Cbeyond: Layoffs Reflect Move From Legacy to Cloud Provider

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.

Of course, the change benefits Cbeyond, too, which lost $5.3 million in 2013’s third quarter. With the co-selling model, the provider no longer is bidding against itself; thus, it stands a better chance of improving its financials.

“We often times would bid our own self down,” said Penick. “The partner would go in with an opportunity, then the direct rep shows up and says, ‘I’ve got this deal and a lower price.’ We’d bid ourselves down.”

After realizing the ineffectiveness of this approach, Cbeyond has stopped selling against its partners, Penick said. Indirect partners earn their residuals and direct reps make their commissions, all by working together.

“Those lines people had drawn … are not there anymore,” said Penick. The attitude has become one of, “‘This is a business opportunity, this is a priority’,” he added.

Penick said the advantage of co-selling showed itself within days of the approach’s January launch. Five deals closed in Miami within the first week, and there were several large wins in Atlanta.

“It’s going to work,” Penick said. “Working with people instead of against people is going to produce a positive outcome.”

That ethos is taking place within Cbeyond as well. With the enterprise unit working with the partner side of the house, groups such as Penick’s have access to more corporate resources. For example, there’s no longer an enterprise training group or a partner graining group there’s one internal sales training group.

“We’ve kicked a wall down between these two organizations,” Penick said.

Meantime, Cbeyond continues to motivate its partners to lead with cloud services rather than traditional connectivity. For starters, it has reduced the SPIFFs on legacy services, and increased the incentives attached to cloud services. There’s also continued emphasis on in-person training throughout the country, and improved video and distance-learning access.

All in all, co-selling is the key, Penick said.

“I was a little hesitant, but I’ve been surprisingly shocked at how open people are, especially in our base where they have struggled to adopt cloud and really drive cloud revenues,” he said. “They’re wide open to [co-selling].”

That tactic is sure to succeed, Penick added.

“Segmentation is last year’s business,” he said. “You should see a channel-agnostic engagement from us. …We are not competing with partners anymore.”

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