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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 (average rate), that is $2200 per month. It goes in faster than the pipe but it will require some hand holding and project management. There may be a SPIFF. The commission will likely be about 18%, about $400.

    It takes a lot of these deals to build a book of business. Declining revenues at the carriers means shrinking commissions for partners.

 Telecom is so broken that carriers can barely deliver network services in a standard interval. Ask for something complicated, the mess gets deeper.

Partners spend more time managing installs than selling. Putting bodies on project management or even contract management is a financial challenge with the depressed commissions.

   So we have partners leaving/aging and we have a business model built on commissions that may not work for many people because it takes at least 12 months to get any real income coming in.

 Carriers keep adding more and more partners. This creates less income per partner. It also means exhausted channel managers, diminished partner support and diluted MDF.

   If only providers understood one simple fact: It isn't about more feet on the street. It's about bettering your A and B partners. Pareto is a scientific fact - 80/20. However, as you add more partners it becomes more like 95/5 - where 5% of your partners bring in 80% or more of your revenue. Then why have the other 90%??? It is wasted time recruiting and on-boarding partners that will not produce for you. It is disheartening to channel managers who recruit for quota but don't see the results. And here's the thing IT IS EXPENSIVE to have so many partners!

   Being the 30th provider at a regional master agency or the 15th VoIP provider at a VAD is NOT going to work for you. And if I have to spell that out for you, how do you have your job????

 If you spent the time, effort and money you spend recruiting and working with D agents, working with your A and B Partners, they would produce more -- and be more loyal!!! It is this mentality that will unravel ultimately. As partners sell out, retire, quit or pivot, the business model now doesn't support new partners starting out. Providers can't really work with new partners. (They hope that masters will do that, but on a 80/20 split of $1000 ARPU, there isn't a model there.) They will burn out channel managers who, when they leave, will cost the provider $500,000 or more in lost business, lost partners and hiring/training the replacement (then re-establishing those relationships).

Comments

  1. As I read this I keep thinking the Channel Partner needs to lock into a go getter agent at the provider. Someone that will help close out deals and make sure they get installed with little to no work on the Channel side. I had a great book of Channel Partners at my last employer but since I've switched they are reluctant to follow. We paid 18% over the term. Now I pay =1 month MRC once closed. ITs faster pay up front rather wait for over time payments. Partners don't see the fast money it could be but rather the over time picture. At the speed of change, I'd be afraid to get into a payment plan, then have a job switch or provider change things and loose out. I would want faster up front money from a Provider that gets things closed out and installed. Example- me.
    Its not more money, its more up front money in a timely fashion.
    You Thoughts?

    ReplyDelete
  2. The channel manager at the provider is handling about as much as they can - recruiting, quoting, helping close deals, pre- and post sales activities. They can't do much more and still make quota.

    Some providers - like AT&T - do pay upfront. Most pay residual. In UCaaS, you can get a nice SPIFF though. So if you carefully design your sales plan aligned with the right comp plan, it could work - until it changes! Also, a couple of master agents will finance the commission in upfront payments.

    Certainly upfront money helps to move partners that have a hardware sales component as their business plan to selling cloud and other services. It is up to the channel partner to take the time to figure out what business model he wants to be in for the future.

    ReplyDelete

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