To Broker or Not to Broker, That Is the Question

By Clark Atwood, President, Concierge Communications

As the economy still refuses to release its stranglehold on many companies, and the communication and technology decisions stagnate, I am starting to see an increase in service providers questioning the broker model. In addition, new entrants from the VAR, MSP and Interconnect worlds are signing direct agreements with service providers – touting their exclusivity to that provider.

The Technology World

Years ago I worked for one of the VAR 500. It was an exciting time, and yet it was also a time when Dell went competitively deep into the business world with no channel program. They were a low-price competitor to all in the industry. Our company was primarily Compaq focused, but also did a fair share of business with HP, Toshiba, Panasonic and others.

By and large, people I met in those days in the technology world were (and can still be) technology enthusiasts for a particular manufacturer. The words “I’m a Novell guy, I bleed red" could be heard in opening statements and introductions. You could substitute the company Novell with Microsoft, HP, Computer Associates, Cisco, or a myriad of other companies. Let’s face it, the tech world has been complex and to be good at something often required that you focused heavily, and often exclusively, on it. Not to mention all of the certification programs they established to train these people but also to indoctrinate them.

Now let’s fast-forward to the collision of the world of communications and technology. The traditional telecom master agent has for years been representing many competing companies within their portfolio. Unlike their technology counterparts, the barrier to entry for representation of multiple providers has been minimal. The master agent's desire to represent more than one company comes not only from wanting to be a one-stop shop, but there are some very real-world examples of industry changes that forced master agents to diversify their base of service providers.

In the technology world, the commissions have been predominantly one-time commissions. Typically in the past you did not hear of technology partners losing massive amounts of money due to the cancellation of a manufacturers program. There is no question that such a cancellation hurt them. But the future money lost to them was from attempting to move the existing sales funnel to a new solution and convince existing clients a new solution would be better for future purchases. They typically did not lose money on something already sold.

Unlike the technology companies, telecom master agents have seen major companies cancelling their programs or making major changes to the program and the commissions due to agents. This is a lot different than the technology partner since they were paid for their sale. The telecom agent was left holding an empty bag after promises of commissions over the life or a contract and or client after the sale completed. Many of the new entrants to the world of annuity streams spread over the life of the contract have not yet gained the experience that many telecom agents (who survived such devastation) received.

Coming to Terms

The term “master agent" is thrown around the telecom world as if everyone should know what a master agent is and their designated role. Since many of the technology counterparts have used the term “broker" to describe telecom master agents, let’s go with that term for now.

Dictionary.com gives us two terms for broker that are applicable to review:

1. an agent who buys or sells for a principal on a commission basis without having title to the property.
2. a person who functions as an intermediary between two or more parties in negotiating agreements, bargains or the like.

Value of the Exclusive Agent

By deciding to represent only one provider in a category the exclusive agent is committing to the provider to sell only their products and services. The providers love this model. They jump for joy knowing that this agent will not flip a lead to or renew a client with another provider. They can sleep at night knowing that this agent is their business partner and is committed to doing everything they can to sell their products and services.

Value of the Broker

Much of the value of a broker revolves around square pegs and square holes and round pegs and round holes. Quality brokers are looking for the right fit for the client. Geography, product mix, support needs and more go into this factor. Price is only a factor when all other decision criteria are perceived by the client to be equal, which they almost never are.

In a perfect world, the broker brings great business, a perfect fit, the right client to the right provider matched with the right solution. There is no shaving of a square peg to fit into a round hole just to sell something. I am the first to admit, we do not live in a perfect world. That being said, we should not discount the value a broker has to do some qualification of an account and match up a better client to a better provider based on their needs.

The broker has additional value: confidence from the client. If the broker is showing value in the sale, and the client recognizes that value, then the client is more likely to buy and more likely to understand the provider’s value. This is more than just throwing a bunch of quotes on the table. The quality broker should understand the client’s business objectives and how the provider will help the client to meet those objectives.

Also I should note that no agent wants to flip an account to a competitor at renewal. To do so does not make financial sense if the contract is for life of client and not life of contract. The agent will lose because the amount of time they have to spend in a renewal with a competitor, educating the client and then there is the whole reinstallation. If a client does flips at renewal, then the service provider should take a look at themselves, their program, product, service and pricing.

Take Out the Emotion

I am sure that both sides of this argument could spend many hours defending their position and proposing new value propositions. In the end, however, it is about whether or not a service provider trusts a broker that has some competitors in their portfolio.

The answer to the riddle is simple: Judge them by their performance. Take out the emotion and judge both types on the non-emotional facts.

• Do you know their close ratio?
• Have you looked at their customer churn rate?
• Do they engage and prequalify the account? 
• Did they do what they promised?
• Are they always asking for price concession?
• Do they have the systems in place to track what they are doing?
• Are they sharing information or just complaining?

Ask yourself, who is the true business partner? A relationship that brings you business or relationship that brings you good business?

Clark Atwood is a principal and vice president for Tempe, Ariz.-based Concierge Communications, a master agent for more than 40 communications and technology providers. As a 20-year veteran of the computer and communication industries, Atwood is an active industry speaker and has established Concierge as one of the founding members of the Cloud Services Coalition. He has previously served on technology councils, successfully completed several technical sales certifications and held sales and management positions in the telecom and computer industries.

He also is a member of the 2011-12 Channel Partners Conference & Expo Advisory Board, representing the Cloud Services Coalition.