Carriers Seek ‘Right Balance’ of Partner-Contributed Revenue

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CHANNEL PARTNERS – The percentage of carriers’ channel-contributed revenue remains out of balance as operators and partners alike try to transform their business models amid technology innovation and a still-weak economy.

That was one of the key takeaways from Tuesday’s “Future of the Channel" roundtable at the Channel Partners Conference & Expo featuring Nigel Williams, senior vice president of enterprise sales for Level 3 Communications Inc.; Brian Law, national vice president of indirect sales for XO Communications; Jim Delis, vice president of national sales for Time Warner Cable Business Class; and Blake Wetzel, vice president of sales for Qwest’s Business Partner Program.

To be sure, said Williams, “we still don’t have the right balance." Level 3’s channel contributes less than 10 percent to the bottom line, which is “way too low," he said. The numbers could be double or four times that amount, Williams said. Nonetheless, “the indirect model is absolutely key and it needs to go from 3x from where it is today."

XO’s channel contributed-revenue stands at 25 percent, a solid figure. But, said Law, “I won’t be happy until there’s more indirect revenue coming in."

Time Warner Cable Business Class, like Level 3, is out of balance, at 4 percent, said Delis. But keep in mind that Time Warner Cable Business Class’s channel program is relatively nascent and Delis said he expects the percentages to improve as the company engages with partners.

Wetzel said Qwest doesn’t disclose its percentages; the balance the company sees, however, “is good," he said.

Any desired increases in revenue contribution should come as both partners and carriers adjust their business models to better accommodate one another. Indeed, Qwest wants to “strengthen how direct and indirect work together," said Wetzel.

Such desire stems, in large part, from a shift on end users’ part. More and more, customers won’t buy from direct sales reps – the concept of a neutral, trusted adviser is gaining traction among businesses. So, Time Warner Cable Business Class, which is relatively new to the channel, needs partners who can do IT functionality while also serving as agnostic specialists, said Delis.

Wetzel agreed. Customers want more “holistic" network advisers who work with a number of carriers, he said.

Williams said much of the drive comes from the need for profitability. The channel has to “find value beyond selling transport," he said. VARs, for example, have to provide a broader range of services, putting the onus on carriers to create strategic bundles for partners to sell. And operators, he said, “haven’t done a great job of that."

In the meantime, how should partners transform their business? For Law, the answer lies in providing well-rounded solutions to business-communications problems.

“That raises the trust level immensely," he said.

Delis, though, suggested finding “where you excel. Be great at what you do," he said. He suggests some strategies such as matching customers to the right carriers, being a full-service provider or offering a complete lifecycle, from pre- to post-sales.

Whatever you decide, said Qwest’s Wetzel, “stay close to customers and articulate your value to carriers."

Williams added that he hopes partnerships with the channel will carry Level 3 through the next few years. What he meant, he said, is that as Google and Microsoft, for example, dive into the free-voice and unified communications fields, telecom faces the threat of being commoditized, possibly “faster than you think." To help prevent that from happening, partners must work with non-telco entities such as Google and Microsoft, and prove their expertise lies beyond the pipe.

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