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Agents, It's Managed Services or Bust!
By Ron Dunworth
This year, agents and their suppliers finally realized that managed services — and, more importantly, agents' abilities to adapt to selling managed services — will define who survives the next five years.
Soon it will not be possible to deal with the telecom manager and get an order based on cutting another 3 percent off the price of their Internet service or providing free install on a PRI. The telecom manager is being replaced by an individual whose job is to manage, for example, the delivery of the unified communications “seat" to his employees. The seat represents a suite of services that he will purchase from you — if you've learned the new way, or from your replacement, if you haven’t.
Soon it will not be possible to make money on transactional sales, working “between the demarcs" and my favorite, “slinging circuits." For those of you who say, "Nay. Selling circuits maybe reduced, but it still represents a wonderful way to make a living," I say, "Certain clients will always need just circuits, but the base of clients is shrinking."
The days of making a tremendous amount of money selling telecom network will continue to diminish and all agents will have to make the move to managed services, or find another line of work. To do this, agents must learn new products in the managed services arena and develop the ability to sell said products to a redefined client base. The agent needs to know how to define call flow and many more things past the demarc in order to sell hosted VoIP than he does to sell PRIs. The level of knowledge and training for IaaS, SaaS, etc., is even more complex.
So who is going to support the agent partner selling managed services? Who will pick up the challenge to train the agent on the new products, how and where they are to be sold? Who will explain how to change the pitch from quoting the best price to offering a business process solution that impacts the client's bottom line?
The new product line vendors don't offer the level of pre- and post-sale support to agents as do the big telcos. Instead they offer a greater commission to a master agent and expect the master agent to support the agents. But the master agent is not able to do this either because paying historically high commissions to agents has left them without the financial resources to build or staff for support.
So how do we do it? How do we modify our model to allow for the costs associated with full pre- and post-sale support for the managed services opportunity? Unlike the federal government, we don’t have the ability to bring in a dollar, spend two and call that good business. If the dollar is all we have, then we need to learn how to adjust the percentage paid to each and every one of the individuals in the supply chain. The agent will make less commission per dollar received by the master than in the past — probably 30 percent less! The master will need the revenue to staff the business with skilled employees who can help the agent define the need, develop the solution, present it to the client and ensure that the vendor chosen can deliver and install as sold.
So will this cost the agent 30 percent of his income on a deal? That depends on how you look at it. Today a PRI and a T1 equivalent to the Internet sell for about $650 a month. With 15 percent commission from the supplier paid to the master agent, and 80 percent of that paid to the agent, the commission is $78 per month.
With managed services as part of the mix, the same agent can sell not only the Internet connection, but a hosted voice solution with more features and benefits to the client. Now his client is spending around $2,000 a month. Let’s rerun the numbers: $2,000 X 15% X 50% (the new, lower commission) means the agent earns $150 per month.
While it sounds like more government math, the reality is we are just taking traditional business away from the “other" guys — the VARs selling phone equipment, new servers, software and outsourced support. We now provide those functions on a monthly service model, just like we originally did for telco.
The bottom line is the business will belong to the channel partner who makes the move to provide a solution, not a product or service, to the client. It could be the phone switch VAR, the data VAR or the telco agent; it depends on who wants to learn more about the others' business first and present the “solution" to the client.
Ron Dunworth is President and CEO for ADVODA Communications , a master agent based in Colorado.