pace our business requires, they can’t get caught up with all the technologies and provider details. So we made a significant investment in a robust product specialty team, now 14 strong, who focus within specific solution categories. As previously mentioned, we’ve also added a “value realization” team to confirm the business value objectives and assist with change management. Across the whole company, from marketing to consulting to analysts to product to project management to client experience, we’ve elevated our skill/experience level to match the new technology demands.
CF: What technological or operational developments occurred during this transformation that required you to be agile and able to pivot?
MS: On the compute side, we’ve moved along with the market from a focus on …
… data center and colocation to clouded infrastructure, desktop as a service, and public cloud. We see the shift in our client base now to requirements for high-end compliance and identity management.
On the telco side, we’ve moved from hosted voice for phone replacement to business enablement through UCaaS and CCaaS with omnichannel to API integrations to business intelligence to AI.
The pace of change has increased, and we fully expect it to go even faster. Throughout this change we’ve developed processes to evaluate new technologies and scalable systems to support our growing team.
CF: This first started six years ago. Where are you now?
MS: We intentionally began transforming our business in May 2013 (began planning six months prior). We believe we’re ahead of the market and are able to be a relevant trusted adviser for today’s businesses.
CF: Where and how will you evolve in the next two to three years? What opportunities exist in the market now you need to already be preparing for?
MS: We’ll evolve wherever the market needs to go. The pace of change and choices in the market are unrelenting. Right now, cloud and unified communications adoption is at an all-time high in our client base. IT is aligning more closely than ever with the C-suite and we’ve seen a lot of growth this year in the UCaaS/CCaaS space with BI and AI — specifically in using the technology to drive revenue and client experience.
For almost all of our clients, compliance requirements are expanding, and as organizations struggle to achieve and maintain compliance, this is a growing area for our business. As more and more applications move to the cloud, the need for robust identity management is increasing and we believe that in order to stay ahead of the threat environment, clients need to look at adaptive security measures beyond two factor authentication. Network and technology advances in cellular are also poised to have a major impact on business. Integrating 5G into a business’ connectivity strategy will become commonplace over the next two years. And, IoT will have application across a broader spectrum of businesses.
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