This is Part 2 of a five-part article, Master Agents Revisited. Other parts of the article are:
This article presumes that master agencies expect to take on the distribution role for managed and cloud services. Anecdotally, we know that they do, but Channel Partners wanted to find out what that means in practice. So, we asked nine leading master agencies about their current and future revenue ratios for core telecom services, managed services and cloud services for 2010, 2011, 2012 and 2015. As expected the trend is that core telecom services will make up less of the pie over time, while cloud and managed services will grow. However, the degree of the shift varied dramatically by master agency.
In 2010, seven of the nine master agencies said 80 percent or more of their revenue came from core telecom services; three said more than 90 percent. Only two derived a lower proportion (45 and 60 percent) from telecom services. In every case, the needle moved down slightly typically two to five points in 2011, with similar projections for year-over-year declines through 2015. Acknowledging that their starting places varied widely, master agencies’ expected revenue from core telecom in 2015 to range from as low as 35 percent to as high as 85 percent.
So, where is the other revenue coming from? It was split among managed, cloud and “other” services, with “other” most often defined as wireless and/or conferencing/collaboration services.
Managed services revenue: In 2011, managed services accounted for 0-12 percent of revenue for master agencies that still earn an overwhelming majority of revenue from core services; the outliers that already had shifted revenue to other areas reported 24 and 38 percent. By 2015, the telecom-centric masters expected 7-20 percent of revenue from managed services while the outliers were at 30 and 48 percent respectively.
Cloud services revenue: The distinction between the telecom-centric and the outliers disappears when talking about cloud. In 2011, cloud services accounted for 1-15 percent of master agencies’ revenues. By 2015, they predict 5-25 percent.
“Other” services revenue: It is important to note that “other” accounted for significant numbers 0-25 in 2011 and 0-18 predicted for 2015 but the percentages increased for some and decreased for others.
Thought not statistically significant, these results indicate that master agencies’ transition to offering cloud and managed services is still in its early days. They also may indicate that at least some of the master agencies are taking a very conservative approach to diversification. Further evidence of this can be found in their supplier mix, which relies heavily on telcos even for new services. In answer to questions about their supplier base today, most masters indicated having from 30-50 suppliers, with 60-100 percent of those being telcos. In addition, telcos are delivering a significant percentage of managed and cloud services that master agencies offer today; though almost all had contracts with non-telcos to provide these services as well.
“In most cases we do not see emerging services like MSP or cloud as an either-or play against telecom,” said Todd Thomas, area vice president of sales for master agency X4 Solutions Inc. “Our strategy in 2012 and beyond is to redouble our efforts to support the product and service initiatives of our carrier partners. In many cases, that will mean supporting their entry into these emerging markets.”
Thomas articulated a common position among master agents that it’s not a good idea to be “distracted by shiny objects” and to make sure that resources are focused on core goals.