8x8: Cloud Services Partner Recruitment Spiking

Hosted networking services specialist 8x8 has spent much of the past year revamping its channel program and its portfolio of services offerings, and both sets of moves are positioning the company well as interest in cloud-based networking crescendos.

8x8, which has been publicly traded since 1997 and is one of the country's largest VoIP service providers, lays claim to nearly 30,000 customer businesses. Kim Niederman, formerly its top sales executive, became 8x8's president in January, and that same month, 8x8 reported Q3 revenue of $23.3 million, 31 percent higher than a year earlier, with a 42 percent growth in business customer revenue.

Its overall growth strategy is staked to channel business, but it has also included significant acquisitions. In 2010, 8x8 acquired Central Host, which brought it cloud-based hosting services. Last year, it bought first Zerigo, a virtual private services, DNS and monitoring specialist, and then Contractual, which brought a slate of call center services.

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The full 8x8 portfolio now includes everything from hosted VoIP -- still the most popular lead-in, according to its executives -- to video services through its Virtual Room offering, the managed hosting and cloud-based contact center services. In late November, 8x8 added a Windows-based cloud hosting platform.

But it's the channel program that's caught on, said Don Trimble, vice president of channel sales, and 8x8 continues to attract traditional telecom agents and service providers along with IP-PBX VARs and networking, data center and videoconferencing resellers. Trimble said 8x8's partner recruitment effort has increased tenfold over the past year.

"They're expressing a lot more interest because they know they're going to have to figure this out," Trimble said, referring to hosted and cloud-based networking. "The quality of the partners we're seeing is also really improving, and we're also improving time to revenue."

Hosted PBX services are still its most popular offering, primarily to customers below 100 users, said Matt Hutchinson, director of channel marketing. But with the customers and solution provider partners 8x8 manages sufficiently varied, it was time to broaden the channel program.

Last year, 8x8's program revamp focused on compensating partners in several ways -- upfront bounties, monthly recurring revenue (MRR) for 8x8 services sold under term contracts, and commissions on equipment sold with the services -- with the idea being to appeal to both telecom agents and VARs and their varying levels of familiarity with residual compensation.

The company has further filled out the program. 8x8 now tiers partners as Platinum, Gold and Silver, and where it previously offered a flat dollar amount in compensation per service, it now offers an upfront bounty of two-times the MRR value of business booked. If a partner sells $1,000 in MRR for a particular transaction, for example, he can receive a $2,000 check for that transaction.

"It allows them to sell the services for as much as they can command in the marketplace," Trimble said. "And they want to sell for more, because it ties to their compensation."

The Silver level of 8x8's program is the same as the previous program, with no revenue commitment. Ramping up to the Gold and Platinum tracks mean increased MRR commitments, but partners all receive small-percentage "kickers," increased bounties and a range of other program benefits.

8x8 services partners directly and through master agencies. Partners see bounties, residual commissions and additional, contract-based commissions, and they can see total monthly commissions as high as 28 percent of the deal, at the Platinum level, if all of their deal requirements line up.

"It was important this not be a short-term, one-trick-pony kind of program," Hutchinson said. "We need a mechanism through which these partners can pay their sales forces and be able to keep selling it."

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Joshua Quick, president of Quick Technology, an Austin, Texas-based solution provider, signed on with 8x8 in October 2011. The company, which was founded in 2010 and primarily serves 10- to 75-employee businesses with managed services, needed a new hosted voice platform that could more flexibly support his customers, Quick said.

"We looked at a couple of partners and actually met 8x8 at IT Expo here in Austin," Quick recalled. "They were talking a lot about the shift from on-premise PBX to hosted and how as a channel partner you can still make the same amount of money. The 8x8 solution offered things I needed like better call routing, auto attendant, and web interface features and the fact that you can go in and adjust most of them on the fly without needing onsite assistance."

Quick Technology does some SIP trunking and on-premise solutions, but about 95 percent of his customers are buying hosted PBX solutions, Quick said, and SMB remains the sweet spot for that model.

"We'd been doing managed services, but it was hard not to see how VoIP was moving forward," he said. "The bandwidth caught up to the point where most small businesses can get speed for the price of a T1."

For an average 8x8 hosted services deal, Quick said, he can capture up to $6,000 in bounty revenue and up to $250 a month in residuals.

"We rarely get support calls," he said of 8x8's reliability.

Quick said he'd like to see 8x8 set up a formal sub-partnering system for businesses like his. Right now, unless Quick Technology draws up its own contract with a sub-agent, he's hesitant to partner in the field for fear of having customers stolen out from under him.

"Sometimes we'll get the partner going underneath us, and we'll get the commission and pay them out of that," he explained. "But I don't really feel that's effective all the time. You don't see that type of structured [compensation] pyramid at 8x8."

8x8 will be closely watched in the next two years by analysts, who see the hosted UC space as a magnet for consolidation. That trend has picked up as emerging players like RingCentral take in tens of millions in funding and providers such as M5 Networks, which was acquired by ShoreTel in February, taken off the board.