The Evolving Business Models of Agents

Long Distance, PRIs, VoIP, even MPLS – each of these, at one time, was the new, high-margin solution that was on the leading edge of telecom technology. And each one is now a commodity.



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

Cloud Cover

When we were young, many times my friends and I would find ourselves lying on our backs in a field on warm spring day watching rabbits, cars, and sometimes even dinosaurs float by high above us in the sky. Ok ,of course those things weren’t really flying above us, but to us that’s what the clouds we were watching represented. But to guess back then what “the cloud” would represent today would have taken an astounding imagination.

It seems like the Cloud is all we hear about now in the telecom sector. It appears to be following a similar trajectory as VoIP, MPLS, TEM, DSL, etc, in that it starts as esoteric concept amongst a very small group of elite engineering types and from there it experiences a meteoric rise in popularity and the term is used ad naseum. Similarly, its’ adoption curve also appears to follow a similar trajectory in that initially it was adopted by larger entities, then medium to large enterprise, then SMB’s (Small to Medium Business) and sometimes then SoHo (Small Office Home Office). It even shares the same challenge that VoIP encountered as its’ popularity increased, like lack of a common and precise definition; as a sales rep I recall many a time during a probing session having a customer ask me “how much for VoIP” which at that point they didn’t know what they meant , a phone system? SIP Trunking? Cloud is clearly an umbrella term under which there are many varieties of products and solutions. The “Cloud” has transcended all of that, it has take a life of its’ own and has even become a part of pop culture.
This past Spring at the Channel Partners Show in Las Vegas and was fortunate enough to catch the Keynote address from Tiffani Bova of Gartner Group, which was a powerful message about where the industry is going and agents should be getting onboard. Tiffani expressed that according to Gartner Cloud is the number one trend, Mobility as a somewhat distant second. She said that 66% of SMB’s will pursue private cloud solutions, 30% alone will implement in 2011 and by 2015, 90% of Enterprises and some government will implement at least some type of cloud solution. Her question, and I believe the salient one from my position, is which agents will make the transition to survive and perhaps thrive, and which ones will not make the transition and ultimately be part of a dying breed.

The fundamental concept behind Cloud Computing is not a new one, yet with the ubiquity and cost effectiveness of bandwidth, along with the availability of virtualization technology and the evolution of security have made it feasible and indeed a preferable method of performing a variety of business functions. Agents for the most part agree that Cloud Computing needs to be a weapon in their arsenal. According to a recent Channel Partners survey, up to 99% of agents today* count up to 49% of their type of services through partnerships with IT Service Providers . So it seems that Agents “get it”, this isn’t a phase like 3D TV, this is a fundamental shift like entertainment over mobile devices. When faced with the last fundamental shift most agents I know embraced VoIP in a timely manner but even so, the transition can be a difficult one, taxing the resources of a small business. The dangers of cannibalizing your own business are only exceeded by the chances of losing your customers to someone else that did embrace the transition.

PAETEC recognizes that being an agent and adopting a new solution set and technology doesn’t come with a manual and can be daunting. We are able to leverage our superior engineering and technical resources with our Channel Managers and Management, trainer and other subject matter experts as well as our extensive view of best practices to help each of our agents to successfully design and implement their Cloud Computing strategy. No matter the agents’ business model, whether a Master Agent, Network Sales company, Data VAR or Managed Service provider, PAETEC can help you customize and execute a transitional plan for you. If your agency has been an early adopter of The Cloud, PAETEC can help you tweak your model to optimize for it for success.

Our Partner Services This include:

· individualized business planning
· co-marketing campaigns
· Educational Webinars and live trainings
· special SPIFF’s
· sales contests
· a comprehensive product and service suite

Altogether there is no carrier partner better positioned to work with you to ensure you are able to fully capitalize on the short term opportunity and build a foundation for long-term success. Contact Shawn.Cordner@paetec.con or your channel manager to learn more.

*SOURCE: VIRGO Channel Partners, Name of Study, Publish Date

No Fishing!

What is your favorite flavor of Ice Cream? Is it Rocky Road? Vanilla? Maybe it’s Black Cherry? No, this isn’t “get to know your classmate” day in Kindergarten, this is an example of a mistake made by most sales people at some time as they probe their prospects. We have lovingly given this technique a name: Fishing.

Maybe this example will ring a bell; “Who is your current telecom service provider; PAETEC? XO? AT&T?” I bet you’ve heard that before, and probably done it. It is when you ask a question and then proceed to provide multiple choice answers for your prospect to choose from. Sometimes we do it out of habit. Some do it to fill the silence. Some even do it to prove their acumen to their prospect and themselves.

Whatever the reason, this seemingly innocuous misstep can mean the difference between winning and losing a deal. By giving your prospect options, they now have an easy “out” . They are likely to choose one of the options you gave them instead of taking a moment to give you a full and complete answer. In this example, your prospect may answer “XO”, as they could be the voice services provider. Without the multiple choice; you would be likely to get a more complete answer like: “ Well, we use ABC carrier for voice, but…” Maybe they go on to explain that XYZ carrier provides their data. Or maybe they start to explain their pain points with their provider.

Regardless, the odds are that by not giving them a multiple choice question, you will get a more complete answer that is full of information that could be used further in the sales process to help you win the business. Information that may have taken much longer to get out of your prospect (and let’s face it, we don’t always have all the time in the world with our prospects) or more importantly, we may have never gleaned this information at all.

The moral of the story; when probing our prospects we want to ask concise, open ended questions. And always remember: NO FISHING!

A New Agent Business Model for a New Decade: Why Become a Managed Service Provider

The clichéd adage, “change is the only constant” could have been invented just to describe the landscape of the telecommunications business. Growth in telecom is largely achieved through innovation, which can often be disruptive; and so our world is inherently fluid.

As new technology is made practical and affordable (and/or as the regulatory environment allows) the telecom ecosystem adapts to deliver new products and services to customers or to leverage the technology on the back-end to lower costs, or both. This evolution serves as a catalyst for Agents themselves to evolve. If Agents are anything, they are adaptable; quick on their feet and nimble, they have consistently been able to adjust their business models over the years to embrace new carrier services and fully capitalize on the opportunities that change presents. Just in my 11 years in telecom I have seen the typical Agent business model change from selling discount LD, to a consultative sales approach focusing on advanced data solutions, and everything in between.

Recently, there has been a “perfect storm” of poor economic conditions, revolutionary changes in technology and unprecedented access to, and a voracious appetite for, bandwidth (which has become ubiquitous and incredibly cost effective) that has once again changed the game. This perfect storm has influenced consumer behavior significantly; today’s customer wants to outsource as much of their telecom related operations to someone else as much as is practical and affordable. Here are a few of the buying triggers for customers today:

· Due to the poor economy affecting their sales and revenue, businesses have been reducing costs across the board
· Access to capital has been limited; to preserve CapEx budget, customers want to shift their purchases to their operating expense budget as much as possible
· Their increased reliance on the Internet and software applications for commerce, communication and almost every other aspect of their operations has led businesses today to seek protection of their infrastructure from such threats as security breaches, downtime/disruption in service, disaster and even lost productivity
· Again feeling the pinch of the economy, businesses have needed to reduce their IT staff or create more productivity on core functions with the same amount of staff

Because of this, customers are making a fundamental change in their philosophy in favor of shifting the responsibility of many of the mundane, transactional tasks that they typically would handle in-house, to their service provider. Managed Services aren’t really a new concept, just like cloud computing isn’t new either. However, those are the buzzwords that the most recent incarnation of these familiar concepts are being called. “Cloud” services have been around a long time, and so has the concept of “managed services”; what is different this time around is that technology is finally catching up to the potential of the concept and the market has the need and desire to acquire these services. This has led to these buzzwords ripping through our industry like a viral internet meme rips through the inboxes of Generation Y. But this is not all hype.

This demand for managed services is met by Managed Service Providers . Wikipedia describes them as typically “an information technology (IT) services provider, who manages and assumes responsibility for providing a defined set of services to their clients either proactively or as they (not the client) determine that the services are needed. Most MSPs bill a flat or near-fixed monthly fee, which benefits their clients by providing them with predictable IT support costs”. These are firms where businesses outsource a great many of their IT functions, like desktop support and repair.

The decision maker today is typically the same for both IT and telecom services and now these decision makers are increasingly looking to apply the same model to more of their tasks including their telecom services and even their phone systems. This makes the traditional IT MSP’s an attractive target for carriers to recruit as agents. While they don’t have experience in the telecom side, they are uniquely well positioned to add telecom to their portfolio as a value added service.

But conversely, there is a remarkable number of Agents that have begun repositioning their businesses as MSP’s. They are expanding their portfolios to include the management of things like routers, firewalls and hosted or hybrid PBX’s. They are starting to offer data storage, backup and recovery and some are even going as far as investing in data centers of their own to be able to provide colocation and data center services. There is a definite upside to the agents who have been faced with a confluence of factors of their own that have but their businesses at risk. Some of the benefits are:

· Increased revenue per customer even in the face of the price compression and increased competition the rest of the industry is seeing
· Higher margins on professional services
· Agents own this residual revenue stream which mitigates the risk of carrier consolidation and some carriers changing their position on the agent channel, leading to reduced commissions or even cut contracts (as we have seen over the past few years from quite a few carriers)
· Creates a stickier, more stable and less price sensitive customer
· Easy upsell to their existing base and opens the door to a new market segment to which they can later laterally market their telecom services

By becoming an MSP, Agents are creating great value for their customers and in their own business. The downside is only that it would take an investment of time and money to build the infrastructure to support the customers and the expertise to do it well. Well at least, that was the case. PAETEC has invested in growing our product portfolio for partners over the last year to include an entire suite of services to turn any Agent into an MSP. Agents can leverage our resources, our infrastructure and our expertise in order to meet the managed service needs of their customers. Products like our:

Managed Routers
· Managed firewall (both CPE based and from the Cloud)
· Cloud based Intrusion Detection and Prevention
· IP Simple phone system
· Data backup and recovery
· Dedicated Servers and web hosting
· Colocation and more

We have even rolled out our SBOSS software package, which agents are implementing to help them manage their new MSP business. Our commitment to the Agent Channel has made us focus on enabling our partners growth; which is why we have gone to great lengths to ensure that our Agent partners have the tools they need to be successful into the future. As their business evolves, so will ours in support.

CLICK HERE to learn how becoming an MSP could benefit you or to learn more about PAETEC’s turnkey services that enable our partners to become MSP’s with little to no investment.