Like any fragmented marketplace populated with small, specialist or locally-focused entrepreneurial businesses, the telecom equipment and service channels have been home to a few mergers and acquisitions over the years. But several closely timed transactions begged the question, is a larger consolidation among channel partners beginning? That is the premise of this article. Absent an overwhelming supply of empirical evidence save a few recent deals, the anecdotal evidence suggests indeed market conditions may be right for partners to come together.
And what might those be? At a high level some predictable factors include the recession, increasing technology complexity, escalating customer requirements, emerging delivery models, supplier policies/requirements, etc. All of these conspire to create opportunity for channel partners but also put pressure on them to evolve beyond the status quo — a decision point that often ends with a plan to buy, merge or exit.
Answering the channel consolidation question is complicated by the fact that there are several partner types — agents, VARs, dealers, interconnects, consultants, systems integrators — each with different business models. To simplify this discussion, however, the greatest contrasts will be drawn between the residual-based services businesses (agent) and the margin-based gear businesses (VAR/dealer). Some of the drivers are common, but some are unique to each by virtue of their model.
Glass Ceiling. In all cases, the impetus is that the business progress to the next level. What that means varies by the starting point. For the sole proprietor, it's often a recognition that they've hit a wall in terms of the revenue they can produce and maintain on their own without making significant changes to the business, e.g. bringing on employees, partners, etc. In this situation joining up with a larger entity can jumpstart that plan.
This was the case for agent Jana Beck, who in April sold her successful agency JB Telecom Consulting to master agency Concierge Communications. Perry Chrisler, president and founder of Concierge, said Beck was reluctant to "complicate" her business by taking on partners, but ultimately decided she did not want to spend the time replicating the consultative model and back-office systems that Concierge already had developed and which she had seen firsthand as a subagent. As part of the acquisition, Beck is now one of three principals at Concierge and she also serves as vice president of sales. For Concierge's existing principals Chrisler and Clark Atwood, bringing Beck on represents an opportunity for them to begin to shift out of the day-to-day operations and focus more intently on business development. Chrisler recites the adage that he is now able to spend time "on" the business instead of "in" the business. As Concierge grows — organically and by acquisition — it can add principal partners or junior partners in much the same way as does a law firm, Chrisler said.
