At a very macro level, there are three agent business models:
· Transactional – high volume, provides the "three option" proposal, soho and SMB market
· Consultative – high touch, lower volume, enterprise market
· Master Agent – business via subagents with varying business structures and target markets
Each model has its own virtues, benefits, and advantages, but, all are equally impacted, much like carriers, as products or services become commoditized. As they lose their inherent value due to newer technologies, changes in the regulatory environment, or price structure and competition, we all face price compression and a decrease in average revenue per customer in what ultimately becomes a deflationary product segment and commission stream.
Let’s look at MPLS. Few are out there selling these services based on differentiation, or value-add, from one carrier over another. Features like multicasting, remote access, QoS, etc. were once a way to sell one carrier’s MPLS solution over another. However, now they are so commonplace that those decisions are being made based on applications that can be layered over the network, i.e. PAETEC's cloud-based Network Firewall or Intrusion Detection and Prevention System. While our MPLS network is differentiated from others, the true value to the customer today is in what we can do with our network to address their full needs.
Walking the floor at the Fall Channel Partners show, I saw that there were still some niche players out there leading with MPLS and filling a specific need (international, etc.). But, overwhelmingly, what I saw was the next big thing: (yes, you guessed it…) Cloud Computing!
Much like VoIP and other technologies before, “cloud” is still a nebulous concept for many, despite the adoption curve (one of the steepest I’ve seen in over a decade). Five years ago when you mentioned VoIP you may have been thinking of a best-effort, bring-your-own-bandwidth solution using one codec and protocol. And the person you were talking to may have been thinking of a phone system with an entirely different codec and protocol. Both of you were right, but it took some time for there to be consensus on the industry vernacular.
That is where we are with cloud computing today. Is it iCloud from Apple using the public or mobile Internet? Is it a private network? Is it Data Center storage of customer-owned servers or is it service provider-owned, virtualized servers? Is it a highly specialized software company providing access via the Web? Cloud computing is all these things and more, but if the past is a fair indicator, we should start seeing these disparate ideas congeal into a more structured, generally accepted idea of what cloud computing means.
When that happens – again looking at the history of telecom – might cloud computing follow the path of deregulated long distance, where smaller niche providers with lower overhead compete vigorously with the larger telcos who have invested heavily in their own cloud computing offerings, leading to a precipitous price war that ignites price compression and lower margins? Or will the bigger players look to acquire these niche companies, leading to heavy consolidation in the industry?
The only thing that seems certain is that the cloud is already impacting the equipment side of the industry and my best guess is that, over time, it will become a deflationary product and ultimately reach commodity status.
Am I saying not to engage in cloud computing? Quite the contrary! In fact, if you haven't already, it is imperative that you have a cloud strategy and begin communicating that to your customers immediately. There will be massive adoption and a decent run of high margin, highly profitable business for everybody. What I am suggesting is that now is the time to start preparing your businesses infrastructure to hedge against what will ultimately be a declining revenue stream, like all other telecom services.
So how do you hedge? What comes after cloud? How do you ensure a long term, profitable business? Well, if I knew the answer to that I would likely have a C-level title. I won't venture a guess, but I'm willing to at least point out what may be obvious to many of you already: it’s time to start building up the professional services aspect of your business.
Consulting, compliance, network and asset management… become your own service provider. Agents don't need to become resellers or Data Center owners to be able to capitalize on the current trends and offer managed services as an overlay to your traditional telecom services. Charge your customers management fees for some of the services you used to use as a loss leader to get the network business.
PAETEC, as an example, has a full suite of services in the cloud, data center and colocation space and we have the resources to educate and support you as you venture down the road of high-margin professional services. We even offer a software package, SBOSS, to help you manage every aspect of your nascent Managed Services division. We can even offer billing solutions.
Ultimately, what I am advocating is not much of a departure from your normal business. Merely focus on newer technology and providing value-added professional services, which many of you have done in some form for free for years, as a way to increase profits and hedge against the inevitable cycle that relegates today's brightest, profitable technology to tomorrow’s commodity.
Contact me or your PAETEC Channel Manager to learn how we can help you grow your business and fully take advantage of ALL of the opportunities that cloud computing brings to the table today.
-sc
Shawn Cordner
Manager, Strategic Development
PAETEC
215.839.9639
shawn.cordner@paetec.com
