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Equinix Cuts Switch & Data Agent Program

Equinix Inc. has discontinued the agent program it acquired when it bought Switch and Data Facilities Inc. in April 2010, according to letters sent to agents earlier this month, giving 60 days notice of contract termination. Equinix did not return phone calls or e-mail requests for comment.

Sources close to the company said about 35 agents were part of the Switch and Data program and, presumably, all received the termination letters. They also said the Switch and Data channel support staff, which included Joe Mileo, director of indirect channels, and four team members, were laid off.

The termination letters stated the company reviewed the various channel programs that Switch and Data implemented” and is electing to discontinue the Agent Program.” No reasons were stated, but the notices cited a “termination for convenience clause” contained in the Switch and Data agent agreement.

The notices also referred to opportunities for Equinix to work with terminated agents in a different program” and different relationship.” That arrangement is not explained further, but the letters stated Equinix representatives will be reaching out to terminated agents to discuss the opportunity.

None of the now former Switch and Data agents, who spoke to PHONE+ on condition of anonymity, said they had been contacted by Equinix about the new program.

Neither did they express surprise over Equinixs move, saying they saw it coming, primarily because Equinix does not have a channel program, and its sales management was known to be anti-agent.” Equinix reportedly has a referral program, but agents claimed the deals are vetted” through the direct sales force, so they were not trusting of the process.

Some agents also pointed the finger at Switch and Data. The termination for convenience” clause in its agent contracts gave Equinix legal grounds to make the cuts. To be fair, Switch and Data also had a safe harbor” provision that enabled agents to earn the suspension of that clause by reaching a certain revenue threshold. The safe harbor, sources said, was effective for the present year and the following year and required agents to maintain performance levels to retain the protection. Sources said few agents achieved that revenue level, however. And, it is unclear what will happen to those agents, however few, now that the program is terminated.

Agents speculated that their collective reluctance to risk a lot of revenue with Switch and Data under its contract, in turn, may have made the channel look anemic to any acquirer in general and confirmed the alleged anti-channel positions of Equinix, in particular. Sources said the agent channel contributed less than 10 percent of Switch and Datas overall revenue. The program was relatively young, having started in 2006.

Regardless of where the blame lies, agents said they expected Equinix would regret the decision. They will end up a loser in this. The agent community, in my opinion, is large enough these days to put a damper on their ability to go after anything but the high-end market that theyve already got as customers,” said one agent. Switch and Data used its channel program, in part, to drive revenue to facilities in tier 2 and 3 markets, the agent said.

We will cost them more in lost profits than if they continued paying us,” said the agent, noting that partners will begin to migrate their customers to other data centers and colo facilities where they can.

But thats easier threatened than done. Colo is very sticky and its difficult to move,” acknowledged another agent. Well do what we can, but I am not holding out a lot of hope.”

The limited ability of agents to retaliate by moving their accounts also may have emboldened Equinix to cut the agent program, agents claimed.

Some agents predicted Telx would be a likely beneficiary of Equinixs exit from the indirect channel. While agents are unhappy about losing commissions on revenue sold, they are not concerned about losing Equinix as a supplier going forward, citing plenty of competitors in the Equinix footprint.

After integrating Switch and Datas 34 data centers in 22 markets in the United States and Canada, Equinix now operates 87 colo facilities across 35 metro areas in North America, Europe and Asia-Pacific.

 


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