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Birch Talks Partner Numbers, Expanded Strategy

Birch Communications now runs a thousands-strong dealer network thanks to the addition of many partners from the recent Lightyear Network Solutions and Ernest Communications purchases.

The $22 million Lightyear deal closed in early October, just a few weeks after the Ernest deal was wrapped.

During the acquisition process, Birch was working on new contracts with Lightyear and Ernest agents. To date, of the partners who were actively selling for Lightyear, Birch has signed between 90 and 100 percent of them, said Vincent Oddo, president and CEO of Birch Communications. Of active Ernest dealers, “every single one” had been signed by Oct. 16, except for one remaining contract that was expected to be inked by week’s end. “So, 100 percent,” Oddo said.

“We have 6,000 productive dealers that sell for us,” said Oddo.

Those numbers indicate the channel’s importance to Birch but partners do not provide the company’s only go-to-market strategy, Oddo noted. That’s why Birch executives disagree with sources’ characterization in a recent Channel Partners article that the company’s M&A strategy of assuming only assets (partner contracts are viewed as liabilities) puts 15-20 percent back into Birch’s bottom line. The figures are more like 3 and 4 percent, Oddo said. If they really totaled up to 20 percent, that would mean Birch gets all of its revenue from the channel, he said. But Birch sells through seven different avenues, including direct and telesales, and the channel represents just a part.

“Dealers, partners are a piece and, for us, it’s sort of in the middle,” Oddo said. These partners, he added, play a “significant role. They’re one of our seven important channels.”

And as Birch branches into new regions (such as Kentucky, because of Lightyear) and areas of expertise, the company is looking to certain types of agents to thrive. The strongest partners are the ones who have found a niche they can serve well, Oddo said. Think a certain vertical market or knowledge about multilocations’ unique needs.

Indeed, Ernest’s strength lay in the multilocation arena and gives Birch a new capability. Ernest, a virtual network reseller, did not have its own infrastructure but served larger SMBs with locations throughout the country. That multilocation focus “was a nice sort of bolt-on for us,” said Oddo. “It takes a special knowledge to get that right.”

As such, Birch has acquired Ernest’s prowess not just on the sales side, but also within the back office, customer service and end-user Web tools, he said. And Birch is keeping an unspecified number of Ernest employees including Paul Masters, who co-founded Ernest and worked as president so it can maintain operational and partner continuity. Masters now serves as vice president of Birch’s enterprise solutions channel, which caters to the multilocation sector.

Birch officially launched that channel on Monday alongside the Gold Elite teams that serve just multilocation customers. Birch further debuted its eConsole portal, developed as the FCC was reveiwing the Ernest transaction. eConsole lets multilocation clients see and modify their account information, add trouble tickets and confirm new orders, all in real time. Ernest didn’t have a similar resource and Birch knew “we needed to have that tool to compete in that marketplace,” said Oddo. 

Meantime, Masters is one of about 50 people that Birch has hired from Ernest and Lightyear. That’s on a permanent basis. The company also is retaining another 25 people in consulting roles set to last about 90 days; those positions could turn into permanent ones, Oddo said. Many of the consulting jobs are in the sales, engineering, network, back-office, account management and provisioning departments.

Since 2005, Birch has proven to be one of the most active consolidators in the telecom sector Ernest marked its 19th acquisition. Over the years, Birch has kept its eye out for weaker players that it could roll up, “classic consolidation strategy,” Oddo said.

So what’s next? Oddo said Birch will continue looking for acquisitions that would increase value and further the company’s efforts to become a nationwide, IP-based broadband and voice network for SMBs. However, he said, “there has been a lot of consolidation already, so I don’t know how much more consolidation there will be.”


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