Channel Partners and the End of the Telephony Fairy Tale

Once upon a time there were premises-based telephony systems, and it was like a fairy tale – channel partners provided necessary and important products and services and reaped the rewards. Selling big pieces of hardware along with software, installation, ongoing maintenance, service and support, channel partners were able to grow successful businesses. With unified communications (UC), channel partners including VARs and managed service providers (MSPs) could add even more value on top of the PBX – messaging, conferencing, mobile apps, etc.

But along came the cloud, and the fairy tale began to vanish like pixie dust. Slowly fading were the large margins from selling hardware, along with the installation, maintenance, and service revenues. Instead of selling tens of thousands (or even hundreds of thousands) of dollars worth of equipment and services, channel partners needed to change their business models to sell recurring cloud licenses with much lower margins. While switching from the on-prem Capex model to the cloud’s Opex model is beneficial to most end-user organizations, it creates significant challenges to most channel partners. For many VARs, it’s been challenging to transition into a recurring revenue stream that greatly impacts their bottom lines.

Adding to the situation, some cloud providers eliminated the middleman altogether by enabling customers to purchase cloud services directly from their websites or digital storefronts. While competing with channel partners was rare in the on-premises days, it’s become more and more common in the cloud world.

In recent years, vendors have been slowly taking ownership and control away from VARs. In many cases, channel partners are sales agents receiving referral fees, as the vendor becomes responsible for the customer relationship and account management. While this agent model isn’t new, it’s taken on renewed importance in the cloud world, as agents don’t have to deal with inventory, installation, services, etc.

Fortunately, smart channel partners, and those working with the right vendors, can still find ways to add value, maintain customer relationships, and remain profitable.

Considerations in a Cloud World

With the rise in demand for cloud services, especially since the pandemic and the need for more flexible approaches to communications and collaboration, channel partners need to evaluate their business models, vendor partnerships, and path to the future.

What are some things channel partners should consider in today’s cloud world?

• First, work with a vendor that values partner relationships and takes a partner-first approach. Not all vendors are equal when it comes to their channel approach and strategy. Partners should not only look at the UCaaS vendors’ offerings, but look for a provider that offers flexible financial models and programs. Consider issues such as who owns the customer relationship, what financial incentives does the vendor provide, are there various options such as managed, wholesale, or white label services? Does the vendor want a true partnership, or just a lead referral? What tools does the vendor provide to help the partner? Does the vendor compete with its partners?
• Next, identify ways you can add value to the UCaaS sale, including support services, integration with vertical and horizontal applications, training and adoption programs, network services, cloud migration, etc. If your organization has professional services experts, identify ways your customers can benefit from these services. When it comes to UCaaS, many organizations will need some kind of professional services, whether customization or integration with specific applications, for example. Taking it a step beyond offering these services, look for a vendor that allows you to include your services (non-recurring and/or monthly recurring) on the customer invoice, providing a single invoice for customers with both the vendor’s services and yours included.
• Find ways to go beyond selling just a UCaaS solution. For example, look to contact center as a service (CCaaS) to add additional value and profitability. CCaaS adds tremendous value to the UCaaS sale in terms of synergy, while providing additional customization requirements and opportunities.
• Consider hybrid cloud opportunities. Just as there’s no one cloud size that fits all, there’s no one path to the cloud. Not all companies will move completely to the cloud all at once and instead prefer a gradual migration that leverages some of their investments. This creates a real opportunity for you to guide customers along their migration journey, strengthening your relationship with them and likely surfacing additional revenue opportunities along the way.
• Also, don’t forget about devices and peripherals. Endpoints and devices such as DECT phones, attendant consoles, conference phones, and more can increase profitability.

For more insights about the changing dynamics and how channel partners can succeed and thrive, I invite you to attend a Channel Futures webinar I’ll be presenting with Mitel’s CMO Dave Silke, along with Peter Johnson, Chief Operating Officer, BSB Communications. Please join us on Tuesday, June 29, at 2:00 PM Eastern Standard Time. We’ll be discussing the changing role of the channel in today’s market and what partners need to be thinking about to differentiate themselves in a subscription-based world.

You’ll learn about:

• Key trends in the communications market that will impact your business this year
• Hidden cloud opportunities and how to identify them with your customers
• The unexpected ways you can grow your cloud business without changing your business model

For more information and to register for the webinar, click here. I hope to see you there!