XOs Channel Strategy: Setting the Record Straight

Contrary to rumor and erroneous reports, XO Communications Inc. (XOHO.OB) is not recruiting more VARs at referral-lead rates so it can pay – and depend less – on telecom agents.

Yes, XO is bringing on more data experts as it works to diversify its indirect channel. And yes, it is phasing out agents that have not met contractual obligations such as hitting agreed-upon sales numbers. But XO agents aren’t losing ground to VARs and continue to be crucial to the service provider’s fast-paced growth, executives told PHONE+.

In fact, XO’s indirect channel, which is heavily comprised of master and subagents, makes up 25 percent of the company’s overall revenue, a big reason why XO has seen double-digit sales growth this year alone, said Tom Gorey, director of the XO business partner program.

Simply put, XO is expanding its channel – and not to the exclusion of agents, Gorey reiterated. Diversification just makes business sense.

“We’re leveraging a new channel but I’m doing it through our existing distribution strategy,” Gorey said.

Like their telecom counterparts, VARs can either contract with XO directly or through master agents. And XO does not pay higher commissions percentages to one entity than it does to another, said Gorey.

Meanwhile, Gorey also said speculation about XO running an indirect channel referral program is false. The CLEC’s direct sales division does pay for referrals, but the policy in no way touches or impacts the indirect channel, Gorey said.

Richard Gannon, XO’s national partner channel manager, agreed. “Nothing’s changed except more support,” he said.

To be sure, the XO channel has undergone some drastic changes in the past four years as new leaders have come in to clean up what was a chaotic program. Some of the changes have been big. For example, Jim Delis, with the help of Gorey and others, localized channel support so that a subagent in New Jersey who contracts through a master in California gets support in New Jersey.

There have also been more controversial moves, including the decision to axe underperformers. And several of those smaller agents have made no bones, to PHONE+ and their peers, about their anger over losing their contracts and residuals. XO has narrowed its agent roster from 2,500 to about 250 in the past several years and, Gorey said, has remained “very public about what we’re doing.”

Those agents were cut from XO because they weren’t selling on a consistent basis or maybe had one deal “and that was it,” Gorey said. In other words, they weren’t keeping up their end of the deal. So as Delis, Gorey and others revamped the channel program, they focused on the agents committed to selling the company’s services.

“We all know what we can expect from them and who we can count on,” Gorey said.

Interestingly, added Frank Reyes, XO’s western region channel sales director, those 250 agents “are doing more quantity now than all of the others in the past.”

That’s because XO’s reallocated resources – support staff, training materials, and so on – have allowed the company to strategize and communicate more with its agents, Gorey said.