Are MSPs Selling UCaaS? New Survey Points to Gap

Do Canalys' numbers line up with what MSPs are seeing in the market?

Dave Sobel, host of MSP Radio, believes so. But Sobel notes that one must take into consideration the size of the businesses that some MSPs serve. Namely, small businesses may not view unified communications as a pressing concern in their day-to-day operations, he said.

MSP Radio's Dave Sobel

"Take your typical sub-20-person businesses – how much 'unified communications' do you need? It’s flirting close to zero, and when your IT budget isn’t large, this is an area they don’t need. I’d say there is a significant segment of the overall business landscape that isn’t there," Sobel told Channel Futures.

Canalys asked partners about the extent to which their customers are using opex – meaning ongoing expenditures – for their UC and collaboration platforms. A plurality (31%) said all of their customers are using capex — meaning upfront spend used to buy equipment.

Twenty-three percent of partners said 10% or less of their customers will pay using opex. Fourteen percent said between 11% and 20% will pay with opex, and another 14% said opex accounts for between 21% and 30% of UC deployments. Finally, 18% of partner respondents said more than 30% of clients buy UC using opex.

Excluding store-based and online retailers (both 100%), SMB-focused resellers were most likely to work with customers who fully relied on capex for UC. Then came MSPs at 44%, distributors at 33% and systems integrators at 26%.

The fact that SMB resellers scored so high on capex likely will surprise few. Many MSPs and agents hail from the world of hardware-focused reselling, where they sold equipment from UC giants such as Avaya and Mitel. But many of those companies moved away from hardware resale into a hosted solution that they or one of their partners managed, especially as those on-premise vendors struggle.

Does the current level of capex spending shown by the survey match actual demand from end users?

White Oak's Daniel Beckworth

White Oak Solutions CEO Daniel Beckworth doesn't think so.

"I find that end users have no issues with opex purchases for UC/collab. In this case, they anticipate it," Beckworth said. "My assumption is that MSPs and integrators are beholden to traditional distribution methodologies, which limits their offerings."

Andrew Rustad, director of sales engineering for the eastern U.S. at Sandler Partners, shared multiple reasons why an MSP may choose to move into the cloud with voice.

"They are now moving their clients to the newest leading-edge technology, and the MSP is no longer required to maintain expensive certifications for their technicians," Rustad told Channel Futures. "Many times the unified communications solution will fall under the Microsoft umbrella that the MSP is already responsible for managing, and this also creates an additional reoccurring revenue stream for the MSP."

Sandler Partners' Andrew Rustad

Canalys also shared a regional breakdown of how partners answered.

Latin American partners (53% of them) were most likely to have all of their customers paying with capex. Asia Pacific and North American partners (23% for both demographics) reported the highest percentage of customers who were paying with opex more than 30% of the time.

UCaaS hasn't gotten the best press lately, with per-seat price compression notably dropping across the board. Many of the technology advisors (agents) who made their fortune sourcing UCaaS during the pandemic have either focused on selling more seats or on identifying less commoditized technologies like contact center as a service (CCaaS) or cybersecurity.

That being said, does it economically benefit MSPs to sell unified communications? For Ryan Yakos, senior vice president of Sandler Partners' Central region, the delivery model of UCaaS could tip the scales toward a "yes." MSPs that sell UCaaS through Sandler or other tech services distributors (TSDs) hand off the UCaaS management to a supplier and then reap the benefits.

Sandler Partners' Ryan Yakos

"Once they sell and [start generating] commission, this becomes 100% EBIDTA for the MSP usually, so the finances make sense," Yakos said.

Part of the allure of selling UCaaS through the advisor model is the ability gain revenue through a non-strategic technology.

Telarus' Sam Nelson

“MSPs and VARs can quickly align with a TSD in the UC space because it is a technology area that is outside of their core product offering and they can do so without having to make substantial investments," said Sam Nelson, Telarus' vice president of customer experience. "Telarus has made it as easy as possible for MSP's and VARs to align in a joint go to market strategy with the suppliers in our ecosystem.”

Rustad and Yakos said experience and confidence with UCaaS can be a barrier for MSPs.

"Oftentimes you’ll find that traditional MSPs haven't been particularly focused on managing unified communications environments," Rustad said. "These same MSPs also don't have a lot of experience on the sales side selling these solutions."

But developing relationships with suppliers and TSDs can remove that pressure. Yakos said Sandler Partners focuses on training MSPs and selling alongside them at first, as well as selecting suppliers with a hands-on approach.

If MSPs can be convinced of the profitability of UCaaS, their comfortability in attaching their name to such a service is another question. Whether through white-label resale or the agent model, they are putting trust in a vendor to take care of their customers.

While that's a fixture of the technology advisor model, not all MSPs can accept the risk.

“There are products beyond your control that can negatively affect your relationship with the customer, and hosted [VoIP] is one of them. When the network goes down, nobody cares whose fault it is; it's just down," said Jay Morris, channel chief at KeyStone Solutions. "We can control most everything in the MSP/MSSP world. We can control the service levels. We can control that the phone gets answered or ticket gets worked quickly. We can control that problems get resolved quickly. We can control MDR and EDR, and so forth. We can control that we hit the SLAs.

However, MSPs can't control an outage from their hosted provider, Morris said. The long-term consequences could outweigh any short-term profit, he said.

KeyStone's Jay Morris

"If we put that label on our bill, we can put our core service revenue and our customer relationship in jeopardy by chasing wallet share for products or services we have little to no control of," Morris told Channel Futures. "Then, we’ve lost sight of what business we’re in and what our core objectives are, namely, keeping our customers up and keeping them safe. We just want to be the best managed services and cybersecurity company in the business."

Morris' KeyStone shuttered its CoreDial-based hosted VoIP solution about two years ago. He joined the company at that time to scale KeyStone's sales through the advisor/agent channel. Morris said the MSP pivoted to make sure it was focusing on IT team as a service and staying away from ancillary services that its channel partners might be selling.

While some MSPs can drive significant value and profitability out of expanding their tech portfolio, the downstream impact on channel partners needs to be considered.

“I never wanted us to be a fox in the henhouse with IT advisors … indeed MSPs are becoming more aware that there's revenue being left up on the table, but the argument I always make is, they're not in the channel," Morris said. "Yes, they're in the channel buying, but they're not in the channel selling. If we weren’t selling our services exclusively through the channel, we might be more inclined to monetize non-MSP/MSSP products that we could sell customers. But even that still comes with its own set of risks.”

Canalys asked partners about their prospects for UC and collaboration in 2024 and received mixed responses. Nine percent of respondents said their UC/collab business will decline in 2024, and another 21% expected it to stay flat. On the other hand, 41% of respondents predict an increase. Twenty percent of them think the increase will be more than 10%.

Canalys asked partners about their prospects for UC and collaboration in 2024 and received mixed responses. Nine percent of respondents said their UC/collab business will decline in 2024, and another 21% expected it to stay flat. On the other hand, 41% of respondents predict an increase. Twenty percent of them think the increase will be more than 10%.