While telecom sales reps are being beaten over the head with the mantra of consultative selling, the long-simmering debate about vendor agency vs. vendor agnosticism recently was revived in a TelecomAssociation Linked In Group. The discussion prompted some questions: What is the right business model? The neutral adviser or the in-the-know partner? Or maybe it’s somewhere in between.
PHONE+ queried agents, consultants and vendors about the subject to ascertain some answers.
Let’s start by getting on the same page and defining each model:
Vendor Agency: An agent consults with a client on its telecommunications needs, makes vendor recommendations and is paid by the vendor when a client contracts for services.
Vendor Agnostic: An agnostic firm consults with a client on its telecommunications needs, makes vendor recommendations and is paid by the client for such advice while the client contracts separately with the recommended vendors.
These definitions are overly simplistic, but form the foundation for our comparison, which will necessarily take into account the greater complexity and, in some cases, blurring of the lines between the models.
In his November blog TA Founder Dan Baldwin, who also is an agent for ATEL Communications Inc., makes the case for vendor agency, citing five reasons that agency model is better. But better for whom? The pros and cons of the models vary depending on whether you look at them from the perspective of the customer, the vendor or the agent/consultant. (See accompanying table.)
Neutrality. One key differentiator between the models is neutrality. Richard L. Hathaway, principal of RLH Telecom Solutions LLC and also president of The Society of Telecommunications Consultants Inc. (STC), said as a consultant, he has never recommended the same solution two consecutive times because of the variance and uniqueness of clients’ needs. “It’s difficult and unrealistic that the same solution offered by a manufacturer’s broker, agent or distributor is right for every client,” he said.
However, agents like Steve Gerhardt, CEO of D&M Enterprise Group said proposing multiple solutions to a customer’s problem and then letting the customer choose the vendor allows them to stay somewhat unbiased.
Sales pressure. Quota requirements are one reason Mark Petersen, managing partner of Telesys NW, chose the vendor-agnostic model. He said sales pressure from vendors translates into sales pressure on the client, sometimes forcing them into inappropriate or early decisions.
Furthermore, he said telcos would want to discourage agents from becoming vendor-agnostic consultants for this exact reason. “They want for the agents to be dependent upon them for that commission stream such that the agent channel managers can continue to apply pressure,” said Petersen.
Agent Gerhardt said he could see how quotas could be a problem for agents but he himself doesn’t consider his quota status when pitching services and has never had an issue meeting them nonetheless. “I guess I get enough business that comes in that we disperse it around enough that it fulfills the agreements we have in place,” he said. “It just works out.”
Money. Petersen admitted one disadvantage to the vendor-agnostic model was establishing a client business that has enough repeat business to sustain the model. Agents might see a more rapid return on investment, especially with recurring commissions.
Additionally, as TA’s Baldwin stated in his blog, agents might be able to sell at better rates. “Agnostic reps usually only get truly low pricing by pitting the different vendors against one another and chiseling the price down,” he wrote.
However, Petersen, whose company started under the broker model in 2002, but then switched to vendor-agnostic in 2004, argued that neutral consultants have a shot at bigger deals. “As we built our business, we recognized that the type of clients that we wished to serve, the size of business opportunities that we wished to close, were not widely available to an agent,” he said. So, it becomes a question of volume or value.
TA’s Baldwin suggested in his blog that agents or agnostics may not be swayed to change their respective models, but that they have an opportunity to cooperate. He suggested agnostics work with agents to get a quicker vendor comparison quotes. “By working together, both the agent and the consultant can stick to what they’re best at,” he wrote.
In an interview with PHONE+, Baldwin claims to have provided dozens of quotes to consultants in the last year, but admitted so far only one deal has closed. “I’m eternally hopeful, though,” he said.
To advocate for further teaming, TA is planning an online seminar in January on agents partnering with consultants and auditors. Baldwin also has set up the Consultant Support Network for ATEL to facilitate cooperation with agnostic consultants. CSN provides a range of benefits, such as wholesale pricing, expert provisioning, prospecting lists and more, to new consultants for $95 monthly after a $95 setup fee; experienced consultants may be qualified for the fees to be waived.
Is it possible to be an agent and be agnostic, too? There are a couple of scenarios wherein companies attempt to be both. Whether or not these approaches successfully combine the oxymoronic models is a matter of opinion.
One is that the agnostic consultant signs up as an agent under a “zero commission” plan. This option is available from many service providers, such as resellers PowerNet Global Communications and TMC Communications.
Michael McLelan, senior vice president of business markets for PNG, said his company provides the same level support to its zero-commissioned agents, giving them the access to training, proposal tools, provisioning systems, etc.
“Our quoting system will take quotes from various carriers and prepare a professional proposal,” explained Sarah Graham Linares, vice president of revenue assurance and product development for TMC, noting the consultant can edit the proposal and even add his own logo. TMC offers consultants CDRs or branded consolidated multicarrier invoicing.
On the flip side, she said TMC can help an agent look like a vendor-agnostic consultant with these same branded proposals and consolidated invoicing for a multicarrier solution.
Some agents, like D&M’s Gerhardt, said they have successfully combined elements of both models without giving up carrier commissions entirely.
Gerhardt explained his company routinely performs “agnostic” services, such as auditing, usually charging an hourly fee. But not always. Sometimes, these services are subsidized by the carrier commission. Sometimes, they are waived because a backend telecom management contract will provide monthly revenue on top of the carrier commissions. D&M never takes a portion of shared savings, however. Instead, it recommends negotiating with new or existing vendors for better pricing. Always, he tells customers that D&M is compensated by the carrier.
Gerhardt said his customers never question D&M’s neutrality since he represents 15 carriers under direct agreements and another 30 through master agency Intelisys Telecom Solutions. “I give them the choice of five or six carriers,” he said, explaining his proposal process. “It’s not like I am choosing for them; I am just narrowing down the search and saying, ‘These are the carriers that will suit your needs.’”
Whether Gerhardt’s approach is truly agnostic or not depends on the perspectives of the parties involved. Ideally, any agent or consultant would only ever recommend the products and services best suited for the customers’ needs. But the reality is that even if these recommendations are not influenced by the presence of commissions or referral fees, they can be affected by other things such as familiarity with the vendor’s operations/offerings, a pre-existing relationship with the vendor, or even non-monetary rewards in the form of more accessible or more robust support, for example.
In this comparison of models, one truth comes to mind — everyone is in business to make money. And whether the agency model or agnostic model reigns supreme is not for us to decide, but ultimately lies in the hands of customers.
“The business model is a personal and business choice each individual makes based on his or her own experience and preferences,” said STC’s Hathaway. “It’s neither good nor bad in and of itself as long as the client is informed.”