PARTNER CHANNEL: Agents Rate Carrier Partner Programs

Posted: 9/2003

Agents Rate Carrier Partner Programs
Unprecedented Research Reveals Channel Priorities
By Dr. Judy Reed Smith

Agents represent an increasingly important sales channel for telecommunications service providers. As companies tighten their belts and seek creative ways of maximizing their sales budgets, they gravitate toward solutions that can increase revenue without increasing fixed expenses or capital expenditures. Ironically, the sluggish economy that created a rich pool of talented people for internal sales opportunities is driving telecom firms to the agent channel. Over the past decade, large indirect sales groups have emerged and evolved. These sales teams typically began with skilled salespeople who developed and cultivated relationships with other sales pros who sold for them. They paid these subagents a commission, keeping a slice to cover their work on contracts, interfaces with carriers, training and administration. Today, many master agents are evolving into significant companies with more than 300 agents selling for them, contracts with 20 to 30 vendors and their own software systems managing  and dramatically improving  their interfaces with carriers. This level of sophistication increases the attractiveness of these agents to providers as it reduces the hassle for carriers and resellers to add these channel partners to their sales forces.

These channel partners have become so attractive, in fact, that contracting with them is becoming a matter of competition. Atlantic-ACMs interviews with channel partners for the 2003 Agent Program Carrier Report Card reveals several large channel partners are not entertaining new suppliers because they are at the limits of their support capabilities.

It is not surprising, then, that commission structures for master agents are moving upward  especially from suppliers with lesser-known brands. Nor is it surprising that many of the carriers interviewed for the study were considering changes in terms of their partner contracts, such as ongoing payments with evergreen clauses to keep revenue flowing while customers remain with providers, up-front payments and other incentive programs, such as travel opportunities and prepaid credit cards.

For its partner program report card, Atlantic-ACM assessed 220 individual provider rankings by master agents (defined for the purposes of the study as organizations with subagents and direct contracts with one or more carriers) representing nearly 3,000 subagents and hundreds of millions of dollars in annual telecom revenue.

Surprisingly, network  which often equates with brand  edged out issues such as price and contract terms in priority. However, all three received overall importance ratings of 8.5 or higher on a 1-to-10 scale (10 = highest importance). Also weighing in with overall importance scores of 8.0 or higher were commissions and incentives (nearly as important as the first three with ranking of 8.41), technical support, financial stability and product provisioning speed. Behind these areas were network reach, sales support, marketing support and product portfolio diversity. Even the item with the lowest relative score  portfolio diversity  is considered important with an overall score of 6.47

In terms of execution, the median overall score among providers on a 10- point scale (1=Very Bad, 5=Average, 10=Superior) was 5.65. While no provider exceeded seven points, ACC Business, which scored the highest overall, reached the seven-point threshold with an overall score of 6.86. Other carriers scoring higher than the median in overall score included AT&T Corp., SBC Communications Inc., Sprint Corp. and other providers, which is a pooled score for companies that were evaluated by fewer than 20 percent of respondents.

Five main areas were studied for the 2003 Agent Program Carrier Report Card: Contract Terms, Conditions, Commissions and Incentives; Support (Marketing, Technical, Sales, and Provisioning); Products and Pricing; Network Quality and Reach; and Carrier and Channel Stability.

Contract Terms, Conditions, Commissions and Incentives.Within each of the broad categories, votes were cast for 36 different companies, ratings in key subcategories reveal that providers strengths and weaknesses vary widely. In the main category of contract terms, for example, a miscellaneous group made up of other providers topped the field, followed closely by ACC Business and then SBC. In the subcategory of flexibility in contract negotiations, however, Covad Communications Group Inc. pushed its way into the top three. Likewise, Global Crossing Ltd. shot up to a top-three spot for contract renewal features and MCI made it into the top three for competitiveness of commission rates. This story of varied strengths and weaknesses of carriers by category is clear throughout all 24 subcategories of the evaluation.

Additionally, in each category, anecdotal interviews sometimes revealed deep anger towards one carrier or another and tales of customers or commissions being stolen away by insensitive carriers. Interestingly, however, even when a disgruntled agent voted, he or she gave the provider(s) in question high marks in certain areas despite a negative experience in another. Therefore, many variations show up in the detail of the survey.

Support (Marketing, Technical, Sales and Provisioning). In the support category, overall no one carrier distinguished itself significantly against the others, with Sprint slightly ahead of Covad and ACC Business and the other providers a hair ahead of all. Atlantic-ACM likens this miscellaneous category to AVIS in the rental car market: they try harder with better support, because the partners, in many cases, are their only sales channels. Also, when the other is a small provider, master agents would not be likely to work with it unless it was exceptional. On the flip side, master agents may continue to work with big brand vendors through less ideal conditions because the branded product is an easier sale to close than a lesser- known companys product.

Looking beyond other providers, ACC Business and Sprint show strength in product provisioning. Within the support category, Sprint led the pack for helpfulness of training programs, while Covad pulled ahead slightly in responsiveness of technical experts and Sprint inched ahead for ease of access to information.

Products and Pricing. In the products and pricing area, SBC slightly outscored the rest of the field overall  an outcome that was reflected in large part in subcategory scores. In a measurement of the ease of closing sales with a providers products, SBC had a lead over Covad, which was its nearest competitor. In another subcategory however, SBC dropped to third behind other providers and Global Crossing in competitiveness of pricing.

Network Quality and Reach. It is interesting ACC Business edged out Sprint and AT&T for the top ranking for network quality, when we assume ACC Business uses the same network as AT&T. All three were rated in the excellent category. For reach, the top spots went to the long-term interexchange players  AT&T, MCI and Sprint  as well as ACC.

Carrier Stability. Because of the financial challenges that have faced telecom companies recently and some carriers on-and-off commitments to channels, carrier stability was rated. Financial stability, commitment to the alternate channel and the ability to deal with channel conflict were ranked as important to channel partners. For financial stability, the two carriers in bankruptcy  MCI and Global Crossing  as well as Qwest Communications International Inc. (with threatened financial issues) and even Covad, now out of chapter 11 and other providers all weighed in under the median for financial security. As you would expect, Verizon Communications Inc., SBC, Sprint, AT&T and ACC Business were rated as relatively secure financially.

There is more to the story than can be covered in this article, such as who was at the bottom of each category with weaknesses that need to be addressed. Likewise, there are many tales of the strengths that providers may turn from good to great. As more companies dive into the agent channel, channel partners will increase their influence, pulling the best sales people with the incentives and commissions they enjoy. Contracts will heat up and service providers will compete hard for the attention of the strongest players. This critical channel deserves the attention of providers top management. Atlantic-ACM will continue this research with an annual shared company study to draw that attention and help providers and agents work together effectively.