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The Race to the Middle?The Race to the Middle?

Is the convergence of IT and telecom channels a "race to the middle?" Who will the winner be?

July 17, 2012

13 Min Read
The Race to the Middle?

By Khali Henderson

15f5eb1d678b4039afbddd03a4daa11a.jpgThe industry has been talking about the convergence of IT and telecom technologies since the mid-1990s thanks to the emergence of voice over IP.  That the two technologies are converging most everyone agrees; the few dissenters would argue that IT and telecom already have “converged.” On the convergence of their respective channels, however, there is little agreement and less still on whether they are engaged in a “race to the middle” and whether one or the other will emerge as the “winner.”

Depending on who you’re talking to and most importantly where they are in the IT or telecom supply chain the perspectives may vary widely. What complicates the discussion of convergence of channels is that it is no longer only about the technology they sell but also about the domain (LAN vs. WAN) they work in and delivery model (cloud and managed services) they use. So, it’s not just IT VARs and PBX dealers fighting over control of customers’ voice and data hardware/software in the LAN. It also is about VARs and dealers competing with telecom agents for voice and data services in the WAN and, more recently, for delivery of IT and communications “as a service.”

“Regardless of where the partner begins its technology journey, there will be no letting up on the increase in partners expanding their capabilities to include these new converged solutions,” wrote Gartner analyst Tiffani Bova in a May 2012 research note, “Five Trends Impacting Traditional Channel Programs.” “Partners are focused on keeping themselves relevant as the market shifts to ‘as a service’ models and customers want more solution/outcome-based options.”

Indeed, customers may be driving channel convergence as much or more than are converging technologies, domains or service delivery models. “The more potent reality is that customers will drive the continued move toward convergence of IT and telecom attributes among channel partners in both arenas,” said Dale Tucker, director of business development for CenturyLink. “In the end they will want comprehensive IT solutions providers. Those companies that fail to adapt whether on the telecom or IT side will be marginalized if they do not evolve accordingly.”

One such converged channel partner is COLOTRAQ, which sources IT infrastructure and network services for clients. CEO Dany Bouchedid said convergence has been taking place in client organizations for at least five years. Case in point: The telecom manager is all but gone, replaced by his or her IT counterpart, in most enterprise companies. But even small and medium businesses are finding the advantages of converged technologies like VoIP. “Once the two markets are one, maintaining two sales channels to address [their] needs ceases to make sense,” Bouchedid said.

“Enterprises to SMBs want fewer technologies, products and suppliers,” said Larry Walsh, president and CEO of The 2112 Group. “Thats creating a climate of opportunistic sales and engagements. Solution providers and agents, for the first time, are being asked about hosted VoIP in the same breath as servers and PCs.”

Walsh said research from the Cloud & Technology Transformation Alliance, a joint initiative of The 2112 Group and Channel Partners, shows that both channels are missing huge opportunities and losing sales because they cannot fulfill their customers technology and communications needs.

On Your Marks

With customer accounts hanging in the balance, are IT and telecom partners engaged in a race to some middle ground where the skills and capabilities that once separated the channels become indistinguishable?

The answer may depend on how you interpret the question. Most sources agreed that there was some overlap, particularly centered on cloud-based services, but few subscribed to the idea that the disparate channels would replicate each other’s skills, especially legacy skills, on a 1:1 basis.

“It’s undeniable that we are headed to the same place,” said Jeremy Kerth, president of Wired Networks, a telecom agency that also sells IT services and solutions. That place, for Kerth, is the cloud: “The cloud is allowing … a single entity to own most of the major IT silos.”

“There is clearly some overlap happening, but I do not think we are racing to the middle,” said Jim Ward, president of iVergent Inc., an ADTRAN dealer and telecom agent. His reasoning is that not all skills sets will be duplicated, citing the example that a data VAR is unlikely to invest in learning older voice technologies.

Similarly, Nancy Ridge, vice president for master agency Telcombrokers, said the crossover knowledge on both sides of the channel has increased in the last few years, but that specialization of skills and capabilities will be important and possibly unavoidable. “There is simply too much information for any individual or organization to know and do well,” she said.

CenturyLink’s Tucker agreed. “I don’t think it’s a race to the ‘middle’ because, to me, that implies being only adequately competent at both, but excelling at neither. Rather, I foresee that there will emerge standouts coming from both the IT and telecom channels that master converged technologies in their specific practice areas.”

The idea that the IT and telecom channels might eventually look alike also was dismissed by Clark Atwood, president of Concierge Communications. “There is more fragmentation than consolidation going on, so there are more options for successful business models, not less,” he said, adding there is no compelling reason why the channels should converge. “Call me a contrarian but the question in my mind is not, ‘Are we all converging?’, but ‘How do we adapt to a changing landscape?’ I believe the answer can be different depending on the VAR’s or agent’s individual perspective,” he said.

The race, then, may be less about competition between channels and more about competition between business models. “It’s not so much a ‘race to the middle’ as it is a sprint to become a ‘complete’ solutions provider that can address a variety of technological challenges and help companies solve real business problems,” said Cary Tengler, senior director of national partner programs for Comcast Business Class. He further noted that “the starting line” is a transactional sales model. “In the end, it will be easy to distinguish between the partner types. On the one hand, there will be successful, converged solutions providers. On the other hand, there will be the laggards and losers who didn’t leave the starting line and make the transition.”

Channel Partners explored the future of the transactional model in a five-part series published last fall and now available in the Channel Partners Resource Center as downloadable report, “A New Partner Model for New Times.” In it, we discuss how many VARs have been working to ditch the “box pusher” moniker and shore up their services revenue by adding professional, carrier, managed and/or cloud services. While transactional agents, “circuit slingers” as they are called, are paid recurring commissions, those are declining on commodity products, so agents also are looking at ways to develop their own services professional or managed for which they can bill independently of their suppliers.

Some disagreed with the notion that there was a “race” between the channels at all.

“We are all moving toward a middle point, or a point of overlapping, but [we are] not racing,” said Alan Sandler, managing partner for master agency Sandler Partners. “Any time our industry has gone through technological changes inside and outside the network we have always had more time to adapt than it seemed early on. First mover advantage is highly overrated (although it can be lucrative). We want to be part of the conversation. Customers don’t have to make the leap right away, our job is to help them time and navigate these migrations.”

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