Cloud, Next-Gen Services Help Master Agents Grow Quickly And Beat 'The Squeeze' As Connectivity Commissions Decline

Five years ago, Intelisys had to buy its way into selling cloud services. But thanks to its efforts, today's master agents and partners may not have to do the same.

Back then, Intelisys bought Cloud Services Coalition, a cloud services solution provider and integrator founded by Andrew Pryfogle. He went on to become the senior vice president of cloud transformation at the now 24-year-old master agent.

Intelisys saw the major pivot to cloud coming and knew it needed to acquire the right expertise to lead the transition and offer the level of education that its sales partners deserved to help them stay ahead of the curve. Sales partners needed to be educated on the benefits of cloud and told how to pitch and close cloud deals. Intelisys identified Cloud Services Coalition as a leader in cloud selling and education, and the best organization for the job.

[Related: Telecom Consolidation Sets Aggressive Growth Agenda For Master Agents, Partners]

"This is when we really started adding more value to our partners and helping them make the pivot to different kinds of services, away from the more traditional connectivity providers," recalled Jay Bradley, president of Intelisys.

Today, the Petaluma, Calif.-based master agent offers various cloud education tracks for its partners and is seeing high single-digit growth in cloud sales from its partner community each year as part of its overall business mix. Cloud services, in particular, Bradley said, represent a whole new opportunity for both master agents and channel partners.

Partners are grappling with eroding broadband connectivity and legacy voice margins. Sales in the wireline segment for every major carrier – including AT&T, Verizon and CenturyLink – have been declining at a low-single-digit rate over the last several years, according to investment research firm CFRA. More users are moving from traditional wireline phones to high-speed internet and mobile services, where users expect to pay less for voice services.

As such, master agents must look beyond brokering connectivity to fill out their books of business with value-added services that offer higher commissions for sales partners. Master agent may be under pressure to grow quickly, but growing by way of mergers and acquisitions is not the only option for these companies.

The days of master agents acting as "clearing houses" are over, said Patrick Oborn, co-founder of Sandy, Utah-based master agent Telarus.

"Everyone is feeling the squeeze," Oborn said. "You are going to make less money doing more work until you can't afford to pay your people anymore. [Master agents and sales partners] have to transition to higher-margin services and products," he said.

Services like cloud, unified communications, and SD-WAN services, for example, are offering partners a way to "claw some margin back" from sinking connectivity commissions, Oborn said. Services like these have Telarus, and other master agents, placing their bets and the channel should take note, he said.

"We are focusing on UCaaS and cloud because the commissions there are still safely above 20 percent, in some cases 25 percent plus [sales performance incentive fund] SPIFs," he said. "That's where the money is."

PlanetOne Communications is another master agent looking to expand beyond traditional telecom boundaries. In 2016, cloud sales accounted for 50 percent of the Scottsdale, Ariz.-based company's revenue. PlanetOne doesn't have any cable suppliers within its portfolio, but offers a bevy of channel-friendly cloud service providers, SD-WAN and UC players, as well as connectivity and wireless carriers.

Lauren Shapiro, president of PlanetOne, said that the company is laser-focused on helping partners have "strong, compelling business conversations" with their customers to learn about their requirements that are driving the need for cloud products today.

"It’s really the conversations with the [C-level executives] that are helping partners understand business needs, and those are opening the door for new opportunity for partners," Shapiro said.

Intelisys, which was acquired by IT distributor ScanSource last year, agrees that the partners who are having the most success today are the ones that can talk to their end customers with a "neutral voice," Bradley said. That goes for both telecom agent partners, as well as ScanSource's VAR partners who are starting to dip their toe into recurring revenue by adding services to their portfolios.

"The recurring revenue opportunity is newer to VARs, but one of the biggest messages to them, just like our agents is 'invest, learn, and continue to grow your team and hire people that understand cloud and all these new opportunities,'" he said.

While expanding to more recurring revenue services is essential for both the master agent community and their channel partners, master agent also need to grow in technical expertise and resources for partners, according to Vince Bradley, CEO of World Telecom Group (WTG), a master agency based in Malibu, California.

"I would say there is going to be a trend with the masters stepping up to not only grow from revenue and headcount perspective, but also from a back office perspective," WTG's Bradley said.

For its part, Telarus offers VX suite, a software platform that partners can use to monitor the quality of their customers' VoIP traffic and to diagnose any performance issues. The tool is included in every quote.

While masters are boosting their own technical capabilities, agents should be proactively building more expertise around new technologies, or retooling their businesses to capitalize on things they've already be doing for their customers, Telarus' Oborn said.

"[Channel partners] really need to get into new [services] or start billing for consulting for their time or even auditing bills – maybe start charging for the stuff that they used to do for free because they aren't getting paid on the carrier side like they used to," Oborn said.

Most channel partners won't make the pivot to successfully selling next-level services, including cloud, on their own. But the good news is that master agents are uniquely qualified to help solution providers. These firms have the size and deal-making prowess that bodes well for a business that, much like the telecom industry, is dominated by a few big suppliers that are fighting one another for market share.

Master agents often have the scale to capture the attention of larger cloud players, like Microsoft, and their sales partners benefit by not only having access to these larger providers – something they couldn't obtain on their own – but potentially better contracts and more support through a master agent agreement.

Because of this ability to work, at scale, with larger suppliers, master agents can more easily recruit cloud expertise than a small solution provider organization. As a result, many masters are building up their educational resources for partners, including educational programs and mindshare events for their partner base.

WTG is already seeing "skyrocketing" demand for education on cloud-based services, as well as SD-WAN and IoT from its partner community through Learning Campus, the master agent's online training and development program for partners, WTG's Bradley said.

Intelisys is on a mission to help both the traditional telecom agent partner, as well as VAR partners, learn about selling cloud services through Cloud Services University, its cloud training program for partners. Intelisys has had more than 3,000 individual partners sign up for its program, and more than 2,500 certifications earned to date.

Intelisys also offers its exclusive cloud training program, Super9, for partners interested in sealing major cloud deals. The program includes a one three-day training session, followed by regular communication and mentoring with the Intelisys Cloud and Complex Bids team.

PlanetOne offers Cloud 411, an education center and resource tool that aggregates sales tools, presentations, and data from its cloud provider partners that channel partners can use to help close cloud deals. The master agent is also taking its educational event, Cloud Strategy Session, around the country. These day-long events for telecom agent partners, VARs and MSPs are aimed at helping partners understand what is driving their customers' needs around cloud, and then helping partners embrace cloud opportunities through a "high-touch engagement process" with the support of PlanetOne, Shapiro said.

For most partners, selling cloud services at this point isn't their core competency, Shapiro said. "It's very much about a side-by-side relationship to help build up their comfort, and partners don’t have to be the expert."

Master agents can act as "the glue" by bringing the right cloud providers into conversations between partners and their end customers, Shapiro added. "We don’t just step in and step out; we provide guidance and coaching. For us, it's that very high-touch engagement process that is driving success."