Q&A: Intelisys' Bradley On The Changing Landscape For Telecom VARs

There’s been a lot of talk lately about the convergence of VARs, carriers and the telco channel, but perhaps those best positioned to spot the trend are the master agents, who sit on the front lines of the channel game, facilitating partnerships between service and solution providers.

Intelisys Communications is a leading master agency, with relationships with 45 telecom service providers and a projected $200 million in net billed revenue and gross commissions of $37.5 million in 2011. At Intelisys’ annual Channel Connect conference, held last week in San Francisco, the topic of channel convergence loomed large.

CRN Associate Editor Brittany Danielson got on the horn with Jay Bradley, Intelisys’ president of telecom services, prior to last week’s event to talk about changing channel landscapes, why data VARs are trying their hand at selling network services, and how more VARs can get in on all the action in the carrier world.

Here’s an excerpt of that conversation.

What’s enticing traditional data and equipment VARs to come over to the telecom space and begin selling network services? And why is it happening now?

It’s the opportunity first and foremost. The opportunity has always been there, it’s just a matter of focus. And when times are good in IT, their business model is based more on turning over equipment and having those upfront commissions and those upfront sales and immediate numbers, whereas on the services side it’s always taken a little bit longer to really move the needle for a lot of those companies.

But over the last several years I certainly think that the recession repointed some of that segment back to services revenue as a way to protect themselves when times are a little bit more lean on the IT side. And I think that the move toward cloud is part of the reason we’re seeing additional growth, because a lot of those traditional IT hardware sales are now going to be wrapped up in cloud solutions. And I also think that it’s the services channel’s visibility.

I think that over the last five years and including the hard times and the recession, companies like Intelisys have been doing really well, and really didn’t skip much of a beat. And so another important part has been the visibility of that success to a whole a new segment of potential distributors.

How much growth is Intelisys seeing from the IT VAR community?

Across the board we’re doing well into to double digit growth as a business. We’re seeing double digit sales and revenue growth from the traditional agents, data VARs, interconnects, system integrators as a group, which is stronger than it’s been in the past. In terms of a number relative to the overall partner community, I would say it’s an additional 5 percent a year that we’re seeing from just the traditional IT VAR segment. Intelisys is very bullish on this segment. We understand their business models, we understand how to serve them, because it is different. And how we serve and incubate a data VAR is different than how we serve someone who is completely focused on network services.

How has that number of VARS adopting carrier services changed compared with five years ago, and do you see this convergence continuing to pick up speed?

There have always been some that made the commitment early, but I would say that five years ago we were seeing maybe a couple of points of growth, so it’s probably more than doubled in the past five years coming from that segment. And we expect to double the growth over the next five years. The indirect channel on the services side is going through somewhat of a renaissance in terms of the quality of partners and distributors that we have in our community. We’re seeing really, really smart folks coming out of the IT world, coming out of carrier direct sales that are very attracted to what’s happening in the channel world.

Do you see this convergence going both ways?

What I see and what I hope is that we’re moving our partners from selling circuits to selling solutions, and in some cases that is going to require an equipment component. But more often than not the equipment can be handled by the supplier, meaning the carrier. So I don’t see a lot of traditional agents, master agents and telecom service providers moving heavily into the data VAR space, but I do see them selling more at a solutions level, which may involve equipment that is bundled with the services.

Next: Challenges And Getting Started

What are some inherent challenges that VARs face when adopting network services?

The challenges depend on the data VAR and their size and the resources that they have to invest in network services.

Certainly the product knowledge is a challenge at first, but product knowledge is always one of those things that you can get past. If it’s a small data VAR, the biggest challenge may be financial in that you really need to stick with it for a while in order to start seeing some significant revenue, just based on the residual method of payment. That is commonly one of the tougher challenges for a VAR.

In our world you make a big sale, it takes time to provision, it takes time to install, it takes time to bill out, it takes time for commissions to be produced and paid. The time from the initial sale to payment may be six months or longer. But at Intelisys we’ve done some things to make that a little bit easier.

So for those folks that want to get into to services but know that they won’t start being paid until they’re installed, we’ve put an advanced commissions program into the marketplace where we’ll fund those commissions to partners so they don’t have to wait six months to start getting paid. And that’s gotten a lot of traction both with our traditional partners and data VARs and others.

What are some ways VARs can get started selling carrier services?

They have a couple ways to go about it. They can go out and acquire a network services arm, a smaller network services agency that is in their marketplace that wants to become a part of a bigger entity. That’s one way to do it.

A second way to do it is to hire a staff that is completely focused on network services.

Another way to do it is to partner with one of our existing agents. Our sales partners in our community today on a regular basis partner with data VARs. In the past it’s been more of a referral relationship, but we’re seeing a shift more toward those folks who used to have a referral relationship within our community of agents actually coming in and selling under those agents to move the needle and get the ball rolling for them.

What are some critical steps to building a successful network services business?

From my experience it’s committing at least one full-time resource to the effort, someone who does have experience in network services. That’s my number one predictor of success.

Secondly I think you need to build out your runway to a realistic timeframe. Anything under two-to-three years in terms of the effort and the resources is not going to give you a fair shake in terms of having success. It’s really about managing expectations about the sales and commissions you need to build over the first six, 12, 18 months, and also what your network services revenue will look like in three-to-five years. If you can plan on those horizons, you have a great chance for success, because those are the horizons you need to be looking at to set the proper expectations.

Another is to choose your suppliers wisely. What we tell both the data VAR segment and agents and sales partners is to really think through which suppliers are strongest in the market, which ones are committed to the indirect channel, who really wants my business? And Intelisys offers 45 different suppliers in our portfolio and you just can’t know the inner working of more than four or five. So really specifically look at your market geographically and from a customer-based perspective in terms of their usage and the kind of products and services they need. Then focus your energies on those suppliers that can have the greatest impact.

My advice overall to data VARs rethinking network services or looking at the space if they haven’t already is to think big. There are companies of size now as master agents and distributors and the money is big. It’s real. Put the resources into it to experience some early, midterm and long-term success, because the opportunity is there.

Are network services becoming a do-or-die proposition for VARs?

I don’t necessarily see it as that black and white. What I do see is that both the traditional network services channel partner and the data VARs are changing.

I think the big winners will be those companies that can combine the elements of what systems integrators do with what data VARs do, with what cloud providers do, with what [telecom] channel partners do into a business model for the next ten or twenty years in our industry that really is going to ask these folks to be a complete advisor to their end user customers. As we all know, convergence is happening.