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CONTENTS Martin Vilaboy Editor-in-Chief martin@bekabusinessmedia.com Bruce Christian Senior Editor / Event Coordinator bruce@bekabusinessmedia.com Brady Hicks Contributing Editor brady@bekabusinessmedia.com Percy Zamora Art Director percy@bekabusinessmedia.com Rob Schubel Digital Manager rob@bekabusinessmedia.com Jen Vilaboy Ad Production Director jen@bekabusinessmedia.com Berge Kaprelian Group Publisher berge@bekabusinessmedia.com (480) 503-0770 Anthony Graffeo Publisher anthony@bekabusinessmedia.com (203) 304-8547 Michael Burns National Account Executive michael@bekabusinessmedia.com (262) 993-9116 Beka Business Media Berge Kaprelian President and CEO Corporate Headquarters 10115 E Bell Road, Suite 107 - #517 Scottsdale, Arizona 85260 Voice: 480.503.0770 Email: berge@bekabusinessmedia.com ADVERTISER INDEX ACS Cloud Partners (www.asccp.com) 11 AireSpring (www.airespring.com) 9 C3 Complete (www.c3cloud.com) Back cover CELLSMART (www.cellsmart.io) 36 Clear.Live (www.ClearLive.com) 25 ConectUS Wireless (www.conectUS.com) 13 Console Connect by PCCWGlobal (www.consoleconnect.com) 2 Crexendo (www.crexendo.com) 35 CVx (www.cvxexpo.com) 20-21, 31 FaxSIPit (www.faxsipit.com) 37 FirstComm (www.firstcomm.com) 29 Granite Telecommunications (www.granitenet.com) 15 HugeUC (www.hugeuc.com) 27 NHC (nhcgrp.com) 3 Profitec (www.profitecinc.com) 19 Rapidscale (rapidscale.net/partners) 7 Sophos (www.sophos.com) 17 Telesystem (www.telesystem.com) 5 Windstream Enterprise (www.windstreamenterprise.com) 23 Zero Outage (www.zerooutages.com) 41 Disclaimer: This index is provided as a free service to our advertisers. Every effort is made for accuracy, but we cannot be held liable for any errors or omissions. THE CHANNEL MANAGER’S PLAYBOOK 8 Beyond the Acronyms For channel marketers, partner models begin to blur By Martin Vilaboy 12 It’s Still ITDMS’ Kitchen Cloud marketers cannot underestimate the prevailing influence of IT decision makers By Martin Vilaboy 22 Where Have All the Cowboys Gone By Peter Radizeski 28 The Morphing ‘MSP’ Model The recent burst in cloud-delivery changes what is means to resell managed services By Martin Vilaboy 34 Digital Transformation Success in the Midmarket By Paul Kozak 38 Let’s Make Customers Happy The emerging SD opportunities for partners and providers By Peter Radizeski Volume 17: Channel & IT Transformations © 2023 Beka Business Media, All rights reserved. Reproduction inwhole or in any formormediumwithout express written permission of Beka Business Media is prohibited. ChannelVision and the ChannelVision logo are trademarks of Beka Business Media 4
For channel marketers, partner models begin to blur By Martin Vilaboy Beyond the Acronyms All the way back to the early days of deregulation and divestiture, providers of communications and access services have enjoyed a pretty clear path for channel marketing. Back in the day, if a telecom provider wanted to ramp up partner sales, it would seek out strong sales agencies or enlist the help of one of the big agent aggregators. More recently, phone system and IT resellers emerged as logical up-sell partners due largely to the opportunity to bundle equipment with connectivity and collaboration services. And during the past several years, channel program emphasis has largely focused on signing up managed services providers (MSPs). But as we move into the post-pandemic environment, after the acceleration toward digital transformation has altered buyer behavior, acronyms are becoming less and less important to providers. Partners that can play the role of “trusted solution advisor,” make no mistake, will be the winners moving forward, as enterprise IT executives must navigate increasingly complex technology stacks that play increasingly larger roles in every part of the business, often 6 THE CHANNEL MANAGER’S PLAYBOOK
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while faced with a shortage of qualified IT personnel to hire. The required characteristics and capabilities of a trusted advisor, however, are not exclusive to any partner acronym or model. In turn, channel managers of communications and connectivity solutions face a less-defined go-to market strategy then they possibly have ever encountered, leading to the recognition of and marketing toward a more diverse set of partner business models. Of course, the traditional telecom agents, for their part, are consolidating and retiring, and there has been virtually no injection of youth to sustain the telecom agent/subagent model. MSPs, meanwhile, still arguably the darlings of channel program marketers, never truly represented the opportunity that was expected from them, as many folks are finding out. “Vendors that blindly seek MSPs because of model alignment look past their limited capabilities, lackluster sales records, subpar renewal performance and inability to evolve their models for future market conditions,” warned analyst at Channelnomics in a 2022 report on the MSP channel. For starters, MSPs tend to prefer mature, stable technologies that can be combined with their scalable and repeatable offerings, argued Channelnomics analysts, and be delivered for a price based on the number of seats or devices. So emergent or “transformational” solutions that don’t fit into that mode of operation will be of little interest to them. Likewise, “MSPs haven’t expressed a great interest in moving up the technology stack to business applications,” said the research firm, limiting the appeal of many cloud-based or SaaS solutions. Meanwhile, MSPs typically prefer a “sell-to” model, whereby they combine products and services into a bundle that are sold directly to the end users and billed by the MSP. Technology vendors often prefer the “sell-thru” model in which the end users are responsible for the payment. “In a classic sell-thru model, tech vendors have a pretty clear understanding of how their products are positioned, priced and delivered,” Channelnomics researchers explained. The “sell-to” model “means tech vendors lose control over how their technologies are priced, marketed and paid for,” they continued. MSP also might not be the best fit for providers looking to land the proverbial “whale.” According to separate reports from CompTIA and IT solution provider Datto, MSP tends to service the smaller end of the SME (small to midsized enterprise) market. According to Datto’s survey of more than 1,800 MSP partner organizations, 71 percent of respondents primarily serve businesses with between 20 and 200 employees. That figure was 84 percent in the 2021 survey. Just 3 percent of MSP channel partners serve clients with more than 300 employees, and well more than a third reported to primarily serving business with 100 or less employees. The majority of MSP clients are spending between $5,000 and $15,000 per year on managed services, showed the Datto data, while nearly seven in 10 MSP partners have revenues of less than $5 million. Perhaps this should come as little surprise, since MSPs tend to provide the greatest value to firms that lack certain internal IT resources, effectively eliminating the largest enterprises as potential prospects. Perhaps equally important, “MSPs are typically more skilled at systems administration and troubleshooting than customer prospecting and deal closing,” Channelnomics researchers pointed out, and are underinvested in sales excellence, customer success and marketing, while playing “a limited role in the strategic mission of customers.” This despite a time when technology providers are placing increasing emphasis on customer experience, retention and enablement, while business decision making is increasingly made by “buying circles” that include line of business managers along with IT executives. Who’s Up? Many channel veterans we spoke to believe IT hardware and software VARs that adopt recurring revenue models are best positioned to take advantage of the current environment. That’s particularly true for the contestants willing to truly embrace telecom and related services rather than treating them as “other services.” VARs also might be a better fit for larger customers that have in-house IT, working as a supplement to internal resources rather than a replacement. They are also well-suited for the logical bundling of connectivity and communications with the growing number of devices being deployed in corporate networks. Already, larger VARs including Peak, Barcoding and Lowry, among others, are beginning to dedicate budgets and teams to monthly recurring services. It probably won’t be that easy, however. Instead, channel marketers could face a landscape in which the next primary partner target, or “the next MSP” so to speak, is “none of the above.” Rather, channel programs will need to weave their way through a broad and varied base of potential partners, including many that have adopted practices of several types of partners and don’t neatly fit into any of the traditional categories (agent, MSP, VAR, ISV, cloud broker, integrator, etc.). Who MSPs Currently Serve Customer with 20 to 50 employees 17% Customer with 50 to 100 employees 20% Customer with 100 to 150 employees 13% Customer with more than 300 employees 3% Customers with annual spend between $5K and $10K 25% Customers with annual spend between $10K and $15K 28% Customers with annual spend between $15K and $20K 20% Customers with annual spend between $20K and $30K 12% Source: Datto MSP sur vey, 2022 8 THE CHANNEL MANAGER’S PLAYBOOK
A recent slew of partner program updates coming from major tech companies, for instance, included little emphasis on the usual channel acronyms and silos and much emphasis on “flexibility” in working with “multiple types” of partner models and modes. While certainly still focusing on its large reseller base, VMware partners now can pursue “one business model, depending on their core competency, or there can be many business models, depending on how they execute that customer lifecycle with their end users,” said Kaushik Ram, senior director of partner programs and experience at VMware, upon a program update announcement last year. Partners won’t be typecast into particular roles, he noted. As part of the first material change to Microsoft’s program in many years, said Rodney Clark, corporate vice president of global channel sales and channel chief at the Redmond, Wash., company, the updated Microsoft Cloud Partner Program “spans partners that sell services, develop software offerings or focus on devices.” Microsoft officials emphasized the goal of backing all partners regardless of business model, it was reported. “This is a program for all partners – no matter what type of business model you have,” added Nick Parker, corporate vice president of global partner solutions at Microsoft. “There is something in there for every partner to differentiate their offerings to their customers.” CX & Enablement One thing seems pretty certain, “proximity to the customer” is key, said analysts at IDC. “Quality CX” is the new mantra, and for good reasons. Customers face complex problems and rapidly evolving environments. And prospects usually have done the majority of their discovery research before they are even touched. Getting those customers is tough. Not keeping them eliminates any real value. In comes the “trusted advisor” that can address their important questions, understand the triggers and business needs of the customer and stick through beyond implementation to help drive intended outcomes. It’s certainly not an easy role to play, but it’s not one that’s particular to any partner model. It’s also why we are seeing channel reward programs starting to shift from sales- and transaction-based tiers to points-based systems that reward partners for customer experience achievements such as product and customer enablement training, post-sales activity and willingness to share and integrate customer data. When announcing the latest retooling to Microsoft’s partner program, Clark pointed to research showing how a group of partners that invested in Microsoft’s advanced specializations, which let channel companies differentiate across a range of technical fields, grew twice as fast as a group not participating in that program. A group that in addition to pursuing specializations also invested in digital sales via cloud marketplaces, emphasis on partner-to-partner engagement and participated in Microsoft’s co-selling programs grew at 140 percent. Not surprisingly, Microsoft seeks to “get all the partners to participate in that 140 percent growth,” Clark told TechTarget’s MicroScope. As cheesy as it may sound, finding productive channel partners within the current and coming ecosystem could be less about partner business models and the “what” that is being delivered and more about developing true partnerships. Certainly, serving and retaining customers will require partners and providers that are willing to deeply cooperate, share and integrate throughout the entire customer lifecycle. On one hand, cloud and digital transformation have greatly expanded the potential base of viable partnervendor relationships. On the other hand, channel program marketers and partners have a less clear and defined path to finding ideal partnerships. o Drivers for Changing Partner Business Models Better revenue/profit potential 50% To stay competitive/avoid obsolescence 46% Customers buying more technology direct 39% Customer demand for managed services 38% Positioning to take advantage of trends 35% Vendors pushing in new directions 22% Positioning the company for a sale or M&A 19% Source: CompTIA, 2023 Incidence of Business Model Change for Channel Firms Source: CompTIA, 2023 What types of t ols do you use to manage a d optimize cloud usage? Source: Anodot ‘2022 State of Cloud Cost Report’ Employees with women managers are more likely to say tha manager has supported and helped them over the past year. e following disruptors will ? 38% 34% 27% 19% Native tools Actions taken by managers to support employees, by manager’s gender, % Third-party solution that manages multi-cloud environments M ltiple thi d-pa ty solutions Built our own One third-party solution nce UK Spain U.S. Italy Singapore Germany Brazil 40% 60% 80% 100% 5% 19% 15% 10% 81% 11% 65% 19% 72% 18% 18% 13% 21% 12% % 20% 14% 17% 9% 25% 19% 26% 7% 4% 9% 6% 6%3% 3% 19% 14% 24% 10% 17% 32% 23% % 63% g Piloting Small-scale Large-scale 1% 32% 37% 42% 44% 50% 53% 42% 44% 43% 19% 15% 21% 15% 13% 53% 33% Some extent Great extent ze, By Organization Size, 2016-2027 (USD Million) 2,360.60 Have already undergone business model change Currently undergoing business model change Considering a business model change No business model changes planned 24% 25% 19% 16% 35% 27% 38% 30% 25% 42% 31% 33% 9% 6% 11% 17% Large Mid-sized Small Micro 10 THE CHANNEL MANAGER’S PLAYBOOK
It’s fairly well documented how IT buying decisions are no longer made by one or two people within an organization. Rather, there is usually a type of “tech buying collective” that holds influence over decision making, with an average of six to eight key stakeholders possibly weighing in on the purchasing process of cloud technologies, show surveys by business IT member community Spiceworks. Often larger companies will have even larger buying collectives made of 10 decision makers or more. The research also suggests that the larger the group of decision makers, the longer the buying cycle. “There’s no single B2B buyer persona that accurately represents every IT buyer making purchase decisions,” said Spiceworks researchers. “Instead, stakeholders with unique needs, preferences and objections make up a buying collective.” Generally included in the buying collective are IT decision makers (ITDMs) who manage and support the technology on a daily basis and line of business decision makers (BDMs) who might be end users or might oversee the approval process. While this certainly means there are now more cooks in the kitchen who must be engaged and persuaded, the marketers and sellers of cloud solutions must be careful in their efforts to “convert the entire kitchen” not to lose sight of the fact that ITDMs are still the head chefs in the room, and their influence remains strong throughout the entire purchase process. Cloud marketers must speak to a circle of stakeholders, but it shouldn’t come at the cost of underestimating the prevailing influence of IT decision makers. IT’S STILL ITDMS’ KITCHENS By Martin Vilaboy 12 THE CHANNEL MANAGER’S PLAYBOOK
“Our research on the cloud buyer’s journey shows members of the buying collective turn to internal tech experts early and often,” said Spiceworks researchers. What’s more, while both ITDMs and BDMs both tend to seek out the same information, ITDMs are more likely to consume marketing content than BDMs, and they are significantly more likely than BDMs to engage with tech marketing through webinars, in-person and virtual conferences, online communities, social networks and blogs, show Spiceworks findings. These types of marketing engagements cannot be underestimated, as it’s estimated that 70 percent of the buyer journey takes place before a sales engagement, said the Spiceworks report. Overall, 59 percent of all decision makers said they do the majority of their tech purchase research online, without speaking to a salesperson. Among ITDMs specifically, 64 percent said they avoid engaging with sales during this process (vs. 52 percent of BDMs). Among small businesses, three-quarters of ITDMs prefer researching primarily online without talking to sales. Cloud Gatekeepers While it’s true the initial evaluation of a new IT service may stem from a problem experienced by BDMs and the line-of-business end users who report to them, ITDMs largely remain the gatekeepers for new cloud solutions. Spiceworks’ analysis of the levels of engagement by ITDMs vs. BDMs throughout the various Source: Tripwire, 2019 ITDM vs. BDM: When decision makers are involved during cloud buyer’s journey Source: Spiceworks ITDM vs. BDM: The most wanted information during the cloud buy rs jouney 65% 70% 68% 33% 47% 37% 58% 20% 27% 38% 22% 30% 36% 44% Determine need Evaluate solutions /vendors Recommend solutions/vendors Approve funds ITDM BDM Make final decisions Approve purchase Implement/ manage solutions Source: Spiceworks Transparent pricing information Detailed product or tech specs Product demo/ walkthrough Deployment guides Side-by-side feature comparisons High-level summaries Conversation with solutions architect Compliance (e.g, GDPR, HIPPA, SOX, PCI) ROI/TCO estimates 59% 51% 58% 49% 58% 47% 58% 46% 53% 48% 50% 44% 50% 42% 49% 38% 47% 40% ITDM BDM Source: Tripwire, 2019 ITDM vs. BDM: When decision makers are involved during cloud buyer’s journey Source: Spiceworks ITDM vs. BDM: The most wanted information during the cloud buyers jouney 0 10 20 30 40 50 60 65% 70% 68% 33% 47% 37% 27% 38% 22% 30% 36% 44% Determine need Evaluate solutions /vendors Recommend solutions/vendors Approve funds ITDM BDM Make final decisions Approve purchase m Source: Spiceworks Transparent pricing information Detailed product or tech specs Product demo/ walkthrough Deployment guides Side-by-side feature comparisons High-level summaries Conversation with solutions architect Compliance (e.g, GDPR, HIPPA, SOX, PCI) ROI/TCO estimates 59% 51% 58% 49% 58% 47% 58% 46% 53% 48% 50% 44% 50% 42% 49% 38% 47% 40% ITDM BDM 14 THE CHANNEL MANAGER’S PLAYBOOK
"We are appreciative of all of our resellers taking on new frontiers and creating unique practices that are accelerating LTE and 5G Wireless WAN adoption. Granite has worked hard to receive this recognition.” -Eric Purcell, Senior Vice President of Global Partner Sales at Cradlepoint www.granitechannels.com channel-sales@granitenet.com Partner with us. Grow together. Don't just take our word for it... Contact us 877-884-5200 LEARN MORE LEARN MORE “Granite’s ability to consistently leverage our technology to help drive positive outcomes for customers across industries, at scale, set them apart and made them one of our 2022 Partners of the Year.” -Julianne Zuber, Head of North America Channels at Juniper Networks LEARN MORE ““Granite’s SD-WAN has demonstrated true innovation and is leading the way for Software Defined Wide Area Network. I look forward to continued excellence from Granite in 2023 and beyond.” - Rich Tehrani, CEO, TMC “I am honored to recognize Granite with a 2023 Product of the Year Award for its commitment to excellence and innovation” - Rich Tehrani, CEO, TMC LEARN MORE "Granite Channels has made a commitment to engaging with partners in a more impactful way, not only through the expansion of our team and both the solutions and support we provide, but by bringing partners into the workings of Granite. " -Charlie Pagliazzo, Granite VP Channel Sales
stages of the buying process found that ITDMs are about twice as likely to be involved when it comes to determining need, evaluating solutions and recommending vendors. Perhaps not surprisingly, ITDMs become less involved than BDMs when funds and purchases are approved, and final decisions are made. And once a decision is made, ITDMs once again become the primary players to implement and then manage the solution on an ongoing basis, making them central to retention efforts. That’s especially important for cloud services, the Spiceworks report points out, in which recurring subscriptions are dependent on ongoing user satisfaction. “Because ITDMs will continue to evaluate the product over time, sales and marketing teams are advised to stay on ITDMs’ good sides if they wish to retain customers,” they advised. Even during the stages in which ITDMs are less involved in the decision making, their recommendations remain highly influential. “It’s a given that business decision makers trust IT professionals to make tech decisions and recommendations,” said the Spiceworks report, “but it may come as a surprise that BDMs also trust ITDMs’ business savvy as well. Indeed, nearly threequarters of BDMs said ITDMs in their organizations understand business needs well enough to make informed tech decisions. Interestingly enough, “the inverse is not necessarily true,” Spiceworks researcher continued. While BDMs give themselves high marks for their tech know-how, ITDMs don’t necessarily concur. A full 58 percent of BDMs self-reported understanding tech well enough to make informed tech purchase decisions, but only 41 percent of ITDMs agreed. It should be noted, however, that IT decision makers in larger organizations had a higher opinion of their BDM peers, as 56 percent of ITDMs in large organizations (500+ employees) said BDMs understand tech well enough to make informed IT purchase decisions compared to only 34 percent of ITDMs in SMBs (1-499 employees). Looking specifically at the differences in marketing content consumption preferences, “ITDMs want to get a good feel for a product before making a recommendation to business decision makers,” suggested analysts at Spiceworks. Since cloud-based solutions lack tangible products, ITDMs say online demos/walkthroughs, tech spec sheets, how-to guides, handson labs and webinars are particularly important to gaining an understanding of what it’s really like to use the product before their organization makes a commitment. On the other hand, BDMs tend to gravitate toward word-of-mouth, valuing the opinions of existing users and analysts, showed the surveys. “For example, BDMs have a stronger preference than ITDMs for content that includes interviews, case studies, testimonials and thirdparty research.” Incidentally, BDMs are also more receptive to advertising or podcasts when evaluating a cloud-based solution. ITDM vs. BDM: Differences in Most Useful Content Types in Cloud Purchase Process Source: Spiceworks How-to demos/ walkthroughs Technical spec sheets How-to-Guides Hands-on-Labs Webinars or live online events Interviews with product experts Case studies Customer testimonials Articles/blogs Research reports Commercials/ promotional videos Podcasts 50% 31% 39% 28% 36% 24% 33% 20% 28% 19% 13% 20% 12% 18% 12% 16% 16% 9% 10% 18% 6% 10% 4% 8% ITDM BDM 16 THE CHANNEL MANAGER’S PLAYBOOK
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Cost and Security Perhaps the biggest difference in the type of content that resonates with each group of decision makers comes in the area of costs. While 62 percent of BDMs believe using public cloud is cheaper than self-hosting applications, only 46 percent of ITDMs believe this to be true. Overall, only 27 percent of U.S.-based ITDMs believe that using the cloud is cheaper than self-hosting. “This pessimism represents a challenge for tech marketers, especially because IT professionals might be initial gatekeepers that have the power to rule out a solution early in the buyer’s journey,” warned Spiceworks analysts. Another area of misalignment among ITDMs and BDMs is around payment preferences. Across all geographies, 55 percent of BDMs say their organizations would rather pay for tech infrastructure as an operational expense (opex) rather than a less frequent but larger capital expense (capex) compared to 47 percent of ITDMs. Among U.S. organizations surveyed, the gap is even wider: 44 percent of BDMs in the U.S. said their organization prefers opex over capex compared to only 27 percent of ITDMs. Likewise, BDMs are more likely to view adopting cloud technology as a way to reduce the need for potentially expensive hires or additional training. Nearly six in 10 BDMs said using cloud services can reduce the need for developing specialized IT skills and expertise in-house, compared to half of ITDMs. BDMs also are more likely than ITDMs (49 percent vs. 39 percent) to say their organization follows a “cloud-first” technology strategy. Turning to the also-important issue of security, a plurality of IT buyers said cloud providers offer superior security compared to their own organization’s data centers, but significantly more BDMs hold this belief (59 percent) than ITDMs (50 percent). “Additionally, our data suggests some BDMs might have a blind spot regarding cloud security,” said Spiceworks researchers. When using cloud-based B2B solutions, companies essentially pay for the use of infrastructure and services maintained by a third party, continued Spiceworks researchers, potentially leading BDMs to assume their cloud providers will provide adequate security and safeguard everything. However, the “shared responsibility model” for security and compliance in the cloud says service providers (such as Amazon Web Services or Microsoft Azure) are responsible for the underlying infrastructure of the cloud, explained Spiceworks researchers. At the same time, customers are responsible for what’s running on top of that infrastructure, including their own data, access management settings, applications and configurations. “While we found that the majority of companies (55 percent) have evaluated and addressed the ‘shared responsibility model’ for security and compliance as part of their cloud strategy, there’s a disconnect between ITDMs and BDMs,” said the report. In small businesses (1-99 employees), for example, 57 percent of BDMs think that they’ve addressed the shared responsibility model compared to only 37 percent of ITDMs. The same phenomenon exists in medium-size businesses (100-499 employees), where 71 percent of BDMs think they’ve addressed the shared responsibility model, compared to only 44 percent of ITDMs. ITDMs and BDMs are much more aligned in larger organizations, where 73 percent of ITDMs and 70 percent of BDMs say they’ve addressed the shared responsibility model. Forced to consider a tech buying collective made up of stakeholders with unique needs, preferences and objections, marketers of cloud solution can no longer rely on a one-size-fits-all approach. Rather, they must have a grasp of the key differences between ITDMs and BDMs and the specific objections that might need to be overcome. At the same time, cloud solutions marketers must remain in tune with the types of messaging and materials that ITDMs in particular are seeking, as IT remains central to the cloud purchase journey despite its level of direct involvement in any specific steps along the way. o How important is optimizing spending and reducing the cost of existing cloud services? Source: Anodot ‘2022 State of Cloud Cost Report’ What are your top challenges to controlling cloud costs? yer’s journey ITDM vs. BDM Beliefs about Cloud Costs 0 60 37% 58% 20% 27% % al s Approve purchase Implement/ manage solutions 59% 58% Source: Spiceworks Cost of cloud cheaper than self-hosting Cloud reduces need for specialized expertise Organization prefers capex over opex Organization employs “cloud first” strategy 46% 62% 50% 59% 47% 55% 39% 49% ITDM BDM Very important Extremely important Somewhat important Hardly important 59% 30% 10% 1% Gaining true visibility into cloud usage and costs Complex cloud pricing Complex, multi-cloud environments 49% 50% 53% 18 THE CHANNEL MANAGER’S PLAYBOOK
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Business Meets Pleasure in the Desert at CVx Scottsdale For more info contact us | berge@bekabusinessmedia.com 480-503-0770 CVx Attendance Includes l Independent Agents & Technology Solutions Brokerages (Master Agents) l MSPs & IT Partner Distributors, Resellers & Sales Consultants l Communications & Cloud Solutions Providers l Cybersecurity and Software Vendors TSB representation at CVx 2022 included Telarus, TBI, Teledynamic, Intellysis, Sandler Partners, Avant, AppSmart, Jenne, BCM One, Moruga and NHC Location Educational Content Four concurrent tracts to recharge partner sales efforts for 2024: l Sales Training Tract l Financial Tract l Emerging Tech Tract l Cybersecurity Tract Agenda Highlights l 3 Days of Expo Hall (Tightened Hours) l 2 Days of Educational Sessions & Bootcamps l Opening Day Golf Tournament l Opening Night Reception l Series of Sponsored ‘Meet-Me’ Events l Complimentary Expo Hall Meals & Refreshments l Expo Hall Networking Events EnTelegent Solutions EPIC iO Ericsson (Silver) Fastlink Software First Comm FISPA (Fiber Internet Service Providers) FluentStream (Bronze) For2Fi, Inc. GoldSky Cyber Security GoTo (Bronze) Grandstream Granite (Bronze) Gravity Systems, Inc. GreenStar Marketing (Bronze) GTT (Bronze) Hiya (Bronze) Infiflex IntelePeer Intermedia (Bronze) Iron Mountain Data Centers Jabra Jenne, Inc. (Silver) Kaduu Konftel Level.AI Lochbox MACH Networks (Silver) Malwarebytes 1stPoint Communications 888VoIP (Bronze) Abundant IoT (Gold) Aircall (Silver) AireSpring (Silver) Altaworx / AMOP Arelion Aryaka (Silver) Astound Business Solutions Azuga (Gold) Bicom Systems (Silver) Bigleaf Networks Blackfoot Communications (Silver) Business & Bourbon (Bronze) BuzzTheory C3 Complete (Gold) Clear Live (Silver) Compliance Solutions (Bronze) Console Connect Coro Cox Business (Silver) Crexendo (Silver) CyberReef (Bronze) Cyolo DE-CIX North America (Bronze) Dialpad DynaLink Energy by Tune Mojenta MyCloudIT National Retail Solutions, a division of IDT Corporation NHC (Platinum) Nextiva (Platinum) NTS Direct (Gold) NUSO (Gold) Ooma Inc (Silver) OpenVPN Orca Wave Peerless Network phoenixNAP Poly (Gold) Profitec Billing Services Quest Technology Management (Gold) Red Jacket Solutions, LLC Reinvent Telecom Rev.IO (Bronze) RingCentral (Silver) RITALIA FUNDING (Bronze) Sage Management (Bronze) Sandy Beaches Software SCB Global Simplified Networks (Bronze) SkyAMP SkySwitch Snapcom LLC (Bronze) Snom, a Vtech Company (Gold) Sophos (Silver) Spectrum (Silver) TailWind Voice & Data Technology Solutions Xchange (TSX) Telarus (Silver) Telecom for Change TeleDynamics Telesystem (Platinum) Telispire Telstra (Bronze) Thermo Credit ThreatLocker (Bronze) TimelyBill (Silver) TMCnet/ITEXPO Touchstone Technologies Inc. (Bronze) TouchTone Communications Trifecta Telephony Uncode (Platinum) UScellular (Bronze) Viirtue LLC (Silver) VoIP Supply (Bronze) Wildix Inc. (Silver) Windstream Enterprise (Platinum) xAmplify Xcitium (Silver) Zadara 2022 CVx EXHIBITORS & SPONSORS INCLUDED Talking Stick Resort & Casino, Scottsdale. Ariz.
22 THE CHANNEL MANAGER’S PLAYBOOK By Peter Radizeski Where have all the cowboys gone? There is only one publicly traded broker (TSB) that is growing at 18 percent. This despite hundreds of vendors leaning on the channel for sales. One vendor called to ask where the next avenue for sales would come from. A vice president of a TSB asked me the same thing. These are all indications that the traditional telecom agent channel is slowing down. What is happening to the traditional telecom partner? Partners are retiring or doing some form of investment with the private equity-backed TSBs. Going through any kind of investment requires time and attention that would be taken away from sales. For a good four months, sales activity would be secondary. There has been pricing compression, as well. Network, voice, UCaaS and even SD-WAN pricing is in decline. Renewals mean either increasing what the customer currently has or writing down revenue. This doesn’t add to the year-overyear revenue numbers. Neither does the pandemic churn. The MSP segment of the channel is a hot target for vendors. That segment has weathered its own frenzy of M&A. There is a lot of variety in what an MSP looks like. A few former CLECs – such as AireSpring and TPx – now look like managed services providers. Informa puts Expedient, a former data center company, on its “MSP top 25.” Black Box and Presidio, which waffle be-
tween VAR and MSP, are nationwide with revenue near a billion. There are global ones such as Dimension Data. Mostly, any IT shop attaining 60 percent of its revenue from MRR is called an MSP. According to data from CompTIA and other sources, there are more than 40,000 MSPs operating in North America with almost 60 percent reporting less than $2.5 million in revenue. MSPs with less than $1 million in revenue account for 30 percent of them. The majority of MSPs (84 percent) reported serving businesses with 20 to 200 employees. What does all this mean? The MSP may be an attractive partner segment for vendors, but it has a lot of subsets. If a vendor is not targeting businesses with 20 to 200 employees – which is the sweet spot of the SMB market – then the majority of MSPs won’t move a revenue needle for them. These MSPs by their own admission do not target mid-market or enterprise. (It would help if vendors knew their target market and the partner profile.) One TSB claims 8,000 to 9,000 partners, depending on the press release. When speaking with industry veterans, most believe that there aren’t more than 6,000 active partners. If 10 percent of those are retiring or slowing down, where will the sales lift come from? Where are the replacement partners? There aren’t enough new partners entering the channel. More than 10 years ago, alternative providers including CLECs and IXCs not only recruited on college campuses but spawned new partners. Sales reps let go or who quit became partners. Today, there isn’t much recruiting going on. We still see some long-time vendor employees becoming partners. But is it enough to grow the channel out to fit the vendors need? One TSB discussed that there will be a new segment of partners. There will be at least two. The ISV segment is already a big part of the IT channel, especially around software ecosystems such as Microsoft and Salesforce. The other segment is the born in the cloud partner that is cloud first, selling software, digital transformation and customer experience. These firms can look like a digital marketing firm, a consulting shop or just about anything. There is a slew of them out What is your organization’s annual revenue? Managed Services Revenue by the Numbers Source: Datto’s Global State of MSP, 2020 Americas APAC EMEA 0 10% 20% 30% 40% 50% Less than $200k $200 to $499k $500 to $999k $1m to $2.49M $2.5M to $4.9M $5M to $7.49M $7.5 to $9.9M $10 to $19.9M $20 to $49.9M More than $50M Approximately how many clients does your company currently provide managed services to? Who MSPs Serve Source: Datto’s Global State of MSP, 2020 Americas APAC EMEA 0 15% 10% 5% 20% 25% 30% 35% 1-10 11 to 50 51 to 100 101 to 250 251 to 500 501+ 24 THE CHANNEL MANAGER’S PLAYBOOK
there, but they cannot be recruited the same way the traditional agent is. Usually, these partners have their own intellectual property that they are selling – and everything else is ancillary. Therefore, vendors need to understand what aligned and ancillary partners look like and need. Two very different animals. CPA firms have taken on telecom expense management (TEM) with some even playing the part as the technology partner. Not all CPA firms like the partner part since it does not bring in enough income to put the worries of conflict of interest to bed. Transactional salespeople that can sell network and voice struggle to sell non-transactional services. The ARPU on network and voice has steadily declined – even at the ILECs that are trying to survive a deep decline in wireline revenue. The transactional sales rep needs to make more and more deals to stay afloat. That partner does not have the time or inclination to learn new products and how to sell them – unless they are very adjacent to what is currently selling and is almost as easy to close. How many products fit that bill? Not many. Transactional salespeople are motivated by quick sales. This is what keeps them going. Someone who sells a Boeing airplane would not do well selling broadband. The whale hunter enjoys the hunt – and landing a huge deal. Beyond the motivation to sell is the skill set of follow up, research, preparation, presentation and more that is required for a long sales cycle. CCaaS has a nine month to one-year average sales cycle, according to analysts. Someone happy selling transactions of broadband, 5G, POTS and the like would not enjoy a one-year cycle. One vendor asked me about VARs as partners. Channel Partners spent a couple of years trying to marry up VARs with agents. Several TSBs launched programs around VARs to little output. A distributor acquired a TSB and mistakenly thought that the two companies would cross-pollinate. VARs didn’t gravitate to sell telecom and agents weren’t pushing gear. The business models are entirely different. Value added resellers have a business model wrapped around a vendor or two, such as Dell, HP or Cisco. To maintain gold status, they need to sell that vendor first. If they lose status, it hurts customer service and margins. Additionally, the business model has technicians on payroll, who need to be kept busy, billing, in order to sustain payroll. VARs and interconnects (the on-premises PBX partners) have a similar business model. For the VAR to bring on a line of business separate from its main vendor, it would need to be profitable, fairly easy and ancillary. We have seen many vendors try to make the shift from a hardware business to a monthly recurring business and fail. It is a shift in skill sets, financial model, sales and service. Also, VARs traditionally are concerned with LAN and IT, not WAN and telecom. Ordering something from Ingram to be shipped to a customer is a fairly straightforward process that can be tracked. Installing an internet circuit or UCaaS service is not straight forward nor transparent. FOC dates used to be real; now they are just randomly generated numbers. So where is the growth in channel output going to come from? A marketplace? An industry changing platform? Likely, it will take a number of approaches to find good-fit partners that will sell, recommend or incorporate telecommunications and software into their packages. It won’t be one silver bullet. o Peter Radizeski is president of RAD-INFO INC., a telecom strategy and marketing consulting agency. He is a sales trainer, writer, consultant and speaker. He is available to speak at your events on channel, marketing, strategy or sales. Source: Forr Types of Services Sold by MSPs Source: CompTIA, 2022 Despite Increased Spending in IT, Complexity Continues to Rise How has your business benefitted from conversation intelligence? Source: Observe.AI Source: Car U.S. Fix agree or strongly agree it has created more transparency in their contact center Strongly agree Agree Not sure Disagree Strongly Disagree agree or strongly agree it has enabled better agent coaching agree or strongly agree it has helped improve agent performance programs agree or strongly agree it has helped improve their ability to engage with customers agree or strongly agree it has helped them assign agents to the right tasks agree or strongly agree it has helped bring down overall operating costs agree or strongly agree it has helped improve their products or services agree or strongly agree it has helped them make strategic business decisions Source: Datto’s Global State of MSP, 2020 Network services Business services Helpdesk/IT support services Cloud services Storage services Desktop/remote work services Cybersecurity services Internet of things Backup and recovery services Application/SaaS services Telecom/Videoconferencing Print services 57% 59% 57% 55% 54% 52% 50% 50% 49% 46% 31% 23% 96% 94% 89% 89% 91% 87% 90% 92% Better abilit detection an More autom More efficie attack iteml Better detec undetected Improved th 13.50 12.00 10.50 9.00 7.50 6.00 4.50 3.00 1.50 00.0 Millions of subscribers 26 THE CHANNEL MANAGER’S PLAYBOOK
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It’s no secret that managed services providers are among the most highly sought-after channel partners for vendors of all sorts of business IT and communications solutions. That’s particularly true among those providers looking for resellers that can go a bit deep into customers’ tech stacks and sell beyond the more transactional products. Certainly, MSPs in their traditional form have been part of technology indirect channels for at least two decades, even further if you trace them back to the days of the “application service provider” (ASP) model. But in order to keep pace with the complexities of today’s technology business landscape, the MSP model “is evolving rapidly,” said analysts at CompTIA, in the association’s 2022 report on trends within the managed services channel. The term MSP itself is increasingly less defined by one type of service provider, and with the acceleration of cloud and digitally delivered services, MSPs even are being advised to think and behave in ways that are more in line with the model of a traditional sales agency or cloud brokerage firm than an IT shop. Researchers at the Technology & Service Industry Association (TSIA), for example, report to seeing “a rapid separation of managed services providers into two classes, which we call 1.0 MSPs and 2.0 MSP.” By Martin Vilaboy THE MORPHING ‘MSP’ MODEL The recent burst in cloud-delivery changes what it means to resell managed services 28 THE CHANNEL MANAGER’S PLAYBOOK
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A 1.0 MSP, according to TSIA, offers predominantly customized solutions, tends to embrace some complexity and employs a more resource-intensive delivery model. Their engagements are supported by labor-intensive, manual operations. The 2.0 MSP, meanwhile, focuses on standardized offerings, standard delivery operations models and employs software-driven, digital delivery capabilities, the researcher firm continued. TISA’s 1.0 MSP represents the profile of the more traditional MSP model, whereby a proprietary solution might be customized for a customer or specific vertical, and a significant chunk of revenue still comes from nonrecurring fees such as product sales, consulting fees or one-off projects. The 2.0 MSP, meanwhile, embraces where MSPs are and should be evolving toward. A lot comes down to the matter of scale, and its importance in driving growth and profitability. “Managed services providers that have overly complex and custom solutions have created self-inflicted wounds, inhibiting scale,” said TSIA researchers. “Lack of scale ultimately inhibits growth and profitability.” According to TSIA researchers, managed services providers that employed even basic levels of automation in delivery operations experienced as much as a 75 percent increase in profitability. “With over 75 percent of the headcount in a managed services organization coming from delivery resources, it’s no surprise that using software to eat away at manual operations delivered such a strong improvement to profitability in the organization,” said TSIA. Benchmark data for managed services also showed how MSPs that take advantage of a standard service catalog experience higher growth, higher revenue retention and higher profitability. “Since the start of managed services, all the way through 2010 … services have been resource-intensive and highly custom in nature. Custom is the enemy of scale,” said TSIA analysts. “The enemy of scale is the enemy of profit. Digital managed services are not custom, resource-intensive managed services.” The Softer Sell As of early 2022, roughly 40 percent of channel companies surveyed by CompTIA identified as offering managed services to some degree. Of that group, 37 percent call themselves pure-play MSPs, meaning they derive more than three-quarters of their sales from recurring revenue activities. The remaining majority consider themselves as hybrid MSPs, which CompTIA describes as businesses versed and dependent on managed services but still waist-deep in traditional, non-recurring revenue streams of work (think project and product sales). CompTIA surveys suggest MSPs fully understand that cloud is likely to be an essential element of their operations, offerings and business models moving forward, and by and large they are embracing it. Six in 10 MSPs believe cloud adoption has and will continue to increase the relevance of managed services in general, while only 17 percent believe cloud diminishes managed services’ standing in the market. A full 75 percent say cloud as a ubiquitous technology platform has had a positive impact on revenues. At the same time, cloud computing “is a change agent,” CompTIA researchers warned, and the cloud’s dominance as a model “has mandated a slew of adjustments to [MSP] business strategy.” Drivers for Changing MSP Business Model Already driving change Will drive change w/in 12 months Not applicable Customer experience expectations 54% 41% 5% Sophistication of cybersecurity 47% 46% 8% Change in customer procurement 46% 50% 5% Outside economic forces 45% 47% 8% Industry shift to cloud computing 44% 51% 5% Commoditization of managed svs 44% 46% 11% Demand for business consulting 44% 46% 10% PSA/RMM software 35% 51% 14% Source: CompTIA Source: TSIA s? Effects of Having a Standard Service Catalog Source: CompTIA Steps MSPs Have Taken to Embrace Cloud Computing 59% 49% 50% 53% NO 20% Yes 80% 19% 15% 94% 6% Yes No 10% 88% Standard Service Catalog? New Rev Growth Operating Income Revenue Retention Invested in ongoing customer experience Elevated cloud management capabilites Created a cloud cybersecurity practice Shifted to business consulting Shifted vendor li e card Changed our pricing structure Partnering with ISVs to resell SaaS 43% 42% 39% 36% 34% 32% 25% 6% 12% Accounts Emails & Passwords THE CHANNEL MANAGER’S PLAYBOOK 30
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