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Broadsoft (and Others) For Sale

Rumor has it that Broadsoft hired a banker to look at a sale (to a private equity firm most likely). This rumor has been reported by William Blair, Yahoo News, Light Reading and more.

Note reports that Broadsoft is for sale are accompanying reports that 8x8, RingCentral and others are also looking at strategic options.

There are a number of indicators that UCaaS is in trouble: Avaya in bankruptcy; Shoretel being grabbed by Mitel; Broadview to Windstream - to name but a few. There is also the big problem that keeping the sales engine going at 20+% year over year is not just hard but impossible. [In Fusion's investor presentation on the Birch acquisition, FSNN notes that organic growth is 2-4%!!!]

Most providers are not profitable. Light Reading reports, "Like 8x8 and RingCentral, BroadSoft has been growing its business but has struggled to turn that growth into operating profits. In the second quarter of this year, the company reported a 9% year-on-year growth in revenues to $…

Fusion and Birch

Every article just quoted the same paragraphs, including this very confusing one:

 "The Fusion/ Birch deal is an all-stock transaction in which Birch shareholders will receive about 73 million in common shares of Fusion valued at $3.85 per share and thus hold investments in the combined entity. That represents a premium of more than 200 percent compared to the prior trading day’s closing price. That, the release says, is five times the pro forma adjusted EBITDA of the business that is being acquired, including anticipated synergies."  [fierce]

By the numbers:

73 million shares at $2.59 is $189m in stock value... Fusion shareholders will own 25% of the combination while Birch shareholders will own 75%. (Shareholder lawsuits will happen.) FSNN has had a 52 week high of $2.59. It is at $2.21 right now.<< how is the stock valued at $3.85???  Fusion started the day with a market cap of $27.6M. FSNN is assuming Birch debt of $458M Prior to closing, Fusion will exit its Car…

4 More Channel Shows in 2017

Informa's Channel Partners Evolution is in Austin, TX on Sept. 25-28, 2017 at the convention center.Before that, partners will converge on Atlanta for One on One, the 14th Microcorp Event on September 10-11, 2017 at the Hyatt Regency. ChannelVision Magazine is an official Media Partner of The Alliance Partners’ upcoming Tech+Connect 2017 event, scheduled to take place at the La Cantera Resort in San Antonio, Texas, on November 6-8, 2017.  ChannelVision Magazine is also holding an event - CV Expo West - at the INCOMPAS Show on October 15-18, 2017 in San Francisco, CA.

Short Term Thinking as Customers Hanging Up the Phone

Business Voice has a history, and not in a good way. The non-ILECs have made voice an ordeal for business customers. It started when CLECs were selling Integrated T1s like hotcakes. LNP issues. RESPORG/ Toll-free problems. Deployment messes. [To be fair, when BellSouth launched BIS-T1, it was a disaster as well. A huge cluster of a F!] Intermedia.net gave an interview to CRN saying that "Every business needs a voice offering, and solution providers that aren't offering VoIP to their customers today are leaving money on the table." True. But voice isn't just a copper line any more. Cellular, SIP Trunks, TDM, Hosted PBX, UC, WebRTC in apps and more are available to replace the POTS lines. This only adds to the crazy. Plus compatibility and inter-operability issues for PBXs, faxes, alarms, elevators, paging and more. Key System Emulation makes me crazy. Intermedia continues, "I've been thinking about what's stopping partners from selling voice, and th…

INC5000 on Master Agencies

2017 INC5000 LIST OF MASTERS

CONGRATS! to everyone who made the list!

Carrier Sales  $18m almost double last year’s $10m. 
Telarus - $49m 
PlanetOne - $27m up from $23m last year; was at $19.5m two years ago.
TeleProviders which is run by  Jason Sharek, has $10.7m in revenue in 2016; up from $6m in 2011. 
ACS is at $3.4m.
Advantage Comms Gp (ACG) - $10M, doubled their revenue in two years. 
TeleQuality went from $17.7m to $23.8m. (They only deal with healthcare telecom)
Innovative Business Solutions (run by Michael Trede) up to $5.4m from $4.4m!
Mass Comm in NYC (run by Darren Mass) went from $21.6m to $25.6m.
eSquared Consulting (Josh Fulton) is at $12.8m; up from 2 years before at $7m and 55 employees. 
Global Comms Gp (GCG with Joel St.Germain)  … $7.5m – close to last year’s $7.2m
Tellennium is a TEM run by Greg Mcintyre with $37.7m in rev.
SandlerPartners   -  In 2016, Sandler Partners acquired X4. They said it would create an entity that was doing $65M in revenue. The 2016 INC5000 revenue sh…

What Do Bankers Have to do with it?

Last year, 8x8 hired bankers to perform due diligence about a reported buy-out. 8x8 wanted $1.2B+ and the buyer (reportedly Oracle) walked away.

RingCentral just hired bankers after a reported buy-out attempt supposedly by Google and/or Amazon.

 RC and 8x8 have a lot in common - they are both publicly traded pure play UC providers. Most of the UC providers are private - Fuze, Panterra, Jive, Evolve IP, etc. They are both ready to cash out.

Both also have to spend tremendously to keep the organic growth engine of sales rolling along. It started to slow down over the last two quarters but that may be due to not spending every sixty cents made on marketing efforts.

Think about the RNG Market cap of almost $3B. With Revenue of almost $400M, how many years would the ROI be on that?

Their biggest competitor is status quo. A business who rides out the premise PBX or switches to SIP Trunks instead of a pure cloud play.

Certainly Avaya's bankruptcy, Shoretel's sale and Toshiba's ex…

What Does the Master Agency Model Look Like?

So yesterday I did the math on commissions for UcaaS for sub-agents. (See here)  Today, let's take a look at the economics of being a Master Agency.

Remember the UCaaS example? If the seat price is $20, on a 100-seat deal we are talking about $2000 per month. [ $2000 x 20% = $400  ]  That $400 is split between the partner and the master agency per the agreement.  It could be 50% to 100%.

That is correct. Some masters pass 100% through to another master in a swap. However, they lose $32.50 per transaction like this. It costs approximately $30 to collect the correct commission from a provider and about $2.50 to cut a check to the master. So on 100% pass-through, you actually lose money.

Then there is the overhead for the master agency. The physical office, the staff (that gets quotes, handles orders, tackles issues, collects commissions), the channel managers, the legal aid (to get ironclad contracts) and the events (and event planner) are all expenses that have to come out of the…

What Does the Partner Business Model Look Like?

If the seat price is closer to $20, on a 100-seat deal we are talking about a one-third revenue loss.
    $2000 x 20% = $400 - split to Partner is $320
If the split is 70/30 or 50/50, the SPIFF is the spotlight.

Even at 70/30 on a $2000 ARPU deal, $280 is a small monthly stipend.
Folks begin to wonder if it is worth the ordeal.

I am being generous with a 20% commission to the master agency.  Network is lower. UC may be higher or lower.  SPIFFs come and go; up and down.

The question is: Can a Partner live off of your product line?

If not, then your importance declines.

The Magic of UCaaS

Gartner released its latest Magic Quadrant of Unified Communications. CRN has the list but you have to click through a bunch of slides.


Cisco with Spark and its interactive virtual whiteboard (expensive) Microsoft Skype4B - except the conferencing is meh MITEL - except the hodeg-podge of Toshiba, Aastra, Shoretel, premise and cloud make it a mess  (Mitel's largest partner: Frontier) Challengers: Huawei < how is that even possible? NEC only offers UCaaS in North America?! Avaya with Zang Spaces manacled by bankruptcy UNIFY doesn't offer UCaaS - just on-premise and collab ALE (Alcatel-Lucent Enterprise) owned by China Huaxin Shoretel is on the MQ.
Get the RAD-INFO INC 2017 Hosted PBX Market Report: here.

Secrets for Channel Managers (webinar)

Are you a Channel Manager?

Are you looking for some tips on how to improve your job performance?

Then join me for Secrets for Channel Managers, a 50 minute webinar for channel managers to learn tips and tricks before the Q&A. This webinar will be August 11th at Noon Eastern time. The cost is just $25 per person. Register Here!


Secrets for Channel Managers (webinar)
Aug. 11, 2017 at Noon ET
Register Here!

Agenda:
Getting Attention
What's more important than Recruiting?
Are you leveraging Pareto?
Elements that Matter

Send your Questions in ahead of time so I can answer them!

Why Your Partner Webinar Attendance May be Down

I have been on over a twenty webinars for partners this year so far with master agencies and providers.  Here are some reasons why attendance may be down.

1. The presentations Suck!
2. There isn't really a point or a solid take-away.
3. It's cloud all day until you want to puke.

I wrote about the poor presentation performance before. In that post, I also mentioned having a Goal to the webinar. What will the number 1 take away be for the attendee?

The constant barrage of cloud noise is not helping. It is Cloud day and night. That would be fine IF the presenters could be specific but they aren't.

I'm not even certain that the providers know the difference between hosting and cloud. (Hint: built-in redundancy.)

They act like Hybrid is a brand new strategy. It's not. It has always been Hybrid - meaning there have always been elements of the computing infrastructure borrowed/rented, hosted and owned. The presentations lack specifics. By that I mean, who buys it; specifi…

It's 5 Percent!

It's just 5% of your partners who bring in 80% or more of your revenue. So why are you chasing down every former mortgage broker and dude who can spell cloud to sign your partner agreement?

It's like you don't even have a Channel STRATEGY. It's like you don't even understand how the channel works.

Do you have a profile?

Do you know how many master agencies that a partner works with?

Do you understand about pass through and cooperation due to egregious quotas and compressing pricing?

Alignment is part of Recruiting

On-Boarding should include a profile

Fast 90

More is never better; neither is bigger. Focused is better.

Secrets of Channel Management - paperback, Kindle and webinar HERE

How to Move the Channel Forward

How to move the channel forward was originally published on LinkedIn as Pushing the Channel to Cloud



 The headline diagram is the technology adoption curve. In the channel, cloud is still in the Early Adopter phase. Despite 10+ years of shouting and begging, the channel has not fully embraced cloud services (UCaaS included).

 In the PBX space, on-premise may have seen the bankruptcy of Avaya; the exit of Toshiba; and the acquisition of Shoretel, but the hardware guys are still there taking in revenue and waving their flag. Ask Digium. They released new on-premise Switchvox models this week.

 Partners are struggling with one thing: Business Model.

I spoke with a Shoretel partner at ChannelCon who was able to transition to cloud sales. He points out the significance of having a revenue stream that would allow him to spend the two years needed to build up a cloud practice.

 A number of partners have been disrupted by Avaya, Shoretel and Toshiba, but also by broadband and price compressio…

Broadsoft and the UCaaS Sector Today

On an analysis call about Broadsoft and Broadcloud today, no mention of Broadsoft selling direct to end-users via the channel. Yet I have it confirmed that channel partners CAN sell BroadCloud seats putting the deals through Ingram or Telarus to get paid commissions.
Now BSFT is like every other vendor: competing directly with their clients.
There is a rumor that BSFT will be launching a CPaaS soon. That would make them compete against Vonage/Nexmo, twilio and their own vendor Bandwidth.com. Any revenue is needed to keep that stock up.
No idea why Avaya is on a call about BSFT, except that Avaya is releasing a new firmware upgrade for its handsets to re-configure them to be compatible with Broadsoft. So that means another handset vendor that is certified for BSFT -- at a time when handset sales are flat or declining in lieu of softphones.
Slack came up in the same breath as UC-One often. FYI.. Slack has more than 5 Million daily users -- that is more seats than MITEL has (3.2 mil…

3 Things Changing the Channel Forever

There are three things happening that will change the channel forever. And cloud isn't one of them, although indirectly it is.

   One of the biggest factors affecting the channel is the Age. Partners are getting old. They are aging out. And no new blood is coming in. About one-third of the channel has already left - either retired, sold or pivoted to other things (like software). One estimate was that 700 new vendors entered the IT/telecom space in the last 3 years. At least that many. All with the expectation that channel partners will flock over and sell their stuff.

    It is more difficult today to be an Agent. When you made big bank selling T1 and LD, it was easy to transition into the Agent space. Today, notsomuch.

 If you sell a 100MB Internet pipe for $800, you make $120 per month for 3 years BUT you will likely not get paid for 180 days after the contract is inked due to process, install, build, turn up and billing.

 If you sell a 110 seat UCaaS deal at $20 per seat (a…

Data Breaches So Far

We’re halfway through 2017 and, according to Lookout’s Breach Report data, there have been a total of 89 major beaches that have exposed over 1.7 billion total accounts or records, according to Lookout Breach Report data.

  Financial and “personally identifiable” information top the list of stolen data types. This includes email addresses (39% of breaches), financial information (31% of breaches), Social Security Numbers (24% of breaches). Read how more people are affected by data breaches than the flu.

Everyone is For Sale For the Right Price

We hear that often, especially in the UC/VoIP space. However, the "Right Price" that many owners have in mind is far removed from the reality of the sector.

Mitel bought $212M in annual revenue and $145M in cloud revenue for total equity value of $530 million. 2.5x Revenue.

8x8 is rumored to be looking for 6x revenue.

Market caps of stand-alone UCaaS players is running 6x revenue, while Windstream's market cap is just one-sixth of revenue. No Rhyme or Reason to it.

Rumor has it that Nextiva is cleaning itself up for sale. At $150M in revenue, how much would that fetch? People forget that the value is determined by the Buyer, not the Seller. A couple of UCaaS players were waiting out better offers, when they chose to take the prevailing offer, which was less than the Dream Price Tag.

To say that everyone is for sale says a lot about the industry too. No one is in it for the long haul. Why? They have already been at it a while and the success is meager and the grind is…

Finally Some UC M&A

MITEL has been hoping that M&A would help its position as a global leader in UCaaS. They have been shouting about 3 million seats, but still can't garner the press that Vonage, 8x8 and RingCentral do. Even Fuze gets a bunch of press as its plays musical chairs.

MITEL has a vision to consolidate and accelerate to the cloud (see prezo deck slide 5)

Mitel is acquiring ShoreTel in an all-cash transaction at a price of $7.50 per share, or total equity value of $530 million and a total enterprise value of $430 million. This represents a 28% premium over the Shoretel stock price.

With Shoretel, MITEL adds 271,000 cloud seats; Combined revenues of approx $1.3 billion; and Recurring cloud revenues of approximately $263 million. This leaves Mitel with $689M in debt.

While Mitel talks about 3 million cloud seats, a majority of those are non-recurring. (In other words no recurring revenue!) Only 588,000 of the 3.2 million are recurring.



I added some color to Mitel's slide. Vonage…

20+ Hosted VoIP/UC Providers

We all know about the Top Hosted VoIP/UCaaS Players. This is the 2017 IHS UCaaS Scorecard:

Vonage, 8x8, RC, Fuze, West, Verizon, Nextiva, Shoretel, Mitel and Jive. Add in Comcast and Cox.
The twist is Star2Star, Netfortis (now owns Fonality), Windstream and Coredial. Star2Star is more a premise play with SIP Trunks than actual UC seats. Netfortis is Genband powered since the name change from Telekenex and their purchase of Fonality was a head scratcher. Coredial is a white label provider with both a Broadsoft and an Asterisk platform. Windstream sells Mitel, Avaya, Shoretel, Allworx (it owns), Broadsoft and Broadview which it recently acquired.

There are 2000+ Hosted VoIP/UCaaS Providers in the US. More than makes any list or report (like IHS). Most of these companies are marketing challenged.  Others think buying an award will be enough noise.  Here are a selection:

Broadsoft:
TPX (formerly TelePacific + DSCI); Evolve IP;AT&T; CenturyLink;MegaPath; Birch; Bullseye; Broadsmart (…

A Look at the Consolidation Wave

There is a lot of consolidation going on in telecom, but it is centered around fiber and data centers. Why? These are assets that can be financed and monetized with a long shelf life. They can be stuffed into a REIT. (Some REITs you may know include: Uniti Fiber, QTS, Digital Realty)

(How long is the fiber shelf life? Look here.)

But where is the consolidation in Hosted VoIP? With baited breath, we wait for the market to start consolidating.  It just isn't happening. The last deal was Broadview being acquired by Windstream in April. Nothing substantial since.  (there were a couple of really small deals).

One reason is that moving customers from one platform to another is a PITA (pain in the asset). Even migrating from a Broadsoft to another one can be difficult when the versions are dissimilar. What breaks at the customer end features and function wise during this process? It is labor intensive.

The last rumored deal was Oracle trying to buy 8x8. 8x8 has a market cap of $1.3B, on…

Telecom Tidbits #2462

Endpoint management by Phonism now supports Avaya Open Standards as well as Cisco, Yealink and Polycom. Is Zayo next for Crown Castle? Crown Castle is a REIT that owns lot sof cell towers. It has also gone after fiber assets by acquiring Wilcon, Sunesys, FPL and now Lightower for $7.1 Billion. One executive thinks there will be more consolidation in Hosted VoIP. I think there will be smaller deals, but big deals are just too ridiculously priced. 8x8 wanting 6x revenue is just stupid talk. In an interview XO's CMO, Jake Heinz, mentions that XO was jus about at $2 billion in revenue. VZ acquired XO from Icahn for $1.8B. What kind of valuation is that? On a similar note, " Seeking Alpha, commenting on the spinoff of assets to Frontier for $10 billion, said, “Of course the cash influx is nice, but it also comes with a diminished earnings power, effectively trading long-term cash flows for short-term cash flows. These assets were worth $0.10 a share in earnings. In the first qu…

The Problem With Most Webinars

Channel partners are invited to so many webinars - from master agencies and service providers. We could spend all month on webinars and at events (but that won't pay the bills). I am often asked, why don't more folks get on our webinars. Well, here's some ideas.

Bad webinars come down to 3 things: Topic, speaker, content.

Topic: the title has to grab people by the throat. It is the Attention Grabber. A/B testing is a smart idea.

The Speaker: They need to practice. Being unprepared means that you didn't value our time. Don't let a technical difficulty with the slides mean you are thrown off. It happens often. Speak without reading me the slides!!!!

The Content: It is more than just the slides. It is about what message you are trying to convey. What would excite your audience. It is about the PARTNERS, not your boss, you company or YOU. All too often, the deck is jam packed with more info than can be puked out in the allotted time. That is disrespectful. It also sho…

On RAD's Radar: the CEO of LANtelligence

LANtelligence CEO, Marty Tracey, did both an interview with me and a podcast. We discuss the changes facing the channel as well as Cloud Contact Center as a Service.

 LANtelligence comes to the space after morphing from a PBX systems integrator. Today, they design, implement and support UCaaS, CCCaaS and other cloud comms for businesses of all sizes in the USA and Canada. Partners are welcome to work with them as we discuss in the podcast below.


The Interview with LANtelligence CEO, Marty Tracey.

 Here is the podcast with him:



The podcast is at Soundcloud.

From Channel Manager to Agent: A Candid Conversation

Yesterday I had a personal, authentic and candid conversation with Amanda England, who is now a Partner Development Manager at BCM One. We discussed what it's like to be an Agent and how that differs from being a Channel Manager. Great insight and some gems of knowledge in this podcast. Take a Listen at SoundCloud.

If you liked that podcast, here are two more podcasts with advice for agents - HERE and HERE.

Why Do We Have a Channel?

Why is there an indirect sales channel? One reason: We are far more responsive to our customers. Another case in point today. The carrier wouldn't let me sell the upgrade due to ROE (rules of engagement). A month later, client still hasn't heard from his account rep. No upgrade. No new revenue for carrier. Dissatisfied client.

Telecom Tidbits # 2461

Some bits of news from around the industry.

Not a good week last week for Birch: They had an all day outage at 56 Marietta that signaled they are hosted not cloud (no redundancy to speak of). Then they had to pay a $6M fine to settle an FCC billing and marketing investigation.

Sandvine will be acquired by PE Firm, Francisco Partners, and combined with Procera Networks. The sale is roughly $420 million USD. The new company will focus on network intelligence.

In a relatively small merger, Fixed wireless ISP GeoLinks has acquired One Stop VoIP.

Crown Castle made a $7B bid to buy Lightower Fiber Networks.

4 Reasons Why Retailers Love NaaS (Network as a Service, which is an SDN powered service). Retail is really the vertical that is buying the most SD-WAN.

Avaya asked the courts for more time to put a re-org plan in place that most of the debt holders would approve. Avaya is also working on opening up their phones to work with other gear (like maybe Broadsoft).

Channel Management: Four Tip…

Secrets of Channel Management

The paperback version of my book, Secrets of Channel Management, is available now on CreateSpace and on Amazon!

The Kindle version has been available for a while. (Get it here.)

To kick off the second half of 2017, I am presenting Secrets for Channel Managers, a 50 minute webinar for channel managers to get some tips, tricks, reminders and Q&A. This webinar will be August 11th at Noon Eastern time. The cost is just $25 per person. Register Here!

Secrets for Channel Managers (webinar)
Aug. 11, 2017 at Noon ET
Register Here!

I will be doing another webinar on the Hosted VoIP/UCaaS Competitive Landscape. This webinar will examine 20 providers out of the 2000 currently operating in the US. It will provide some context as well as analysis of what the marketplace looks like today. Join me on August 25th at 2 pm ET for this data packed hour. REGISTER NOW! channelplaybook.com

The Competitive Landscape of US Hosted VoIP/UCaaS
Aug. 25, 2017 at 2 pm ET
REGISTER HERE!

Are the Numbers Real?

The RC quote came from an investor presentation.


This second screenshot came from Broadview via a Windstream investor presentation on the acquisition.


Today, there is an article about The Agent Alliance in which it describes them as: "Alliance members collectively have offices in 30 U.S. and international cities, priority access to over 11,000 subagents and direct sales resources, and more than 250,000 existing clients – all resulting in a sales engine that books over $2 million in new revenue per month and manages over $2.1 billion in annual billings."

Where do they get these ridiculous guesses about the number of partners? 200K? 300 masters? 11K?

What happened to reality? And truth in investor filings?

Verizon Re-Orgs

So Verizon re-organized again. They formed Verizon Business Markets in February, 2017, after completing the acquisition of XO. "As part of the [new] reshuffling, Jake Heinz, the former senior vice president of marketing and product for XO Communications, has been named chief marketing officer for Verizon Business Markets," reports CRN. Some folks think Janet Schijns was pushed out, but my understanding was that she wanted the CMO gig. Working at Verizon is not an easy thing as you play more politics than you do in DC. It might just have been time to move on. I wouldn't be surprised if she exits telecom. "Word from Janet is that she has a new role and will announce in two weeks," according to CP. "Joe Chuisano, a 23-year Verizon veteran, is now the North America Verizon Business Markets channel chief reporting to Martin Burvill, senior vice president and group president of Verizon Business Markets. In his new role, Chuisano will lead the indirect chann…