Making Sense of IT-Telecom Channel Convergence
Some consider it a pipedream, others a necessity, while still others think it will occur all by itself.
Convergence of the IT channel and the telecom channel has been one of the most discussed challenges of the computing and communications world, for years. These are two remarkably separate channels operating side-by-side and intersecting far less often than one might think.
Separate but similar
Aggregation is the economic concept that has long driven both these channels, so while they do function separately there are significant similarities.
The IT "reseller" channel was created by IBM to adhere to a long-standing rule that nobody but IBM could sell IBM. To create the differentiation between IBM employees and partners, IBM invented the concept of reselling. Their channel partners were to be known as resellers of IBM products. Distributors quickly leveraged aggregation to earn volume-based discounts based on their large stocking purchases. These large purchases aggregated the needs of thousands of small resellers. The distributors re-sold the IBM gear to resellers with a margin added. The resellers then added another layer of margin as they re-sold the products to customers. Manufacturer to Distributor/Aggregator to Reseller to Customer. That was the original IT reseller channel.
The telecom channel has similar roots. Instead of major manufacturers, the major telcos began allowing agents to sell their services. Many of these agents were former employees who wanted to set out on their own. Similar to the IT distributors, some agents saw opportunity in negotiating volume-discount agreements with the carriers. They then recruited "sub-agents" who would pay them a margin to take advantage of better pricing. Then they'd add another layer of margin as they sold carrier services to customers. The enterprising agents who aggregated carrier services in this way became "master agents." So the original telecom channel consisted of Carrier to Master Agent to Sub-Agent to Customer.
The big difference
Since customers could purchase computer products from any reseller, some of the more innovative IT resellers started adding valuable services as part of the hardware and software purchase. Configuration, pre-testing "burn-in," installation, even initial orientation and support services provided a better value proposition. These leaders soon came to be known as Value-Added Resellers (VAR).
Less innovative resellers decided to compete solely on price. Highly competitive, they kept meeting and beating each other’s price, crushing margins not only for themselves, but for their VAR cousins as well.
Minus the margin from the product sale, the VARs could no longer "add" services for free. Again the leaders emerged, offering their services for sale along with highly competitive product prices. Over the next few decades, these resellers would evolve into Solution Providers, Network & System Engineers, and most recently Managed Service Providers (MSP).
Telecom sub-agents suffered no such challenges. Everything they sold was installed and supported by the carriers themselves. They remained focused on selling carrier circuits. When related services like cloud computing came along, they had the customers and the skills to capitalize by broadening their offerings.
Convergence could come from the difference
Taking the view from above, what we see are two separate channels of similar size, but with vastly different priorities.
Some joke that the difference is that telecom channel sub-agents are so much better looking than IT channel MSPs. They even dress better! Ask why they say that and you’ll hear the simple comparison that may ultimately drive convergence to its logical destination.
The telecom channel people keep themselves looking great because they are all salespeople. That’s all they do is sell. They still sell circuits. They sell cloud. They sell mobile. They sell disaster recovery and business continuity. Some even sell co-location services. That's what they do. They sell!!
Ask IT channel/MSP executives what their biggest challenge is and you’ll probably hear them complain bitterly how they cannot find quality sales talent anymore. It gets harder and harder to get anything sold. Their professional and managed sales team is top drawer. They really know their stuff. They create and manage terrific solutions. But nothing happens until someone sells something to someone.
Something for everyone
Now we come to the place where we overstate what should already be obvious.
You take a channel full of people who sell, sell, sell and another channel that delivers great technology services but is challenged to find great sales talent. Put them together and what do you get?
The most powerful computing & communications channel of all time? Perhaps.
The telecom channel gets to broaden its portfolio dramatically, giving them much more to sell to their existing loyal accounts who are ideally qualified to want them. The IT/MSP channel gets the sales engine of its dreams.
Everybody makes more money.
The clue is in the name
The big question is how to get this convergence started. The clue to the answer is in what we call ourselves.
It's time for the leaders to emerge once again. Perhaps it will be an MSP who reaches out to sub-agents looking to partner with them to sell their services. Or a sub-agent sees several of his customers needing a service and sets out to find an MSP who is great at providing it.
They negotiate a working relationship. Perhaps the MSP expresses a cost to the sub-agent and the sub-agent adds their margin to sell the services. Perhaps the sub-agent refers the MSP to their customer and receives a commission. Perhaps they devise a profit-sharing plan.
Next, perhaps they visit a customer together and propose their solutions. Once they’ve gotten their first sale closed the next one becomes easier. And the one after that.
Success breeds success. More MSPs and sub-agents see their competitors succeeding together and decide to try it out for themselves. Convergence creates itself.
Let's give it a little help
Success can only breed success if others learn about it and see it in action. Here's where Channel Insider readers can help! If you’ve already partnered as an MSP/Sub-Agent team, let us tell your story! Email me at firstname.lastname@example.org and share your story with me. We'll then share it here.
Sometimes success needs a little shove.