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Cbeyond: Layoffs Reflect Move From Legacy to Cloud Provider

By Kelly Teal
February 07, 2014 - News

Cbeyond's layoffs at the beginning of this year came as part of the company's ongoing transformation from legacy CLEC to cloud and managed services provider, Channel Partners learned on Friday.

In fact, those layoffs reflect a lot of activity within Cbeyond, from a potential purchase or sale to the shift to a co-selling model.

The Lowdown on Layoffs, M&A

Just as its peers EarthLink, XO Communications and Sprint all did, Cbeyond started 2014 by analyzing operations to see where it could do better. The resulting job cuts – which totaled about 100 people, or 7 percent of Cbeyond's workforce – took place on the legacy side of the business, said Joey Penick, director of channel marketing, as Cbeyond intensifies its focus on the cloud.

Still, those axed positions spurred rumors that Cbeyond is on the verge of being acquired, possibly by MegaPath Corp.

Penick is downplaying the speculation. Yes, Cbeyond continues to investigate whether it will buy, sell or merge with another company, as it stated in its third-quarter 2013 earnings report it would do. But, "I've not seen any evidence that we're set to be acquired," Penick said. "We're making some really odd decisions in the short term if we're being acquired," he added, referring to Cbeyond's new shift to a co-selling model between direct and indirect sales people.

Co-Selling: "We Are Not Competing With Partners Anymore"

Indirect partners and Cbeyond direct salespeople now work together on all deals. That's because direct reps tend to be stronger on selling cloud, while partners are better at selling to more sophisticated, up-market customers, said Penick. Cbeyond is betting that combining those strengths and creating a collaborative selling environment will push it past its legacy roots, into the cloud. 

"The days of everybody flipping out a quote – those are over," Penick said. "Cloud and mobility have changed that model."

The solutions sale is the new reality and Penick said Cbeyond is enabling that by having allowed its enterprise division to engage directly with partners, and vice versa.

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