State of the Telco Channel: Partners, Suppliers Weigh in on Challenges

Plenty of opportunity exists for carriers and partners delivering network connectivity and transport services to customers, despite questions the telco channel faces around commoditization and digital marketplaces.

The technology advisor channel – traditionally known as the agent or broker channel – claims roots in telecom. Agents emerged decades ago as a way to save businesses money and time navigating carriers in the deregulated American telecom landscape. Although many channel partners have expanded their portfolios to include cloud-based unified communications, contact center and even cybersecurity, the wireline connectivity business remains a mainstay for many. The latest Channel Futures quarterly survey found that 39% of tech advisors increased their WAN/connectivity sales year-over-year. At the same time, another 27% saw a decrease in sales.

At the same time, many carriers are de-emphasizing and shrinking their direct sales forces. While lessened investment in direct sales does not necessarily equate to investment in channel partners – considering many carriers’ emphasis on building their own digital marketplaces – many of these suppliers are leaning on partners more than ever.

Airtel’s Vani Venkatesh

“Channel for us is not just a strategic initiative; it’s a critical enabler. That’s how we reach the enterprises,” said Vani Venkatesh, Airtel Business‘ CEO of global business.

Supplier Buy-In

The agent channel bears the scars of battling their carrier partners over the years. Bankruptcies, M&A and management changes frequently presented opportunities for vendors to shut off agent residual commissions. The fragmented and undersized agent community often stood by, helpless to do anything about this. Technology services distributors (formerly known as master agents) emerged out of partners’ need to generate enough spend with the vendors to protect themselves. Agents were battling to justify their own existence.

Momentum has definitively shifted in the last decade. Carriers like T-Mobile have shifted their internal compensation models to encourage sales people to work with the channel. Members of the so-called “Big 5” have affirmed their commitment to the tech services distributor channel. One partner pointed to the sales incentives and spiffs Lumen has been offering to the channel. Verizon has touted its market development funds for the TSD channel, and AT&T has built programs specifically for TSDs and tech advisors.

“I think we’re going to continue really do things that are going to help us grow with the indirect channel and as a result expand our customer relationships to places where we may not have had those relationships historically,” Chris Jones, who leads AT&T‘s route to market for TSDs and agents, told Channel Futures in an interview two years ago.

AT&T’s Chris Jones

Zayo Group is another company that’s working to revive its efforts within the channel partner community, particularly among tech services distributor and technology advisors. Zayo chief sales officer Brian Daniels said company laid a foundation for the channel in 2022 and is seeking to build on that in 2023.

“Zayo historically has been a bit hot and cold with the partner channel. I’m fine saying that,” Daniels told Channel Futures in a recent interview. “It’s a complete 180-degree shift in mentality where we’re really leaning in.”

Part of that shift stems from Zayo and other suppliers accepting agents’ third-party posture as a benefit, rather than a detriment. Daniels said partners can engage with end customers in a more consultative fashion than any provider can directly.

Zayo’s Brian Daniels

“If I’m a CTO or CIO and I’m building a network, I’ve got my team that’s going to put forth a design and a topology and a software stack and an application stack. But I’ve got a lot on the line if I’m that person,” Daniels said. “I want to engage with people that have consultative technical backgrounds and have looked across a wide range of things, and can come to us and say, ‘Yep, that’s the right decision,’ or, ‘This may be a little bit of a better one because of X, Y and Z.'”

Transactional and Transformational

Daniels noted that Zayo’s partner business exists in a spectrum in terms of … … the scope of the deals. On one hand, the company has sold some of its largest deal through partners with multisite customers like distributed retailers, health care providers and financial institutions. Oftentimes partners and Zayo are bringing in SD-WAN and network management over a network underlay. One might call these WAN/IT transformation projects, Daniels said.

“You’re taking an MPLS network and converting it to SD-WAN. You’re integrating into the cloud. And that’s where I think I’m really excited. I think the partner community is really excited,” Daniels said.

In the meantime, Daniels said Zayo can’t neglect the smaller, more transactional deals partners are bringing to the table. He said Zayo is trying to regard those agents as they would a wholesale partner: making the services quick and easy to consume.

“Time kills the deals in that area of business. We want to make that as efficient as possible. So we’re not going to ignore them. We’re going to treat them like our most strategic wholesale customers,” Daniels said.

Daniels said Zayo is working to tier partners in terms of their emphasis on transactional and transformative deals. And that’s not about assessing a value to one tier compared to the other, but to make those respective motions easier, he said.

“We’re going to have these big enterprise conversations and managed edge. We’ve got to find those partners and figure out how to resource them. But I don’t want to turn my back on the folks that are running a quoting engine, because there’s a lot of value in a quoting engine. We’ve got to enable that wholesale channel. We have to automate it. The more that we can remove people out of that process, you can get a quote faster and a service order faster,” Daniels said.

A Partner’s Balance

Evan Gillman leads New York City-based partner Transit Broker. His firm engages in both transactional engagements with customers regarding network underlay services and the larger WAN transformations. However, he said those efforts begin with the transactional side. As a lean organization with a small base of subagents, Transit Broker couldn’t just chase complex orders, which take a long time to develop and require deep engineering resources from the carriers.

Transit Broker’s Evan Gillman

“For us, transactional deals keep the lights on while we’re mindful of larger, more complex deals that are more sticky,” Gillman told Channel Futures. “At the end of the day, any of these more complex SASE/SD-WAN/security deals all require a network underlay. There absolutely has to be a need for those transactional deals, coupled with the more extensive, stickier, more involved products that are over the top.”

Telcos and SMBs: What’s Goin’ on There?

Conventional wisdom has suggested that IT vendors will turn more to the channel to handle its down-market customers as the vendors layoff more of their own sales people. A good example is VMware/Broadcom’s publicly stated plan of focusing direct sales engagement on its top 600 customers and leaving the rest to to the channel.

That movement seems to be taking place in many parts of the telco world. At least in terms of what vendors are telling partners.

“From an SMB perspective, the rhetoric coming from many suppliers in the channel is that they want the SMB business,” ClearSync Solutions CEO Richard Rodriguez said.

ClearSync’s Richard Rodriguez

But Rodriguez said vendors may walk the walk differently than they talk the talk when it comes to smaller customers.

“In our experience, while they may want it, they treat it as a lower tier priority when it comes to quoting, project management, installation and support,” Rodriguez told Channel Futures. “I understand that many providers are having issues retaining and recruiting talent and this has been …

… cited repeatedly as a root cause.”

Kat Lopez Shelby co-owns Shelby Technology Solutions, a Texas-based technology consulting firm. She pointed to the importance of vendors getting it right on backend of a sale.

Shelby Technology Solutions’ Kat Lopez Shelby

“It’s the project management on the back end that can really cause a lot of stress for partners when things go off the ramp,” Lopez Shelby told Channel Futures.

And as Lopez Shelby and other partners tell Channel Futures, the ability of a vendor to properly support the end customer is impacting where partners choose to put business.

“I’ll do some transactional stuff with you, but why would I want to bring you like a huge deal if you don’t have the true support for it?” she said.

But sometimes, Lopez Shelby noted, it’s difficult to tell if vendors struggle on project management in general or if they simply aren’t giving as much care to the smaller deals.

The other side of that SMB coin is marketplaces and digital platforms. Groups like Beyond Now and CloudBlue, which both help suppliers create their own digital sales platforms for end users to access, are arguing that these marketplaces can help telcos take advantage of SMB demand. Beyond Now found in its survey of SMB IT buyers that 36% preferred to purchase in an online/digital medium.

Adonay Cervantes, CloudBlue‘s global field chief technology officer, said digital platforms play well with SMBs’ demands for self-service options.

CloudBlue’s Adonay Cervantes

“In the enterprise segment, there was a need to have an enterprise sales rep coming from the telco to create a very tailored solution,” he said. “Well in the SMB, it’s more, ‘I want self-service. I want to see the catalog of services, and I want to buy it myself.’”

A spokesperson from Mexico-based service provider and CloudBlue customer Claro agreed.

“They don’t need to wait for someone to start the purchasing process without the pain of talking to someone that will try to sell you more and sell you what you don’t need,” Claro said in a statement to Channel Futures.

Moreover, the movement of the telco portfolio toward subscriptions has also lent itself toward marketplaces, Cervantes said. Claro, for example, has seen particularly strong adoption using CloudBlue for technologies like Office 365 and Google collaboration services, web conferencing, public cloud storage and endpoint cybersecurity. Other providers, like Telstra and Telefonica, are using CloudBlue to deliver various cloud services.

However, the traditional products and services associated with the telcos could be another matter. Gillman said the complexity of the telecommunications landscape makes presents a significant barrier to marketplaces.

“Unless you’re talking about a level of automation with the most basic of products – POTS lines, vanilla internet access, a couple of SIP trunks, or something super, super straightforward, I can’t foresee a time in the near future when this is going to be handled with automation. There are way too many permutations. Every single customer opportunity is …

… completely unique. There are similarities, but there’s way too many complexities in the day-to-day for robots to kick in and start running automation,” Gillman told Channel Futures.

Gillman added that while the channel has seen the rise of automated quoting tools, automation has yet to touch many other parts of the procurement process.

“Once you get past the quoting phase and you want something on an implementation, you need a human being involved. There’s just too many details, handoff, IPs, specific ports that need to be open. There are just too many things that require human intervention to make an order go from quote to bill. We’re not at that point yet,” he said.

Global Perspectives

Richard Rodriguez serves as CEO of Houston, Texas-based technology advisor ClearSync Solutions. The firm serves a variety of clients, including SMB and enterprise. But many of them fall into the global category and need carriers that fit such a profile.

“Seventy percent of our midmarket and enterprise customers are in oil and gas, and most have an international presence, in many cases a significant footprint. This limits the number of suppliers in the channel that want to take on international aggregation and support,” Rodriguez told Channel Futures.

Telstra hails out of Melbourne, Australia. Noah Drake, president and managing director for Telstra Americas, said his company has a sweet spot in helping businesses find connectivity and resources in Asia.

While the company drives “hundreds of millions” of dollars in revenue in the U.S., partners derive only about 8-14% of that, Drake said. He said the company is eying ways to increase that percentage but faces constraints as an international business.

“When you look at some of our competitors, some of them are almost trying to completely outsource it. Where they just say, ‘Hey, we want a full kind of partner go-to-market function and we will be doing the blocking and tackling. And then you just run with it.’ Those competitors often are selling domestic services that are fully managed service offerings that customers are looking for in this day and age,” Drake told Channel Futures. “And that’s great, but it’s a lot more difficult to do that in a developing market than it is to do it in a developed market. So we still can’t fully go to that, but we do want to analyze that and say, ‘Hey, what can we do to increase the productivity here?’”

Indian telecommunications behemoth Bharti Airtel recent signed an agreement with California-based partner Bridgepointe Technologies. The company sees opportunities to help multinational customers growth their connectivity footprint across the globe, especially in Africa and India. Vani Venkatesh, who leads global business for Airtel Business, said the provider doesn’t sell directly to the enterprise in the U.S. Airtel operates small team in the U.S. that is relying totally on partners to scale the business.

She said her firm wants to fit into the larger set of solutions that partners like Bridgepointe provide to their end customers. Moreover, she said, Airtel will benefit from viewing itself as part of a larger customer solution.

“We love [depend on] the expertise of people who have been working with their customers and who know their customers inside-out. We love to do things that we are good at and let our partners do things that they are good at. Because we believe that together we can add significant value to not just to the both of us, but to the customers, who are at the center of this,” she said.

Is the channel growing more comfortable working with multinational customers? Or at least more familiar?

Bridgepointe’s Mel Melara

Mel Melara, vice president of sales and global head of Bridgepointe’s data center practice, thinks so.

“We work with a lot of multinational customers, and we’re working with more and more, which is why I’m out forging agreements in different regions,” Melara told Channel Futures.

Labor shortages are playing into the increased need for businesses across the world to rely on partners like Bridgepointe for technology advisory.

“And I think most enterprises, even medium sized businesses – their IT staffs are getting cut shorter. They’re working longer hours. So they really look for a trusted adviser to help shorten their their project cycle,” Melara told Channel Futures.