XO Partners Weigh In On New Program

Indirect sales partners for XO Communications Inc. told Channel Partners they are cautiously optimistic about the new partner program the carrier announced Monday for a July 1 launch.

Noting the devil is in the details, partners praised the performance-based structure of the program, which offers commissions and rewards for both revenue and sales in the top three of its five new tiers, which include Silver, Gold, Platinum, Platinum Elite and Diamond. However there was disagreement over the lack of sales goals for the two lowest tiers — Silver and Gold. In addition, changes (i.e. reductions) in the commission rates were expected — if not welcomed — to come in line with industry norms.

“The [terms and conditions] will be critical here, but conceptually we agree with the direction,” said Curt Allen, president of X4 Solutions Inc., a top XO master agency that has been working with the carrier for eight years. “This presents opportunities for new entry into the Platinum Elite status levels while rewarding legacy production and base growth of the long-time partners.”

“We’re always encouraged when the light bulb goes on around total billed revenue as opposed to just new logo sales or when retention performance is actually measured and rewarded,” said Greg Praske, CEO of ARG, which has had a direct contract with XO for the past six years.

Praske is further complimentary of the separate tiers for distributors and direct models. “That allows a productive direct agency to access the added service benefits, which are critical in dealing with XO,” he said.

Intelisys Co-founder Rick Dellar said the master agency also is supportive of the performance-based program. “We also support and agree with their transparency, consistency and lack of ambiguity in this area,” he told Channel Partners. “Everyone will know the rules of the game, and the best slices of the pie will go to the top performers.”

However, Dellar said he disagrees with not requiring sales goals for the lower tiers. “It send an inconsistent message about performance and could potentially lead to problems and the lower end of their program, so we encourage them to rethink this decision,” he said, explaining that  partners in lower tiers use resources regardless of their contribution. “Even if the goals are smaller for lower levels, there should still be goals.”

Praske also expressed similar concerns over the policy, suggesting it might encourage low-producing agents to sign directly with XO. “If those agents consume the channel manager resources, which tends to happen when a carrier leans on their channel managers as opposed to distribution partners, it will undermine the overall production,” he said. “It’s a tough balance for any carrier, but it gets exacerbated when you incent production to come from those without back-office resources.”

Allen sees this policy as an attempt to serve a boarder spectrum of partners, including those smaller agents that for whatever reason don’t choose to use a master agency like X4 or Intelisys. “If we are doing our jobs and addition value, our partners will continue to choose us as a path to get to XO services,” he added.

It also may be an over-correction for past biases toward larger players. “XO has probably lurched too far in the recent past to a deference to large masters,” Allen said. Certainly, the carrier’s Platinum Partner Program pilot with its substantial perks was limited to XO’s top 10 or 11 partners, which are mostly master agencies by virtue of size.

It also may be a mea culpa for the mass terminations the carrier made back in 2009. Certainly,

McNamara has said time and again that the company wants partners to feel their business is safe with XO whether they are a small or large partner. As part of the new program, Gold level partners (those with billed revenue of $50,000 or more) will have a contract that prevents their termination.

The unspoken component of the program change is the resulting reductions in commissions for some partners. “The comp changes were expected for quite some time,” said Allen, noting that the new rates are in line with other high-commission carrier contracts.

New Resources

XO also is making investments in people and systems to support its new program.

Allen said the new inside channel management team, hired to support the local channel managers, is a positive change. “This has already started paying dividends for X4,” noting that X4 was able to repurpose its XO quoting desk to a sales function by offloading more quotes to this team. “Our inside channel manager is proactively calling out to new and less active agencies and follow up on open opportunities to close them,” he added.

New and planned upgrades to the XO back-office also are welcomed by partners. “The new tools will be far more intuitive and do a better job of ensuring current and valid information,” Allen said.

Dellar said he hasn’t seen the demo of the new quote and order tools due out this year or the PRM system planned for 2013. However, he said he looks forward to them and hopes XO seeks feedback from partners and customers to develop them.

Praske said he is less concerned about the tools than getting competitive quotes that don’t require an ICB process. “XO seems very committed to cleaning up their ICB issues and pushing competitive pricing into our hands quicker and more efficiently. That will be a big gain,” he said. “We’re actually more encouraged by XO’s willingness to implement APIs so we can integrated into our CRM.”

New Direction

XO has been forthright about the struggles it has had with its channel program over the years. Partners generally are optimistic that the new program will begin a new chapter for the company.

“Despite their past challenges, we have remained loyal,” Dellar said. “If executive well, we believe this [program] will be a step in the right direction of the long-term health and vitality of their partner program.”

Since McNamara joined XO last summer, partners generally have expressed praise for his leadership as well as the commitment of the new executive team with CEO Laura Thomas at the helm. Thomas took the reins in September as interim CEO, following the resignation of longtime chief Carl Grivner early in 2011.

“Along with the continuity of the [channel] team that was retained, the emergence of Ernie Ortega as the leader of the overall organization, Don MacNeil on the marketing/product side and Mike Cromwell running the overall sales organization, the team is stacked.” Allen said. “This is an incredibly talented group and we are confident that with the committed resource we’ll have this partner program producing at incredible levels very quickly.”

These executives shared XO’s three-year plan with partners at a recent road show meeting held with master agency PlanetOne. The plan involves streamlining its product offering, including eliminating most TDM services, and shoring up its service delivery with better tools and processes.

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