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Khali Henderson

Khali Henderson, editor in chief of Channel Partners, draws on more than two decades of experience covering telecom and IT for her observations about the technology and business trends impacting the channel.

Contact Khali at:
Email: khenderson@vpico.com
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Does Size Matter?

By Khali Henderson Comments
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Khali HendersonAs happens every fall, my email box filled with press releases trumpeting Inc. 500/5000 wins for 2011. There were 149 honorees in the telecommunications industry category, which ranges from carriers to manufacturers and, yes, their indirect channels.

Some familiar suppliers in the Channel Partners community were on the list One Source Networks (90) was the highest ranked for the industry with more than 10,000 percent three-year growth and $14.9 million in revenue. Other notables were Star2Star (195), Magellan Hill (563), IP 5280 (909), Telesphere (965), TOD (2136), SimpleSignal (2166), Nitel (2249), Granite (2666), Masergy (3998), McGraw Communications (4187) and TelePacific (4781).

Though not unprecedented, there were at least five telecom agencies that made the cut this year:

The Inc. contest is application-based and by no means a comprehensive comparison of private company performances, but it offers a rare glimpse into the revenues for telecom agencies. While multimillion-dollar companies, this year’s agent winners all earned less than $10 million a year. This is in stark contrast to one of the VARs on the list, Carousel Industries (2841) with $227 million in revenue.

Perhaps this is an unfair comparison; Carousel is a sizable VAR to be sure. However, possibly the largest master agency, Intelisys, disclosed that its revenue is $36 million. It is this lopsided picture that has spurred Intelisys President Jay Bradley to encourage the channel to “think bigger." In my interview with him, Bradley explained that the collective channel for carrier services today has a small share of business telecom spend but the potential to increase that considerably in the same way the channel has in the hardware/software space. Intelisys, he said, expects to reach $100 million by the end of the decade.

But does size really matter? Certainly, getting bigger is one way to gain credibility as a valid sales channel. That as well as other drivers like cloud services and the flagging economy suggest that consolidation among telecom agents may well be on the horizon. Many Channel Partners readers agree. There is some question about how this might transpire, e.g., like companies trying for scale or dissimilar companies (i.e., larger VARs) trying to shore up their skill gaps. Perhaps there will be examples of both. We’ll be discussing M&A strategies as part of our ongoing coverage of business model transformation, and at the upcoming Spring 2012 Channel Partners Conference & Expo, March 27-29 in Las Vegas.

Make plans to attend!

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