Intelisys Channel Connect: Carriers And VARs Talk Channel Convergence

City By The Bay

Attendees of Intelisys' annual Channel Connect event were in the thick of all the action earlier this month in downtown San Francisco’s Union Square, a shopping, cultural and dining hub surrounding the iconic palm-tree lined plaza.

CRN was on-hand talk to the Intelisys community of service providers, telecom agents and VARs about why the moment is ripe for selling business connectivity in the channel.

A Wake-Up Call

In an early morning breakfast panel moderated by CRN’s Chad Berndtson, panelists fielded questions about how and why the telecom and IT channels are beginning to come together to sell network services. Conference attendees weren’t deterred by the 7:30 a.m. kick off; the room was packed with a rapt audience eager to hear expert insight on channel convergence.

Pictured, from the left, are Dale Tucker, of CenturyLink’s Channel Alliance; Craig Schlagbaum, VP of indirect sales at Comcast Business Services; and Dana Topping, co-owner of Intelisys.

Break Out Of The Comfort Zone

Dale Tucker, who heads up CenturyLink’s Channel Alliance, formerly the Qwest Business Partner program, said that for a long time, both traditional telecom agents and VARs were able to stay in their own comfort zones, without ever feeling pressure to cross the boundary between the LAN and the WAN. But now, VARs are getting the message that soon they’ll need to adapt their business models in order to stay competitive.

"The big thing I’m seeing now in the VAR community is the messaging that they’re getting from their own analysts," Tucker said. "For instance when you have a Gartner VP stand up in front of them and say there is somewhere between 100 and 200 thousand VARs in the country and the market doesn’t need all of you to continue doing what you’re doing... The message that they’re getting is that they can’t continue to be comfortable."

The Channel Will Prevail

Craig Schlagbaum, vice president of indirect channel sales at Comcast Business Services, said he thinks that ultimately channel convergence will be driven by what the customer is asking for.

’I always go back to what the end user wants. As time goes on and we move to more total solution beyond just the sale of a circuit, they’re going to want someone who understands the whole thing. Regardless of whether there are 100 carriers or ten, the clients are going to want someone in the middle who is the trusted advisor who can explain it," Schlagbaum said. "There is no way that the channel is not going to be part of this, because the carrier can’t field a sales force large enough to support all those customers’ questions. They’re going to need the hundred thousand of IT advisors out there to tell them what to do. We have a thousand direct reps, and that wouldn’t even come close to satisfying all the questions that customers have. This channel that CRN reports on has been built over 30 years with billions of dollars of influence. You can’t replace that overnight.

Opportunity Knocks

Dana Topping, Intelisys co-owner, said the master agent is at the fore-front of the convergence trend, which presents a huge opportunity for the channel.

’All the analysts are saying this [convergence] is what’s going to happen. We’re seeing both products and demand from customers that are going to make [VARs] move from a premised-based fee to an off premise-based recurring fee," said Topping. "It’s a big opportunity for Intelisys to beef up its channel support nationwide. There are a lot of changes taking place, we’re looking ahead seeing the trends as they’re happening, and along with that why things are changing and how cloud-based products are facilitating that change. We’re poised as a company to take a big role in how that change affects the agent community.’

The Total Solution

Mike Burdick runs an Ellington, Conn.- based communication management consultancy, The Technology Collaborative, which partners with VARs who want to start selling network services.

’In my small world and in my niche it’s been supporting the VARs who want to get into the space but haven’t had the expertise to create the solutions on the telco side, rather than hiring someone externally, they bring me in and create a partnership to help support their customer," Burdick said. "The way I see it is I’m going to come in, create a combined, total solution package and box out the competition. And really come from a consultative approach rather than a hard sale, selling one certain product.’

When In Doubt, Outsource

Patrick Weavers of Infinium Communications, said 95 percent of his business come from partnering with the VAR community. Many smaller VARs are outsourcing a carrier services staff in order to get a foot in the door on business connectivity, Weavers said.

’We’ve found a very nice market place where we can go work with VARs, they bring us in and we engage and take care of the carrier services for them. Originally it was to keep the competition out, and then they found there are some serious cost savings and residuals attached to this, and they’re starting to see the benefits," Weavers said. "They just found that they can’t hire, or they don’t want to hire, so they’d rather outsource it to us.’

Cloud-Driven Convergence

Jason Kraft is a telecom veteran who starting building out a carrier services program at an existing VAR, San Francisco-based FusionStorm in 2007. He said that carrier adoption among VARs has been slow, but this has been the year that the shift is finally occurring.

’I definitely understand the space pretty well and the challenges of starting a telecom program at a VAR. It’s definitely an interesting thing, I think the thing maybe what you don’t realize as traditional carrier agents is that your world is as foreign to the equipment people as vice versa," Kraft said. "Data center and cloud services are big part of why VARs are looking to bring on an agent or have a referral program, because it gives them a bigger piece of the total pie. I think that 2011 is the year that people are getting comfortable with the cloud and looking to go from a few applications to multiple."

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VAR Roundtable

Later in the day, CRN corralled another group of convergence authorities, for a conversation that hit on themes ranging from channel conflict to how VARs can succeed in building out a network services business.

Pictured, from the left, are Donna Arsenault, of Tampa, Fla.-based Republic Voice & Data; Intelisys co-owner Dana Topping; Jerry Hilecher of Los Angeles-based Gateway Telnet; and Jonathan Watkins and Brent Killen, both of Digital Planet Communications, a Minneapolis-based telephony equipment vendor and master agent that works with VARs on carrier services.

A Trusted Advisor

Donna Arsenault, is president and owner of Republic Voice and Data, a Tampa, Fla.-based reseller that provides voice and technology solutions for business customers. She said that customers are thirsty for new solutions and more speed, but they also need an advisor to help them understand the technology and the choices available to them. And by being that trusted advisor to a client – they can apply carrier cost savings in other areas.

’[Clients] don’t even understand how to say cloud computing, never mind what it is. What we’ve found is that there are multiple opportunities to help clients get through that," Arsenault said. "We really need to dig down in order to understand what are your problems and where can we help you. Carrier solutions are ultimately important to us as a recurring revenue stream. It’s gravy, it’s wonderful. It’s also important for sales reps to optimize bills, to look at savings and talk the customers into applying those savings into data or hardware solutions as well.’

Don't Fear The Residuals

Jerry Hilecher, president and owner of Gateway Telnet said adding a residual income stream was a conscious effort on his part after acquiring another VAR, which – although it had a huge price tag – brought in essentially no ongoing monthly income. Now, the residual income he’s earning has made a huge positive impact on his bottom line.

’Especially in tough times, my business has never been better. I have far greater profit margin, far greater overall sales this past year than in ten years. And why? Because by adding the telco aspect to our business, we’re more of true consultant,’ Hilecher said. "The average VAR is not going to be as educated on all the resources as we are. One is having a 100 percent solution, the other is saying how many phones and lines do you need. There is a big difference. By me understanding that market, I can bring a true return on investment to my customers. My primary focus used to be putting in brand new phone systems. Now I can bring that equipment to the customer at no cost, because I have the savings in so many areas.’

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Evengelizing The Message

Intelisys co-owner Dana Topping said it’s going to take some channel evangelizing to get more VARs to adopt carrier services, but the opportunity is out there, and it is massive.

’The opportunity, the message to the VAR community, with cloud services coming in, is that this residual income is an addressable $100 billion revenue stream in this channel," Topping said. "Right now Intelisys sells about $22O million in carrier services -- and that is a drop in the bucket compared to what is out there,’ he said.

’With carrier services and cloud coming into this picture, there is a massive opportunity for VARs and agents alike to play in this space, and we can play in it until we’re blue in the face and won’t even come close to scratching that surface. And so we really see it as an opportunity to train agents and VARs alike. And we’re just beginning to see that cross-pollination of those two groups.’

Carrier Services: Growing Strong

Jonathan Watkins, vice president of partner sales at Digital Planet Commununications, a Minneapolis, Minn.-based telephony equipment vendor and master agent that works with VARs on carrier services, said his company’s carrier services program makes up around 60 percent of business and is growing. Watkins said the most successful VARs are those who dedicate a full-time staff to making carrier services work.

Tenacity: The Key to Success

Brent Killen, also of Digital Planet, said in the last 12 to 15 months, they’ve grown their new partner base by 30 percent.

’We’re focused on finding people who can go out, put a total solution together and get it done,’ he said. ’VARs need a strong commitment to making it happen and being patient. We’ve talked a lot about the fear that they sell a hardware product and now they’re selling carriers services, about carrier challenges, they’re afraid of ruining the reputation of their core business based on trying to sell something new. But if they have the commitment and the patience to carry through, I think they can be successful. Some of them go out and try selling one deal, with one carrier, and if it goes bad, they say, I’m never selling carrier services again. If we said that ten years ago, we wouldn’t be in business. We’ve all had an issue somewhere along the way.’