5 Faces of Transformation

If youve bought into the idea that pure play transactional sales models are not the future, you might be wondering what a nontransactional business model looks like. To help illustrate the point, Channel Partners has invited several channel partners agents, VARs and dealers to share their transformation stories. In this issue, you will meet them and find out how and why they transformed their businesses. Then over the next four months, Channel Partners will cover more of their experiences, including:

We thank these companies for allowing us to share their insight and hard knocks with you. We hope that you will follow this series to its conclusion in Decembers issue, which will be devoted entirely to transformation. You also can follow their stories online at www.channelpartnersonline.com/blogs/transformation.

ASSOCIATION RESOURCE GROUP
(ARG)

Transformation leader: Greg Praske, CEO
Number of employees: 46
Year established: 1991
Original transactional business model: Telecom agent/subagent/master agent
Post-transformation business model: Voice and data network services consulting firm

How has your company moved beyond transactional sales models?

Over the years, we have consistently reinvested our profits to expand our value proposition. Our first step, in the mid-90s, was to add an account management team whose focus was to get out and visit with our clients on a regular basis. That team would perform first bill reviews to validate our clients were indeed getting what we proposed. They would check in to see if there were any changes in our clients businesses and explore any ways that we could assist with the management of their services.

The next step occurred in the CLEC days at the end of the 90s. At that point, we added an Implementation Engineering team that performed site surveys, assisted with cutovers and physically verified all services. We wanted to provide our clients the confidence and insurance to take advantage of the new local services that were now available to them.

Simultaneously, we added a project management team that would take the responsibility of managing a clients implementation of new services. Again, we wanted to take the management responsibility off the plate of our clients and make sure their services got delivered in a timely manner and exactly as they requested. As a lot of our carrier customer service centers were offshored, customers were complaining about hold times and quality of support. So, we added a Client Services team to take away that pain. We developed a proprietary operating system to capture all of our clients relevant information. So, now, they dont have to call the carrier to open a trouble ticket, wait on hold, find their circuit IDs and follow through until resolution. Our clients just contact our Client Services team they have all the information, we agree as to frequency of update and then we run with it until resolution. That takes a big load off our clients plates. We even proactively ping our clients circuits and handle many issues before any service issue reports.

Next, we added a Solution Engineering team as voice and data became integrated and data networks became a bigger part of our business. Rather than have our clients decipher the offerings of a variety of providers, our Solution Engineers consult with our clients regarding all of their requirements and then design the right solution that will be best for their businesses. They can speak to the pros and cons of the various services and providers. As were moving towards the various cloud solutions, our highly knowledgeable and experienced team is delivering more value than ever to help clients navigate the hype from the reality.

Recently, weve added a Managed Services team to work with clients who want to gain greater control and oversight of their expenses, particularly in the wireless arena. We are implementing portals to handle the acquisition, management approval, expense allocation and reporting. As companies are downsizing, automating as many functions as possible creates huge value in fact, we guarantee a 100 percent ROI. Having our Managed Services team also allows us to take on the management of carrier services that we do not broker. We charge a management fee but can then capture inventory and billing information that allows us to provide a full suite of management services. Throughout our history, we have teamed with the best PBX and VAR companies in our market. Through those partnerships, weve multiplied our value-add and brought comprehensive solutions to our clients that go well beyond the transaction.

Why did your company begin its transformation away from transactional sales?

We believe the key to a successful channel business is very, very strong, long-term relationships with our clients. To have strong relationships requires constantly providing a value-add that differentiates our company from any other method of acquiring voice and data services. Thus, we had to transform from a transactional sales model.

As we move into the future, we believe the complexity of voice and data network services will actually increase as companies wrestle with their cloud strategies and the demands for increased connectivity and reliability. To engage on the opportunities of the future in the midmarket space will require a significant investment on the part of the channel partner. The return to the partner during the initial contract term will be minimal, if anything. The only way to succeed and be profitable is to earn an ongoing relationship that extends well beyond the initial term. The transactional model simply doesnt position you for that renewal relationship.

When did your company begin its transformation away from transactional sales?

We began moving away from the transactional model 15 years ago.

How complete is your companys transformation?

We expect to continue to transform our company based on market demands. We feel we have a massive advantage in the market by having incrementally transformed over the years. It would be hard for a new partner to come into our market and make the same investment in value-added resources. Our existing base of clients, which has grown many fold over our 20 years, provides us huge leverage and resources to keep investing in those services that will provide our clients a better experience.

QUEST


Transformation Leader: Tim Burke, President and CEO
Number of employees: 100
Year established: 1982
Original transactional business model: VAR/IT systems integrator/Interconnect
Post-Transformation business model: Transactional business continues to be a part of what we do, but we work with our clients as partners helping them deliver technology.

How has your company moved beyond transactional sales models?

We saw the writing on the wall a long time ago. Its partly a mindset to veer away from transactional short-term to long-term relationship selling. First, you have to look for clients who have real needs and genuinely wish to work with you. That involves fact gathering on the part of the sales group. For us it meant training and retraining and its ongoing! In a relationship or consultative approach, both the seller and buyer partner to solve the customers challenges and in doing so you build trust. That trust gives way to new opportunities and ultimately satisfied, long-term customers. Both transactional and relationship selling facilitate the sale, but with everything else being equal you cant beat the combination of building trust with legitimate expertise. Theres a lot of information available for anyone willing to learn more and Id encourage you to do just that. Thats what we did. I share a lot of useful information like this on my blog.  Its mostly geared toward the client, but the more you understand their needs, the more successful youll be.

Why did your company begin its transformation away from transactional sales?

We continue to see the erosion of margins and the direct model from manufacturers starting from the 2001, 2002 timeframe.

When did your company begin its transformation away from transactional sales?

Quest began to move away from transactional sales around 2001/2002.

How complete is your companys transformation? We are about 80 percent nontransactional sales now.

TELECOM ADVISORS

Tranformation Leader: Dan Vidal, Managing Director
Number of employees: 5
Year established: 2002
Original transactional business model: Telecom agent/subagent
Post-transformation business model: As our name reflects, we aim to be our customers telecom advisor for all things telecommunications related. We strive to be trusted advisers” and attempt to be a business partner to our customers and not just a vendor. Were highly focused on working within a holistic view of our customers businesses and look for the best solutions for them in the telecom space and often beyond. We pride ourselves as subject matter experts in our field and although we dont profess to know everything about everything, we do know exactly how to get results and where to go to find the customer the right solutions.

How has your company moved beyond transactional sales models? Weve always offered consulting services and billed for our time, but now professional services is growing and generating more revenue. We also subcontract work now whereby before we did it all ourselves.

We now offer full telecom life cycle management to our clients, which we charge for. We consider this a managed service” to a great extent that makes us a direct supplier to our clients and not just the telecom broker or account manager. This is also a growing area of our business that brings in recurring revenue. We have several different offerings in this category (not your run-of-the-mill TEM software), one of which includes a wireless mobility management solution that expanded our footprint beyond wireline.

We partner with certain specialty” or niche providers in very specific areas that make sense for some of our clients needs. Although to some extent this might be transactional, this allows us to be a very integral part of our clients business/processes and takes us higher up the value chain. One example is a voice recovery service that is a cloud-based solution that can recover all customers incoming calls (real-time) and have infinite control of what they do with those calls in the event of an outage. This makes us part of our customers business continuity/disaster recovery planning team. We even help clients formulate and document BC/DR plans for their entire organization.

Were also exploring developing a few offerings for the telecom channel itself, which would be a completely different business segment.

Why did your company begin its transformation away from transactional sales?

We understood even at the onset of our business that a telecom circuit is basically a commodity. In todays global economy, of course, selling commodities is a tough gig and we never wanted to compete on price alone. In addition, declining prices and shrinking commissions made it obvious that a transactional model would not be ideal and probably not sustain itself.

When did your company begin its transformation away from transactional sales?

I would honestly say that from day one of our business, we branded ourselves and worked really hard in being trusted advisers” to our customers and focused on solutions, relationships and helping our clients succeed. That said, for many years even though this was the case, 99 percent of our revenue still came from commissions off circuit sales and, therefore, kept us in the transactional sales model. Although this is still a very important part of our business and will continue to be for some time, weve now begun to diversify a bit and began this transformation in 2008. It was right around the time of the economic collapse whereby we had been thinking about this for years but then decided it was time to act.

How complete is your companys transformation?

I would say were still in the early stages maybe 25 percent.

WHITE GLOVE TECHNOLOGIES

Transformation Leader: Tommy Wald, CEO
Number of employees: 90
Year established: 1993
Original transactional business model: VAR
Post-transformation business model: We are considered a managed services provider (MSP), meaning that more than half of our revenue comes from recurring revenue.

How has your company moved beyond transactional sales models?

It started with the definition of what the new business model was going to look like. And then began the painful transformation of letting go of old business while building new business. This also meant terminating some staff members who did not buy into the new model moving forward. It took us over a year to re-establish our business and we had to make investments in areas to achieve this. But in the end we are a much better and stronger company as a result.

Why did your company begin its transformation away from transactional sales?

We discovered that a very large portion of our gross margin production was being generated by product and by a single super salesperson. When this person left, it exposed the weakness of our business and we made immediate moves to ensure we did not get back in this position. The current model we have allows the company to continue to thrive even without a sales force.

When did your company begin its transformation away from transactional sales?

We began in 2002.

How complete is your companys transformation?

We have been 100 percent transformed for more than eight years.

VOICE SMART NETWORKS

Transformation Leader: Dale Stein, Partner
Number of employees: 14
Year established: 1982
Original transactional business model: Telecom VAR selling phone systems; subagent
Post-transformation business model: Managed service provider, data/voice VAR

How has your company moved beyond transactional sales models?

We work with Do IT Smarter, Zenith as our outsource platform, reselling their services to our marketplace, coupled with diagnostic LAN/WAN products and services. We manage the customers technology through the LAN, WAN, voice and data networks.

Why did your company begin its transformation away from transactional sales?

We made the decision when we realized the value of recurring revenue and how it allows us to provide better service to the end-user. We started by selling managed services for the phone systems and found that model worked even better for the data services.

When did your company begin its transformation away from transactional sales?

Five years ago, 2006-2007.

How complete is your companys transformation? Right now transactional sales represent about 20 percent of our business. The rest is nontransactional.