Selling telecom services to the education vertical market, to the public K-12 sector in specific, has its advantages. Agent or carrier-savvy VARs get access to built-in leads, an annual RFP schedule and a multibillion federal fund paying for technology including voice, Internet and other needs. But there are drawbacks, too, such as long sales cycles and stringent paperwork processes. Theres more and partners should be warned up front: Follow the government’s rules when it comes to K-12 bidding. If you don’t, and you get caught, you stand a good chance of going to prison.
Nuances of Education Vertical Sales
You know your technology services and providers inside and out. You know how to sell. But when it comes to the education sector, and public K-12 in particular, theres more you need to know.
In 1996, as part of the Telecom Act, Congress established the Universal Service Fund. One part of the fund, E-Rate, sets aside billions of dollars for schools and libraries so they may buy telecom and data services at discounts of between 20 and 90 percent, depending on need. Each year, most K-12 schools issue RFPs for communications services. They are supposed to choose service providers based on lowest cost. E-Rate supports discounts on four kinds of technologies and related oversight: voice, data, internal connections (routers, hubs, switches) and maintenance of those internal connections. So, for example, hosted VoIP qualifies for E-Rate money while premises-based systems do not. You might think that rural, impoverished or low-population areas would be first in line for the highest E-Rate discounts, since those demographics seem to meet the criteria of greatest need for universal service. Thats not the case. The truth is, they use the free lunch program to determine the need of the school,” said Greg Howard, co-founder of US Telecom Group. In other words, populous cities such as New York, Phoenix or Los Angeles often end up with the bulk of E-Rate money, paying just 10 percent out of pocket. The merits of this are best debated elsewhere, but for channel partners serving metro regions, theres one overriding fact: Competition for education customers is tough.
Which Telecom Services Are in Demand?
- Internet access. Every single year, the bandwidth requirements go up and up,” Howard said. Thats because more schools are turning to video-centric interactive learning on laptops and tablets. They also are upgrading to bigger pipes, often moving from T1s to MPLS and cable connections to accommodate ever-increasing data demands. One of my school systems started out with a 10MBps pipe at $2,500 a month at the time,” said Howard. They now are on an MPLS network with 350MBps at the headquarters and 50-100MBps per school. They bill approximately in the $20,000 range and the bid this year should end up in the $42,000 range because two of the high schools are getting iPads for every kid.”
- Hosted VoIP. Because hosted VoIP switches reside in the cloud, schools may use E-Rate dollars to replace expensive CPE. No, the IP phones dont qualify for federal discounts; however, the monthly service fee does, and savings gained through a move from CPE to hosted can more than pay for the necessary on-site gear.
- SIP trunks. Many schools sticking with premises-based platforms are using SIP trunking instead of analog circuits. That way, they get hosted-like functionality without having to toss pricey equipment that still has years of operability remaining.
- Internet and voice service for mobile devices. E-Rate does not apply to smartphones and tablets, but it does cover the voice and data services required to power those devices. Take, for instance, an RFP provided to Channel Partners that calls for service for up to 85 cellular lines with pooled minutes, long-distance, and texting and data plans. The same school further needs 20 wireless lines with push-to-talk capabilities, service for up to 40 smartphones and service for up to 40 iPads. Such equipment generally is procured through direct through manufacturers and paid for out of a budget separate from E-Rate money.
- Voice. That same RFP lays out the need for long-distance service for the district and all of its schools. As another example, Catherine Lazarock, president of Symplicity Communications Inc., works with a school that has stayed with POTS but is considering moving its multiple locations (each of which use six to nine POTS lines) to SIP trunking as wireline prices rise.
What You Need to Know
Heed these words from Howard, who has sold to K-12 clients for eight years: What you may be used to on a regular basis is not the same in the education sector.” Thats because selling to SMBs does not tend to involve government money and processes. Targeting K-12 is different from serving businesses in several ways. First, federally funded schools issue RFPs for communications services every year between September and February, in preparation for a July 1 fiscal year. As a consequence, the government maintains strict rules around bid-rigging. During the RFP window, channel partners and other providers are not allowed to act as consultants to schools and they are not, at any time, allowed to pay consultants to put in a good word for them. If you break those rules, Howard said, I guarantee you, youll end up in federal prison.”
Second, these schools are not allowed to choose any carrier they want, when they want. Ideally, they must select the lowest-cost provider, although reality does not always work that way. Sometimes, when a school knows you offer the most experience and best service, they will choose you over a competitor. You are allowed to finesse those relationships outside of the September-February blackout dates. Next, because the federal fiscal year starts on July 1, partners who land K-12 deals can expect commission check delays of anywhere between six and 12 months, rather than 60 or 90 days. This stems from the months between deal-award and project implementation. For example, one of Howards sales last summer has been caught up in a federal audit; as of press time, he still had not been paid because the government still was investigating the necessity and cost of an MPLS network. Finally, K-12 sales do not auto-renew. Thats a huge gotcha,” said Lazarock. When you land an education deal that requires switching carriers, make sure to give the operator a heads up of at least 30 days. Otherwise, your client could pay thousands of dollars in fines for short notice.
If the challenges and pitfalls of serving the public education vertical have not scared you away, then apply these principles from Howard and Lazarock to make the most of the K-12 opportunity:
- Educate yourself and your staff on selling into the K-12 space. Use these resources for starters: Universal Service Administrative Co., usac.org; Funds for Learning, fundsforlearning.com.
- Be kind to your channel manager. Use automated quoting whenever possible if you are responding to multiple RFPs. I promise you these schools will take bids from you all day long and youll have channel managers saying, I did 500 bids for you and you didnt give me crap,” Howard said. Channel managers have quotas to meet and they will not appreciate you taking up large chunks of their time for a single-digit percentage return.
- Establish relationships with the schools you hope to serve, and maintain the ones with the education clients you already have. Even though K-12 sales do not auto-renew, you stand a better chance of keeping those customers from year to year when they know and trust you. If you dont offer some customer service or things that make their job easier, why will they choose you over going direct?” Lazarock said.
- Remember that the decision-maker is not necessarily the person on the RFP. Even though the RFP contains all the lead information you could want, including name, email, phone number and existing carrier, the contact person may not be in charge of who wins the bid. Make sure you understand whos involved,” Lazarock said. To do that, network with the school outside of the RFP months.
- Seek opportunities outside of the public K-12 field. Private grade, middle and high schools not reliant on federal funds have more leeway to spend where they want with the providers they want. As such, for more IT-centric partners, in particular, think about the physical cabling/fiber to workstations, as well as servers, and desktop and server maintenance, said Ben Stiegler, CEO of Synertel. There also is a great need for cloud-based emergency notification platforms. Higher education, too, uses different procurement approaches than public K-12. When it comes to technology, unified communications and collaboration remains at the top of the technology needs list for many colleges and universities, according to Frost & Sullivan.
Every year, schools spend billions of dollars, often with the help of government subsidies, on communications services. In 2013, the public K-12 sector alone is expected to buy $9.7 billion worth of IT services and equipment, up 2 percent from last year, according to the Center for Digital Education. The network/telecom breakdown by itself totals around $2 billion. The lesson is, if you learn how to navigate the complexities and you adhere to E-Rate rules, the revenue results will speak for themselves. As Howard put it, The amount of money somebody can make off this is mind-boggling.”