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PAETEC-XETA Gives Partners Greater Managed Services Reach

By Kelly Teal
February 09, 2011 - News

PAETEC Holding Corp. is adding another Avaya Inc. dealer to its managed services and cloud computing arsenal, but little should change – in terms of operations – for channel partners.

The Rochester, N.Y.-based company, best known for its CLEC division, said on Wednesday it plans to buy XETA Technologies Inc. for $61 million in a transaction that bulks up its focus on vertical industries including healthcare, financial, hospitality and education. For PAETEC partners, the purchase provides a lot more opportunity: PAETEC is doubling the size of its managed services division, said Arunas Chesonis, chairman and CEO of PAETEC.

“We’ve been selling equipment and managed services throughout the United States already – it’s a $100 million business for us," Chesonis said. With XETA in tow, PAETEC gains deeper reach, and will boast technicians and engineers in all parts of the country. There were no changes in partner compensation to announce.

“It’s very straightforward what we’re doing here," said Chesonis.

To that point, PAETEC is bolting XETA onto its managed services group that includes previous acquisitions Avaya distributor Quagga Corp. and Allworx, an IP PBX manufacturer. XETA fits right in to PAETEC’s strategy of selling software, voice and data gear, cloud computing, and professional services to enterprises and other larger organizations.

The deal makes sense for PAETEC but may raise questions among channel partners. For example, when PAETEC bought Quagga last year, several VARs said they feared competition from the company. PAETEC soothed those concerns with assurances that inside sales teams don’t target end users where VAR partners already have contracts. On Wednesday, though, Chesonis did say that if those customers use other network service providers such as Verizon Communications Inc. or AT&T Inc. “all bets are off."

“If someone wants to give business to XO, don’t expect us to walk away," he said. “It’s not like we’re going to try to take away our partner’s business," he added. “This is about getting a bit bigger market share."

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