Telarus CEO Adam Edwards: Margin, Resources 'Not an Either Or' for Partners
"It's not an either-or. It's not, 'Do you want a relationship or do you want margin maximization?'" Edwards said.
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Channel Futures: I think the last time we chatted was a year ago, just after you had announced the acquisition of TCG. What has been top of mind for you and your team since then?
[Telarus CEO] Adam Edwards: I’d say what’s always top of mind to us is, how do we better advocate for our partners, and how do we grow the channel?
With regard to the TCG acquisition, my only regret about that is that we didn’t do it sooner. I think when we consolidated teams together, what we got from the TCG team were a lot of passionate producers and a lot of passionate channel advocates. I think what they got was infrastructure, resources, engineering that help their partners sell technologies than maybe they were not selling before. Whenever you run an acquisition, you’re going have a period of what they call forming, storming and norming. You bring teams together, you consolidate, and then ultimately you’re better off, and that’s what happened there.
CF: SolutionVue, your sales assessment platform, got an update recently. It was interesting to hear from [Select Communications CEO] Jerry Goldman about how he thinks AI-based sofware will be more of a differentiator for the TSDs/TSBs in the future. What role are software platforms going to play for companies like Telarus and Avant going forward? In the future, is that going to move to be table stakes? How is that going to shape whom the partners work with, and how often they work with a TSB?
AE: One hundred percent it is going to influence a partner. First of all, their partners are very savvy consumers. And they’re going to engage first – No. 1 – if they actually trust that TSD, if they trust that TSD is going to support them, especially when the chips are down. That’s one of the things they depend on the TSD for: clout, being able to advocate for them when they need an escalation or need some help, or whatever it is. Because remember, these businesses are not like a restaurant where week to week, month to month you have good seating, good traffic and everything else. These are businesses that are built over years and decades. They get their value over decades.
So partners are looking for someone they trust first and foremost. Only after trust exists are they looking at the incremental value that can be added, and that value in terms of giving them insights and direction, whether it’s the sorting and vetting of new providers or education around new technology. It comes in different formats. And if you can give them insights and leverage the breadth of transactions that go through a TSD and turn those insights around, that comes in different forms.
So while we talk about tools like SolutionVue, 100% that’s a game changer for partners of being able to have a guided selling process for their customers and to look good in front of customers, having confidence in selling a new type of products and also getting access to insights that are produced by our engineers. That’s just one way in which those insights are delivered. Those insights are also delivered directly by engineers. They’re going to engage with a partner directly and have a one-off conversation. It’s also delivered in tools like our product matrices, if you want to look at which product interfaces with which platform, or whatever you need to know about the product. Each tool is a different way of delivering insights into quantitative and qualitative data.
My belief is that if a TSD is not leveraging that data for the benefit of their partner, they’re going to have a hard time going forward, because while a TSD may have that trust of the partner, they must also continue to add value and do things for a partner they cannot do for themselves and data insights will be table stakes.
CF: Whether it’s engineering or the matrices or the software, how has the partner community come to value or expect those TSD resources?
AE: I think that the way in which each of these advisors experiences value is different. They’re all on a different scale. And for one transaction in which I know the product very well — I’ve sold it many times before — then margin is going to be most important to me. If it’s something new and I need help, then that assistance is going to be really important for me. So different partners value different things, but even the same partner values different things at different times. And our hope is we’re able to meet that partner who values the entire relationship for each of those items and is optimizing for value. And that’s what’s taking place right now in the dynamism of this competitive environment. Partners are saying, “Hey, I need more, and I want to pay less.”
I think you’ve got to be really creative in how you deliver that value. Because ultimately maybe they’re not experiencing value, right? And if they haven’t taken advantage of these resources, how could you value it? But I think those that do end up valuing those resources and end up continuing to use those. That’s one of the things we track – how they engage and if they do engage. Are they engaging again? And that’s one of the things that gives us a lot of confidence that partners continue to value more than just the financial transaction. That they want a partner who’s going to help them do things that they can’t do on their own.
CF: And I think dynamism you mentioned is such a big factor – that the one-to-two person shop that just started off during COVID is so different from the person who’s been around for 20 years. And maybe they’ve hired all the sales engineers.
I’m wondering if TSDs may increase their differentiation around these different partner types. If there is going to be a TSD that is going to frame its value proposition on simply being transactional? Their target partner is not looking for any sort of extra staff augmentation. They just want the deal. What’s your thought broadly around that, about how differentiation might increase around certain partner personas?
AE: I think it will. What consolidation has done is bring in additional investment into the channel. And I think what it’s also done is create increased competition. I think it’s counter to what a lot of people expected, but there is increased competition. And what that means is, each TSD is going to have to decide for itself how it approaches the market, what value it provides or doesn’t provide. And then partners are going to vote, and partners vote with every sale they make on what they truly value versus what they don’t value. Our experience has been that partners value different things at different times. When it’s something they’re familiar with, then they value, “Hey, I need to maximize my compensation.” And what’s interesting is, we found that even the fully scaled advisor out there that has dozens of engineers on staff continues to engage our staff, not because we have a deeper knowledge in a specific product set than they do (because they may have had that), but they want something adjacent, or there are new providers have not engaged with them. They need an understanding of [the vendors], and because of the position we occupy, we’re able to deliver insights that they can’t for themselves. I think because of our scale, we’ll continue to be able to add value like that.
And the question is, which partners value that and at what times? And they’re going to vote, and they’re going to decide what is valuable to them and what is not. I think as TSDs, it’s going to be up to us to deliver the value, to anticipate what they want. And of course, the market is going to decide. Partners are going to decide. They’re going to tell us by where they place their sales.
CF: Before we started the interview, you used the phrase “market maker” as what the role of a Telarus is going to be going forward. Could you break down what that means?
AE: What I mean by that phrase is, we’re bringing two parties together. While we’ve seen plenty of examples, of partners working directly with providers, what we found is partners demanded that we take a role in the industry – No. 1 to protect their commission. That was about 20-25 years ago. But No. 2, suppliers found that by working with a TSD, they were able to address many more partners. There was support that was able to be done on a wider scale. And they were actually able to grow the market and get some coaching on best practices. On both sides of the equation these parties preferred working with a TSD, and that evolved us into the current environment. We’re here to first and foremost help partners grow and expand, and we advocate for them. But No. 2 is to help suppliers create programs that are beneficial to partners, that are long lasting and give best value to partners.
CF: As you mentioned, you and your peers emerged in some way to be a defense for these partners, in a world where they were constantly getting their commissions shut off. And it does seem like in many ways that power dynamic has shifted a bit where you are much larger than you were before. So what does that look like going to the table with the suppliers now that you have increased scale and as suppliers are evaluating their investment, whether that be in commissions or in MDF?
AE: I’ll tell you, it’s very different. Fifteen years ago, we would sit down and argue for the existence of the channel, why a provider should invest in the channel, what the value is, the fact that these are incremental sales and not just taking away from their direct team. That’s a very different conversation than we have today, where providers have invested in the channel. They see it as a critical route to market, and the conversations we have with providers today are more about advising them on best practices, what behaviors they should exhibit to attract partners and how they should form their channel – rules of engagement they should establish. And the fact is, we have much more fruitful conversations than we used to have because they’re higher level executives that are mindful of the channel, because the channel means more to each of these organizations. So I would say our conversations today carry a lot more weight and get a lot more results than they did 10 or 15 years ago.
CF: You’ve talked about the balance of preserving the long-term value of a vendor’s channel when you’re entering into conversations with a provider that’s getting pressure from their CFO about their channel investment, while also protecting the partners’ residuals in the short-term. Could you walk me through that balancing act?
AE: I don’t see it as much as a balancing act, because I view our objectives as one and the same. We’re trying to do what’s best for the partner, which ends up being best for the supplier and for us as well. When we sit down with a supplier, we’re coaching them on best practices, which ultimately benefits the partner. We’re coaching them on, “Look, you can never change past commission. In our contract, you can’t go revisit it, you will lose all faith that these partners have in you, and you’re not going to see business again, if you try to do something retroactively. On a go-forward basis, you should have XYZ in your offering. And these we believe are the best practices in the channel.”
It may look from the outside like, “Hey, future commissions are being renegotiated. What is the TSD doing to advocate for me?”
I’ll tell you – we don’t publish these conversations that we have, but we have walked providers back from making some pretty poor decisions that would have hurt the partner, that ultimately hurt the supplier in the long-term. That’s what I mean about alignment. Some of these providers have new financial mandates that they must work within, especially in the current environment. But what they sometimes do is make a short-term decision that will drastically harm them and the partner. That’s where we’re aligned. We are aligned in the longevity of channel programs as to what’s best for the partner, best for the TSD, and the provider. Sometimes providers don’t see that, so we have done a lot of coaching and working with providers to meet their objectives for the future, honor their commitments, but also maintain relevancy in the industry with partners. I’d say we’ve done a lot of that, and I believe we’ve done a very good job.
What partners are seeing today is that some providers were paying a large recurring revenue and a large upfront, and that was fine when the market valued customer additions above all else. Now all of a sudden the capital markets are telling them profitability matters. And all of a sudden, their outlook is very different. That’s where we’ve coached them on, “Do not ever impact past commissions. Looking forward, make sure you’re within market and make sure you’re setting up the stage where partners want to work with you, rather than doing something drastic.” And I’d say we’ve walked back a few providers from doing drastic things.
CF: I’m curious about what that negotiation looks like from a communal perspective. In the sense of, how you and your peers are in conversation with the supplier community as a group. How are you all relating to one another as you’re trying to relate as an industry to current and prospective suppliers?
AE: We each have independent engagement with suppliers, but I believe that we’re all advocating for the same thing — the longevity of the channel and the protection of the partner. Those are the things that Telarus advocates for. I think some of us may do a better job than others. I think that while we have independent conversations, I think they end up being the same of advocating because we all know that a happy, secure partner is going to continue selling over and over and that’s how we all win. So the partner benefits, the TSD benefits, the supplier benefits. I think we end up advocating for the same thing: Create great channel programs, invest in the channel, be consistent and follow the rules of engagement.
CF: In the latest ScanSource earnings, CEO Mike Baur said the company is feeling margin pressure because competitors are raising commission-pass through, and they are trying to keep pace with that. At the same time, certain smaller TSDs are openly talking about how much they’re passing through. For example, Clarus is saying, ‘You pay us $1,000 a month, and we’ll give you all the commission pass-through.’ What are your thoughts on these trends?
AE: Believe it or not, we’ve seen that before. That took place probably about 12-15 years ago where someone tried that, and it wasn’t successful.
[Editor’s note: KeaneTel in 2006 rolled out “Master Agency in a Box,” which offered 100% pass-through for $295 or $600, depending on the arrangement].
And I believe it’s because – as I’ve mentioned before – that a partner first has to trust. If they don’t trust a relationship, if they don’t trust the longevity and the financial stability – if they don’t have trust – it doesn’t matter how high the pass-through is. They’re just not going to place their business there. Trust is No. 1 and has to come first. Once that had been satisfied, then yes, pass through does matter.
So we’re seeing increasing competition, and partners are voting on what they value. Is it, “I just need a high pass-through and nothing else?’ Or is it, “Hey, I value more than that and am willing to pay for it.” So we’ll continue to see tightening, but our belief is that scale is the answer to that. The only way to deliver high value – high value meaning both a good pass-through and good value before and after the sale – is scale. And I think that has got to be answered first. Kmart and Sears got together believing they could respond to Walmart’s pricing. But while they responded to the pricing, they forgot to address the cost side of the equation. And if your costs are so high that you can’t really sustain your prices, you haven’t really delivered value, and ultimately those companies went away.
That’s why we believe scale is so important. Because like I said before, partners are savvy business people, and they want value and they’re going to go to where they get value. The question to be answered is, what is it they value most? And my belief is, they want to a healthy pass-through, and they want the added value. It’s not a question of either-or.
CF: I think there’s a relationship aspect that is part of this whole equation. Many advisors will mention a person from Intelisys, Telarus or Avant who really coached them and helped them cut their teeth in the channel. There is a deep personal tie there in a lot of instances. But I wonder how that personal connection – this really relationship-driven channel – how does that factor into the way a TSB is building its business model? Where does factor into the financial equation?
AE: It sounds like your question is, what’s the relationship worth?
CF: That’s it.
AE: Again, I would say it’s not either-or. It’s not, “Do you want a relationship or do you want margin maximization?” The answer is really, “I want both. I value my relationship, and that’s table stakes. I’m not going to do business with someone I don’t trust, regardless of the pass-through. Given that I’ve got relationships with multiple TSDs and trust there, I want to maximize value as well.” It is not an either-or question.
The relationship aspect of this business is not going to go away. No matter how big we get, this is a fundamentally different business than equipment distribution. The relationship matters between the advisor and their customer, and the relationship matters between the TSD and the advisor. And that’s the way it has been, and even though we’re scaling, that’s going to continue to be a critical factor in the nature of the business.
CF: You’re approaching three years partnering with Columbia Capital. Is there anything that you would say you’ve taken away or learned from working with [Columbia partner] Evan DeCorte and that team? And then on the other side, are there things about to Telarus that they’ve learned? What does that exchange look like?
AD: It’s been a fantastic relationship, to summarize it. What we learned from them is how to look more transparently at the business. There are insights we have now on what really is moving the business and what partners really care about, versus maybe some of the things we were just telling ourselves. It’s night and day. I think we’re able to invest so much more in the things that partners care about.
On the other side, what has been gratifying is to have them realize, “Wow, this really is a unique business.” Everybody likes to say that. Everybody likes to tell investors, “Hey, this is a very unique business. This is very different.” Private equity hears that over and over. But it’s been fun to hear them say, “Wow, this is different.” And I think what they’ve learned is that the relationship aspect of his business does matter. And those trusted partnerships are critical. They’re fundamental. And that’s very different than a lot of other business models. I think they came to appreciate that pretty quickly.
CF: Could you elaborate on any areas that Columbia helped you see more transparently and reprioritize?
AE: They’re really not prescriptive in the way they engage with us. They help us where we ask. As we were looking at the business, we started looking at engagement on a lot of different products we had, whether partners are really engaging with those or not. One that was important to us was [network monitoring tool] VXSuite. We acquired the company. We felt like it would be valuable to our partners, but when we actually looked at the partner consumption, and what they were doing, we found that it was not producing the engagement we thought so we’ve focused elsewhere as a result.
CF: Is there anything else you’d like to add?
AE: Our view of the channel is that it is continuing to grow and that it’s going to benefit partners, suppliers and TSDs. I don’t think though, that the way in which it grows is inevitable, and I think it’s incumbent upon us in our role to help partners and help providers with the best possible outcomes, because a growing channel benefits us all. And that’s how we, as Telarus, succeed – when our partners succeed. That’s our vision of the future – we help our partners grow. We help engage in the channel, and we help our suppliers engage with them correctly and constructively. Because that’s how we all win.
CF: Is there anything else you’d like to add?
AE: Our view of the channel is that it is continuing to grow and that it’s going to benefit partners, suppliers and TSDs. I don’t think though, that the way in which it grows is inevitable, and I think it’s incumbent upon us in our role to help partners and help providers with the best possible outcomes, because a growing channel benefits us all. And that’s how we, as Telarus, succeed – when our partners succeed. That’s our vision of the future – we help our partners grow. We help engage in the channel, and we help our suppliers engage with them correctly and constructively. Because that’s how we all win.
Increased scale will help Telarus meet the diverse needs of the partner community, Telarus CEO Adam Edwards tells Channel Futures.
Telarus, the Utah-based technology solutions brokerage, has grown drastically in the last three years, stemming part from the investment Columbia Capital has poured into the company. That funding has allowed Telarus to buy companies such as Chorus Communications, TelAdvocate and TCG. The company has risen both in terms of its employee count – going over400 people – and in vendor recognition – having recently topped AT&T’s list of Alliance Channel partners.
Telarus CEO Adam Edwards
Telarus and the rest of the TSB/TSD market is going through a significant shift. Consolidation on one hand has helped create a select handful of large national TSDs that are wielding more scale at the supplier negotiation table than ever before, hiring at a fast pace and building tools. At the same time, many TSDs are reporting pressure to pass through a higher percentage of their vendor commissions to their partners in order to remain competitive.
Telarus CEO: Partners Are Savvy
Edwards said Telarus’ increasing size can allow it to stay competitive while increasing its resources.
“Partners are savvy businesspeople. They want value and they’re going to go to where they get value. The question to be answered is, what is it they value most? And my belief is, they want a healthy pass-through, and they want the added value. It’s not a question of either-or,” Edwards said in a wide-ranging interview with Channel Futures.
He fielded questions about vendor negotiation, commission pass-through, and the TSD value proposition.
Scroll through the 12 images above to read the Q&A with the Telarus CEO, which Channel Futures has edited for clarity.
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