Lumen, Upstack Sign Deal: What Does This Mean for the TSBs?

Upstack has signed a partnership with Lumen Technologies in a landmark move for the private equity-backed channel partner and the rest of the technology advisory channel.

The deal, announced Thursday, marks the largest direct agreement Upstack has signed with a supplier. The sales partners operating under the Upstack umbrella can leverage Upstack’s contract to sell Lumen rather than working through the distributors and TSBs they have traditionally used for Lumen. The announcement also indicates that New York-based Upstack has built enough scale to justify a a contract with the behemoth carrier. Upstack has acquired more than 20 sales agencies using more than $150 million from Berkshire Partners, Midcap Financial and Morgan Stanley Private Credit.

Lumen’s Dave Young

“Upstack is a shining example of a ‘next-generation partner’ capable of helping businesses adopt emerging technology solutions that will enable their digital transformations and beyond,” said Dave Young, senior vice president of strategic sales for Lumen. “We’re thrilled to be Upstack’s first major technology partnership providing business customers expert advice combined with access to Lumen’s advanced solutions portfolio.”

Lumen is moving a step closer to the customer with the deal by signing a direct contract. It will use Upstack’s platform for automated quoting and pricing, as well as Upstack’s roster of advisory partners and their customers.

Upstack’s Nick Caruso

“With its robust solution set and global network of emerging technologies for customers, Lumen has become a leading Upstack partner month after month,” said Nicholas Caruso, senior vice President, global channels and alliances for Upstack. “We’re looking forward to working with Lumen to help our clients leverage more of the Lumen platform and its next-generation cloud and edge technologies.”

Background

Upstack, which Christopher Trapp founded in 2017, burst on the scene in 2021 with its $50 million Berkshire Partners investment. At the time, the deal marked the largest private equity investment in a direct-selling agent.

At the time, Trapp told Channel Futures that he and his team had debated building a technology solutions brokerage (TSB), formerly known as a master agent. But ultimately, he said Upstack preferred to focus on customer-facing sales.

“The [TSBs] are very talented at managing the relationships with suppliers,” Trapp said in 2021. “The agents are very talented at managing the relationships with the customers. We’re focused on that. It would be dilutive to our value proposition if we tried to be great at both of those today. So we’re going to continue leveraging those [TSBs] going forward,” he said.

Trapp also acknowledged at the time that Upstack would form certain direct partnerships with suppliers and leverage its own back office for those practices. And indeed, the firm has already done that. Cybersecurity provider Netacea announced in January that it had signed Upstack as a partner. In March, Upstack announced an agreement with new data center provider Wyoming Hyperscale White Box.

For many of these smaller vendors, going direct with an agent makes …

… the most sense economically.

“Look at what doing business with two or three TSBs costs,” said Jay Morris, chief aggregation officer for MOReCOMM Solutions. “If you want some decent exposure, you’re not even going to get out of the gate until you write a check for $100,000. Ninety percent of the companies doing business in the channel don’t have those kinds of budgets to pay marketing dollars for for TSBs,” Morris said.

A Bellwether Partnership?

Lumen, however, is an entirely new breed of supplier partner. The carrier, unlike Netacea and Wyoming Hyperscale White Box, has entrenched itself in the agent channel for decades and holds agreements with the national TSBs.

It’s also not the first major supplier on the network side that Upstack has approached. Rumors swirled in the spring that at least one other large networking supplier had spoken to Upstack about a direct contract.

Mejeticks’ Robert Devita

“I believe this is the first of many direct agreements that we will see announced from Upstack,” Mejeticks CEO Rob DeVita told Channel Futures. “As they continue to grow and scale, it will be important that they lessen the need to rely on TSBs and increase their margin internally by removing that layer.”

Peter Radizeski, president of Rad-Info, predicts a similar trend of Upstack moving closer to the suppliers.

“Well, this is the second step in Upstack becoming a broker despite claims by the company to the contrary,” Radizeski told Channel Futures. “I will be interested to see how Lumen products and pricing find their way into a public-facing store and how that will affect the role partners play in the technology procurement process.”

Lumen and the Channel

Dave Young assumed oversight of the Lumen channel partner program in 2021. He formerly worked in Lumen’s public sector and global hyperscale business. His new role as senior vice president of strategic sales put him in charge of channel, hyperscalers and systems integrators. In interviews with Channel Futures, he has preached the need to create a more digital environment for partners and to build synergies between Lumen’s different channels.

“All of those clients that we put together have something in common — working with another company to create value for a customer. That’s really easy to see in the partner channel. But when we begin to look at our relationship with the hyperscalers or the system integrators, you really begin to notice that’s a commonality in all of them. They’re also markets that we believe are the growth engine for what Lumen’s going to become in the next three to five years. And we’re putting them together so we can cross-pollinate ideas and solutions,” Young said in a Q&A last year.

Routes to Market

The agreement comes as the TSB space continues to consolidate. Avant last month announced the acquisition of PlanetOne, marking the transition of yet another independent firm into private equity. Many vendors and partners in conversations with Channel Futures have indicated that they expect the national TSBs to consolidate into three or four major players.

Radizeski has expressed skepticism about the end result that will come from the $600 million investments from private equity that have entered the TSB market in the last two years.

Rad-Info’s Peter Radizeski

“We are just months away from a huge mess in the TSB space that it seems vendors are looking forward to,” he said.

In the meantime, many suppliers are diversifying their routes to market. For example, Comcast-owned Masergy recently turned to Ingram Micro to deliver a managed SD-WAN service through resellers. And Aryaka recently placed a click-to-buy SKU on the AppSmart marketplace, becoming the first network provider to join the marketplace.