The Evolving MSP

Blog archive

Why Aren't You Profiting from the Convergence of Telecom and IT?

You're traveling through a land not of sight nor of sound, but of mind. Well, no, it's not like that. This is not another dimension in the multiverse; it's just another channel. But it's about as large as the one you're in.

If you're from the IT channel, I'm referring to the telecom channel, and if you're from telecom, I'm talking about IT. Two remarkably separate channels operating side-by-side and intersecting far less often than you might think.

Different Rules of the Road
While the economy that drove the origins of both channels -- aggregation -- is the same, the ways in which the channels operate are somewhat different from each other.

Originally, the IT channel was born of the opportunity for distributors and large retail organizations to aggregate the purchases of hundreds or thousands of resellers into one buying relationship that drove deeper discounts, which improved competitiveness. While some resellers were franchises of, or had allegiance to, a particular aggregator, many played the big distributors off each other for better discounts, terms and treatment. Some of this was passed through to the resellers.

The telecom channel was also created by well-funded players who became "master agents" for the large carriers, thus enjoying superior service discounts or sales commissions. To achieve the level of sales they had committed to, these master agents signed on "sub-agents," who sourced services through their master agent to provide their customers with competitive pricing.

The Major Difference
Telecom sub-agents sell carrier circuits to customers, which are implemented by the carriers themselves. Recently, master agents have diversified by aligning with providers of various related services and offering these to their sub-agents for incremental sales to customers.

IT channel partners started out reselling (and were called resellers because, originally, nobody but IBM could sell IBM, so IBM dubbed their PC-selling partners "resellers") all manner of computer-related products to their customers. To compete with other channel partners, they added valuable services to the product sales, leading to them being renamed value-added resellers (VARs). Soon, they started discounting to compete more aggressively. The only thing they accomplished was driving any real profit out of their product sales.

While telecom sub-agents by and large haven't changed much, IT resellers have had to adapt to survive. One by one, they moved away from selling products and toward providing services to their customers. These services were far easier to differentiate from competition and produced much higher margins as a result.

For seven years I wrote a column called "The Changing Channel" here on, and this was the change I was describing. Today the better, more insightful channel partners have become service providers; most of them call themselves managed service providers (MSPs).

What's Your Biggest Problem?
Ask this question of a large group of MSPs and the answer you'll hear most often is, "Finding great sales talent."

There are many contributing reasons for this. The best sales professionals from the IT channel realized long ago they couldn't make money selling computer products. Those who couldn't shift to selling services shifted to selling other products elsewhere. Most of those who could make the shift seem to have opened their own practices. Many retired to live near here in sunny Arizona!

Bottom line: The IT channel is suffering a drought of sales talent.

Ask the same question of telecom sub-agents and they'll simply tell you that they need more to sell. Carrier services continue to commoditize, limiting their ability to make money. They need other services to sell that their customers will appreciate.

Have You Caught the Clue?
So we have a service channel delivering great services but has difficulty selling, and a sales channel seeking great services to sell to their existing customers. Put them together and watch the magic happen.

Many of those who are aware of this opportunity but have been confronted with great difficulty promoting the obvious convergence of these two great channels allow themselves to be distracted by semantics. It's not what we call it -- it's what we make happen that counts.

What we need to make happen is teaching these telecom sub-agents and MSPs to work well together. MSPs can easily teach telecom sub-agents to sell their services and earn hefty commissions, and telecom sub-agents can help MSPs know how and when to best engage them.

Seems to me that letting telecom sell and IT deliver is a match made in channel heaven. What do you think?

Posted by Howard M. Cohen on September 25, 2020