XO Channel Chief: ‘Your Business Is Safe’

Five months after becoming the channel chief at XO Communications Inc., Shane McNamara, vice president of indirect sales, said the carrier is restructuring its 2012 program to address concerns of its indirect sales partners under a new initiative called “Your Business is Safe with XO.”

McNamara, who came to XO after serving as general manager of carrier services for value-added reseller and XO agent CDW, acknowledged that  all but the very largest XO partners are nervous about bringing business to the carrier for fear of termination and subsequent loss of commissions. In 2009, XO terminated the contracts of a number of “underperforming” agents.

“That’s going to end. We aren’t terminating partners anymore,” McNamara told Channel Partners.

Instead, the carrier is taking its Platinum Partner Program out of pilot and expanding it to include Gold and Silver tiers. Partners that reach and maintain $50,000 in billed revenue with XO can become Silver Partners and will receive a contract amendment stating that their agreements will not be terminated.

“To stem the fear and uncertainty, I am drawing a line in the sand,” McNamara said. “For partners not at $50K, are we saying we are going to terminate them? No, but we are going to continue to manage to [their current contracts].”

McNamara said agents that can’t meet the $50,000 milestone may also have the option of moving under a master agency on an individual case basis.

The Platinum Partner Program (P3) was rolled out in March 2011 by McNamara’s predecessor Brian Law to provide upgraded support to 11 of the CLECs top indirect sales partners. The pilot program offered dedicated care and repair for end-user customers of the Platinum Partners and dedicated ordering and installation support.

Although P3 is working well, McNamara called it a “Band-Aid.” “The problem was we put all of our time and energy and focus on 11 partners; there’s a ton of other partners that XO has that didn’t get the time and attention that they deserve,” he said.

Under the new three-tier system, criteria are being developed for Platinum and Gold status that will include a combination of net sales and churn based on three-year averages. Those criteria were not available at press time. Current Platinum members will maintain their status in 2012.

The major difference between Platinum and Gold is priority status for Platinum Partner customers. Both have dedicated resources (a partner channel manager, local channel managers and a post-sale channel account manager), president’s club consideration and MDF. Silver Partners have access to XO’s pricing team, online tools and marketing tools.

“We want our partners to really understand and see that we appreciate their business regardless of what level they are in and to feel like they have a home and we are not taking them for granted,” McNamara said.

Restructuring is phase one of McNamara’s plan for the XO channel. Phase two is upgrading systems and tools. A quote to order tool is planned for 2012; presently this process is done manually.

Members of the XO Partner Advisory Council, who were briefed last week, told Channel Partners they are optimistic about the planned changes, which will go into effect in 2012.

“Conceptually, I think it is a step in the right direction,” said Matt Harty, president and CEO of master agency Converged Network Services Group. “Having partner tiers and aligning support based on production rewards companies like CNSG that do a significant amount of business with XO. In addition, steps that XO can take to make partners feel safe in placing business with them makes perfect sense. If XO can make partners feel comfortable that their residual stream will be safe, it will lead to new incremental business. We are looking forward to seeing the details behind the changes.”

Agents said they were even more encouraged by what they perceive as a genuine commitment to the channel from XO’s new leadership.The carrier’s top brass, including interim CEO Laura Thomas, attended and participated in the PAC meeting. Chief Marketing Officer Don MacNeil, Executive Vice President Ernie Ortega and Senior Vice President of Sales Mike Cromwell also were in attendance.

“To see the CEO spend the entire day with the council and commit to work with subcommittees sent a message that was stronger than anything that could have been presented that day,” said Adam Edwards, president of master agency Telarus Inc. “XO leadership demonstrated their commitment to the channel, but also to the long-term success of XO. It’s clear the leadership team is incented to build for the future and excited about doing it.”

The channel program admittedly is just one  of a range of concerns for XO. It lost its longtime CEO Carl Grivner, who resigned in April, and in the second quarter XO reported revenues of $381.7 million and a net loss of $10.1 million. From 2008 through 2010, XO incurred a combined $150.8 million in net losses from operations, according to an annual filing with the Securities and Exchange Commission.

XO became a private company this fall, so details about its current state are sketchy. Sources close to the company this fall confirmed layoffs at XO numbering around 400 people.

McNamara explained that headcount reductions came as a result of combining the company’s enterprise and wholesale businesses, which heretofore had run separately and with duplicate functions.  He added that the channel was minimally impacted by these changes; he did not disclose the numbers lost. McNamara said that he has brought Tom Gorey back into a dedicated channel role as vice president of sales for the channel. Cheryl Vick, director of operations for the partner channel, also remains with the company. Sherri Turpin, national director of partner sales, left the company and now serves as vice president of channel strategy for EarthLink. McNamara said XO will backfill open channel-manager positions in Chicago and the Northeast.

In addition to XO’s operational consolidation, McNamara said the company will be narrowing its product focus to its IP portfolio, such as MPLS and SIP, and sunsetting other products likes DSL and POTS.

“When any new management team steps in and promises change for the better, we are all skeptical,” said Steve Braverman, CEO of master agency X4 Solutions Inc.  “Proof is in the results, but XO has the right people in place to make it happen.  I have worked with most of them for many years and know if given the ability, which they clearly have been given now, they will produce positive change.”

Braverman admitted being skeptical of putting Thomas, also the company’s CFO, at the helm due to the risk of “running a company by a spreadsheet.” However, after spending time with her, he said Thomas “understands profitability comes not just from cutting costs, but by investing in the best team members and spending money to make more money.”

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