November 8, 2010
By Khali Henderson
The job description for master agents has evolved over the past decade. In their essential forms, they are aggregators of supply for their subagents and of distribution for their carriers. They have invested in human and IT resources and processes to facilitate, simplify and remove risk from the transactions between service provider and indirect sales partners. Theirs is a specialized function that has been perfected by practice over many years in the sales and delivery of telecommunications services. Why then would they want to muck up the works by selling hardware?
This is a good question and one that now can be answered by an increasing number of master agencies that have for all intents and purposes become VARs selling IP PBX solutions.
One of these is PlanetOne Communications Inc., Scottsdale, Ariz., an 18-year-old master agency that began selling IP PBXs from ShoreTel Inc. in January 2010. Its CEO Ted Schuman admits to a recent conversion. I initially stayed away from hardware. I did not want to be a VAR, and I had no desire to have a fleet of vans with PlanetOne logos,” he said. I never felt that hardware and network services had a hand-in-glove fit. Clearly, I feel differently now.”
What changed? Schuman points to a couple of things. One of these is the small matter of the recession, which has put purveyors of network services, such as agents, in a unique position to offer customers savings that can justify or subsidize the cost of new gear. The proliferation of SIP trunking also makes this case especially easy and compelling.
Another driver, Schuman said, is that manufacturers like ShoreTel are taking on more of the heavy lifting to enable master agencies to become VARs without the legions of technicians and truck rolls. In PlanetOnes case ShoreTel handles the installations except for in the master agencys hometown of Phoenix where a PlanetOne partner, Sonoran Integration, takes on the implementations.
This was among the reasons that master agency Telecom Brokerage Inc. (TBI) also decided to move to the dark side and start selling gear. We were very wary to inventory, and install on a national level,” said Ken Mercer, senior vice president for TBI. The first question from our agents was who will install it; the second was who will support it.”
TBIs vendor, ADTRAN Inc., has a special program called ACES (Advanced Communication Extended Services) that put Mercers concerns to rest. With ACES, ADTRAN installs; handles moves, adds and changes; and does the replacement through maintenance contracts,” he said. It was the only manufacturer of its size that offered this to us.”
In fall 2009 TBI became the first master agency to sign a channel marketing partnership with ADTRAN to promote its multicarrier portfolio of connectivity solutions to the gearmakers 2,000-plus VARs and ADTRANs gear to TBIs more than 1,000 subagents. Formal marketing activities began in January 2010.
Thats not to say that the master agencies are sitting around eating bonbons. Schuman said his staff was trained by ShoreTel to provide site assessments, design solutions, prepare proposals and arrange financing. Its very labor-intensive more than I was told or thought it would be,” he said. We are learning how to be a successful VAR.”
For its part TBI also has completed IP telephony certification as an ADTRAN ADvantage Plus Partner and can now resell the companys NetVanta 7100 IP telephony solution as well as ACES professional services. This enables TBI to provide an IP PBX solution to its traditional telecom agents or for ADTRAN VARs that have not yet received their IP telephony certification. Agents are welcome to use the TBI relationship to be sales certified through ADTRAN,” Mercer said.
For TBI, a major driver was enabling telecom agents to sell gear as easily as carrier services so they could gain more account control and wallet share. We wanted to add a complete communication solution for small business customers that our more network-centric agents could sell easily,” Mercer said.
Its like the appeal network services providers make to VARs only in reverse. I think that all of us in the network community have been reaching out to systems integrators because to add network makes perfect sense,” Mercer said. ADTRAN feels the same way. They want our network agents selling phone systems. It is like the perfect marriage. Both of us are addressing small business customers that want a bundled solution and value a loyal relationship that adds value.”
PlanetOnes Schuman agreed. Agents are leaving a ton of money on the table [by not selling telecom hardware],” he said, noting they can make thousands of dollars in commissions for not doing much” through PlanetOnes relationship with ShoreTel. PlanetOne agents receive a one-time payment equivalent to a percentage of gross sales. The average sale is around $50,000, Schuman said.
Since the beginning of the year, Schuman said PlanetOnes agents are on track to close $1 million in ShoreTel sales. Based on the momentum, he is expecting $2.5 million to $5 million in sales next year.
TBIs Mercer said one of its agents has closed a multilocation deal, and the master agency expects to close several more in first quarter 2011.
Challenges. But its not all cheeseburgers in paradise. PlanetOne provides carrier services nationwide, but is restricted to the Rocky Mountain State region with ShoreTel. In order to go out-of-region, PlanetOne has to work through the regional channel manager to register the deal. Its this mismatch in business models that makes the relationship between master agents and manufacturers somewhat uncomfortable. It took six months for us to get this relationship,” Schuman said. They generally dont like [the master agent] business model. I think weve proven that if we follow procedures, it can work.”
Of course, deal registration is the preferred method for protecting accounts from being poached. Similarly, master agents that get into gear sales run the risk of conflict with their subagents that are also VARs thinking they want to compete with them.
Some of our best agents our great VARs who sell many other phone systems, and maintain and install them,” said Mercer. The impact [to them from our decisions] is something very important to us at TBI. The agent is our customer, not the end-user. If anything, TBI insulates the end-user from competitive products some carriers might have that would compete with a VAR.”
Mercer added that because ADTRAN does not enjoy significant PBX market share, many of TBIs VARs-turned-subagents are happy to be introduced to it.”
PlanetOnes National Sales Director Dwayne King made a similar observation: Its a way for VARs to diversify their product offering without taking on any of the additional financial responsibilities that would be required of them by other PBX manufacturers,” he said.
Going forward, both TBI and PlanetOnes executives are optimistic about selling gear and may even consider adding other vendors. Neither is in a hurry to do so, however.
Weve been doing it for a year, and we see it as a success, but we currently are only focusing on ADTRAN systems,” said Mercer. Schuman said if PlanetOne were to branch out, it would be with another PBX vendor and not for six to 12 months.
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