How Does the Technology Advisor (Agent) Channel Reach the Next Level?
Several partners weighed in on the barriers agents must overcome to stay relevant with customers in 2023 and beyond.
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Agents agree that now is as good a time as ever to get into the business.
“If I were going to start an agency, there’s no better time than right now,” Sumo Communications founder and One Source Communications strategic advisor Bret Hickenlooper said.
As Technology Advisor Alliance co-founder Ashley Rowland puts it, new agents must make a difficult “walk through the desert,” in which they struggle to piece together enough monthly recurring commissions to establish their business. For many firms, that takes more than three years to develop such a stream. Consider that many deals take more than half a year for the commission to go through.
Hickenlooper, who founded his agency in 2001, pointed to upfront spiffs from UCaaS vendors that allow new agencies to “bridge the gap.” Rowland said she sees many newer partners taking this approach.
“You can front-load some things in the first few years, whereas if it’s all residual, it’s very hard to get into the agent business,” Hickenlooper said.
Despite the path to success, agents in the roundtable agreed that they aren’t seeing a stampede of new partners. It’s true that many firms launched in the last years, but it likely does not match the number of agents that are selling their businesses.
At the same time, partners remarked that they are not seeing a generational handoff, in which the child of an agency owner takes over their parents’ business.
“We don’t want this market to grow into a space where we don’t get the young blood anymore,” Hickenlooper said.
Partners also expressed concern about the ability of the industry to recruit talent into agencies.
Consider that over the last three decades, agencies have predominantly hired their people from carriers. Providers like Cbeyond built strong talent pools. And it made sense for partners to hire from the vendor side, considering that agents need to understand how to navigate the complex supplier world. IQ Wired CEO Darcee Nelan said agents count their experience in telecom as one of their most prized assets. But that experience, as you might expect, takes years to accrue.
“One of the biggest challenges that we have as agents is the learning curve required to train new people,” Nelan said. “In the old days, prior to convergence, there were fewer products and services to sell, so training new people was easier. Now, as a result of convergence,we have more products and services to sell and the learning curve is steeper, which makes scaling an organization more difficult. This, combined with the Great Resignation, has made it more challenging than ever to find, develop and retain the best talent.”
And the telecom industry as a whole no longer presents the juicy landing spot it formerly presented for young people. Although millennials and Generation Z are digital natives and technology-driven, B2B IT sourcing is hardly their first choice for a career.
“It’s much easier to go build an app. It’s sexier, you make more money and investors understand it,” Rad-Info president Peter Radizeski said. “Also, they have exposure to startups via many programs in entrepreneurship, Kauffman, Google, Techstars and numerous incubators around the country. They see app millionaires. They hear Gary Vee and other talk about it all the time. Gary Vee isn’t talking about being a telecom broker.”
Radizeski added that the technology advisory channel has failed to define itself to the outside world. And he makes a good point. The channel is a language unto itself. If the confusing telecom-speak wasn’t enough, the complicated jargon of two-tier distribution helps serve as a more than effective gatekeeper to outside talent.
“We have so many names for what we do that no one truly understands what we do without taking a deep dive into it,” Radizeski said.
The agent channel’s association with telecom is both a blessing and a curse.
On one hand, partners benefit from being experts on such a complex topic as telecom. As the tired old adage goes, where there’s mystery there’s money, or something like that.
For Marko Spremo, who built a VAR-turned-agency, the transformation process wasn’t difficult because of the required technology know-how. The biggest hill to climb was grasping the process.
“It was inconceivable to think about how hard it was to get something done from the carrier side. And most everyone that’s become an agent came from the carrier. They knew those challenges. So outside looking in, they used to say the line, ‘If you can make fog on a mirror, you can get into this industry.’ There may not be that many barriers to entry, but you must have experience to be successful,” said Spremo, who now serves as vice president of sales strategy at Bluewave Technology Group.
On the other hand, many technology advisors bristle at the label of a telecom broker, saying they can offer their customers many more services than circuits. Moreover, emphasizing other parts of the portfolio could help bring in that elusive young talent.
For example, Top Sped Data Communications vice president of technology Allan Jaffe pointed to cybersecurity. Sure, Gen Z might not want to be telecom brokers, but what about a cybersecurity consultant?
“Cybersecurity is a huge deal today. There’s a lot of reporting out there that it’s a good job to get, and you don’t necessarily have to have a college degree to get cybersecurity training,” Jaffe said. “And I do think that some of that is attractive to people who may have grown up as gamers and used to being in a setting like a SOC.”
Partners admitted that if they want to recruit top sales talent, they might need to recoconsider how they pay those people.
The genius of the agency model is the longtail profit they make through evergreen commissions. But in an age where younger workers change jobs more frequently than ever, that model might not work. The U.S. Bureau of Labor Statistics recently found that wage and salary workers had stayed with their current employers for an average of 4.1 years.
That doesn’t mean agents need to start chasing more upfront compensation from vendors. However, roundtable members suggested that upfront commissions on the individual level might be necessary. Otherwise, why would someone leave a sales job at a vendor that gives them suitable short-term incentives?
More and more owners of large agencies have proclaimed a key secret to their success: that they are providing more than sourcing.
“The reality was that a historic agency was really just providing sourcing, helping someone find a provider, and the legacy was saving money,” Advantage Communications Group‘s David Gardner said in an interview with Channel Futures earlier this year.
But for the folks at Advantage, they say they saw the writing on the wall about that years ago. They and many of their peers began working to expand their business.
In many cases, expansion means diversifying one’s technology portfolio to sell more advanced offerings. In other cases, it’s building out actual intellectual property like a customer experience platform. Another group is positioning itself as consultants by providing more in-depth analysis for their clients and charging for their time.
Still others are doing more after the sale, hiring project managers and taking on more of the technological implementation process.
For Marko Spremo, VP of sales strategy, Bluewave Technology Group, it will be much more than just implementation for the agent of the future. It will be managing the entire technology life cycle.
“Eventually with convergence, someone’s going to figure it out and say, ‘I can provide you all of these things under my brand … I can manage that entire technology life cycle that you’re going to go through. I can help you identify what you have, I can take you through network transformation, and then I can help you implement it,'” Spremo said.
Moreover, the vendor side of the channel is supporting this evolution, said Randy Jeter, president at Premiere Worldwide.
He pointed to UCaaS providers such as Dialpad that are incentivizing partners to handle implementations and managed services. In some cases, vendors are charging the customer thousands of extra dollars for deployment services.
“It’s not a sustainable dollar amount [for vendors] unless you take more operational costs off the vendors’ plates,” Jeter said. “The transformation of the agency has to take more operational costs.”
Agents attending industry conferences constantly hear the message that they need to sell more services than just network circuits.
Some partners hear this message and even agree with it, but don’t put it into practice. And that’s because it doesn’t fit with the lifestyle business they’ve created, Allan Jaffe said.
“Some agents have had 30-year careers and are experts in the circuit world. As they near the ends of those careers, they don’t want to learn and focus on newer technologies,” Jaffe said. “They realize the circuit world is a race to zero, but they’re going to continue to sell them and get the residuals until retirement.”
But it’s worth noting that a large number of agents have evolved their portfolios. Telarus shared at its recent Partner Summit that 60% of sales currently involve advanced solutions. That compares to network comprising 90% of partner sales five years ago.
But this begs the question: Is UCaaS, which has become such a staple of the agent portfolio, an advanced service? No doubt it has proven disruptive to the telecom world – judging by its role in the pandemic. Avant said customer interest in UCaaS increased 86% near the beginning of COVID-19. Clearly, UCaaS was a key resource for customers who rushed into digital transformation during the work-from-home era. And market penetration shows plenty of room still.
However, many agents say they see need to do more than just UCaaS. Of course, UCaaS remains a solid foot in the door and a profitable venture in some respects. But agents widely report that UCaaS commissions are falling as providers cut prices to compete for market share.
In particular, contact center and cybersecurity have emerged as key areas for partners who want to expand their influence with customers. Just as unified communications was high on customers’ minds in 2020 as a way for them to create business value, similarly CCaaS and cybersecurity represent important technology topics that lines of business – not just IT departments – want to understand. Are partners prepared to answer clients’ questions about those topics?
Of course, one does not simply snap a finger and create a cybersecurity practice. It requires entirely new knowledge and most likely new personnel. It’s a key reason Convergent (CTI) agreed to an acquisition last year.
“I could never afford to hire a CISO. But security is a big conversation right now in the partner marketplace. And a lot of partners are very afraid to tackle that conversation,” said Kate Jaffe, who sold Convergent to Helm Partners.
Jeter believes the most successful agents of the future will be those who involve data more in their processes. More specifically, those that can build platforms that capture data from the providers they source to customers. Such a platform, Jeter said, will allow partners function as true consultants to the customer – before and after the sale.
“Once the data is here, the consultants get better because now they’re presenting data … Consultants are making decisions based on uneducated buyers a lot of times,” Jeter said. “The key here is to educate the buyer – converged together – and say, ‘We’re not only going to give you an experience on the front end through designing and analyzing the performance-based platform for you, but after this deal closes, we ’re gonna stick through this.'”
Spremo said that although channel partners built the industry around the SMB customer, those foundations may change.
Forty-eight percent of Avant’s top 50 partners have sold to a company worth more than $1 billion. That number stood at 23% three years ago.
Spremo, however, said growing opportunity exists for partners to break into the enterprise market. Nelan noted that large customers show strong demand for high-touch partners such as Accenture that deliver consulting services.
However, that high-touch must truly be high-touch in the enterprise. Agents will need to evolve beyond sourcing, as this story has already suggested.
“The customer experience has to be better. Just brokering is no longer going to be acceptable in the midmarket to enterprise,” Spremo said. “You must deliver business outcomes.”
Some partners argue that tech purchasing for the SMB segment will become a more automated, digitized process. In other words, they say marketplaces will take hold for smaller customers.
“I think what’s going to happen is, people are going to come in and they’re going to create packages for the SMB. And it’s going to be in a box,” Nelan said.
Several players are already trying to crack that code. Digital platform Beyond Now recently exorted telcos to start building marketplaces to sell into the lucrative SMB opportunity.
The counterpoint remains that some agents are actually growing their SMB base. However, it requires speediness and high frequency to keep up with compressed prices, as well as a knowledge of the segment’s particular challenges.
Everyone in the channel, from advisors to vendors, seems to feel differently about certifications.
For Nelan, who serves as president of the Technology Channel Sales Professionals (TCSP) watchdog group, it’s likely that mass certification will arise in some form eventually for agents.
And certifications could arise for multiple reasons.
She pointed to convergence that is occuring between agencies and other partner types. ScanSource at its recent Channel Connect event urged its massive base of hardware resellers to adopt agency sales. Groups like ASCII have partnered with TSDs to ensure MSPs can refer carrier services to customers.
With that shift in mind, agents might need more credentials to keep pace with their contemporaries in the VAR and MSP worlds.
“If we’re all competing and you’ve got a group over here that’s certified, and then you have people over here that have nothing, who would you trust as a customer? Of course, they’re going to say, ‘I want some level of certification; I want some reassurance that these people are going to be doing my work,’” Nelan said.
That’s where Bret Hickenlooper stands.
“I will never get certified unless I lose a deal to someone that’s certified, and that’s the reason I lost the deal,” he said.
He noted that MSPs and VARs earn certifications because they tend to specialize on specific vendors and therefore don’t need as many.
The technology advisory channel, on the other hand, involves hundreds of service providers that agents recommend.
“I would never take the time to do it,” said Hickenlooper. “We have hundreds of suppliers that we can sell. And if we spent all of our time in certification, we’d never sell anything.”
If the competitive aspect doesn’t spur certifications, perhaps vendor initiatives will. Nelan said the suppliers would like to see more certified agents.
“They’re concerned if we don’t get certified. They’re concerned that it will put the channel in jeopardy as a credible sales agent working on projects. They’re afraid that we won’t be able to stay in the business,” she said.
But of course, suppliers wanting certified partners won’t move the needle. They’ll need to offer financial incentives. But it’s worth noting that if UCaaS and CCaaS providers are rewarding partners for handling implementations, rewarding them from certifications could feel like a logical extension.
But for members of the TCSP, the third driver for certifications is an all-too-real concern: regulatory concerns.
The Federal Communications Commission (FCC) took aim at the agent channel in 2019 over an issue in its rural health care program.
When a consultant (who actually didn’t identify as an agent) colluded with a vendor on its RFP to earn that vendor’s commission in addition the client’s consulting fees, the FCC stepped in to ban double-dipping. The FCC effectively banned rural health care carriers from awarding commissions.
The sweeping motion proved devastating for many agencies that sold to rural health care customers. Many advisors saw their commissions past and present clawed back; some had to lay off staff.
This harmful regulatory action occured in part because of “an uninformed sense of what our agent industry does,” the TCSP wrote. Might certifications that helped define the agent model to end customers and the federal government have prevented this?
“There are UCaaS providers that will pay you more if you certify on their product. That’s totally different than being sanctioned by a carrier from selling health care because you didn’t certify and guarantee to the carrier that you weren’t going to get money from two places,” Jaffe said.
For Jay Morris, channel chief at KeyStone Solutions, it makes sense to develop a certification or accreditation that demonstrates a code of ethics to the client.
“For instance, agreeing first and foremost to present solutions in a fiduciary manner regardless of compensation as an IT advisor,” Morris said. “This among other sets of standards might well facilitate more trust to this individual as opposed to someone who doesn’t adhere to a particular set of standards.”
The Technology Channel Association (TCA) more than a decade ago developed a training program for telecom and cloud service providers. The course lasted about four hours and involved multiple sources. TCA co-founder Peter Radizeski said the group was working to bring more professionalism into the channel.
The certification program ultimately saw fruit in the form of entering different TSD “universities.” However, Radizeski said partners needed more incentive. Moreover, a larger cross-section of the industry needed to embrace it.
“A few vendors and several TSDs pushed employees to certify. Almost 200 people got certified. It is a challenge. They need to see a monetary or personal benefit. And an all-volunteer board of nine people could not push that rock up the hill far enough,” he said.
The Technology Channel Association (TCA) more than a decade ago developed a training program for telecom and cloud service providers. The course lasted about four hours and involved multiple sources. TCA co-founder Peter Radizeski said the group was working to bring more professionalism into the channel.
The certification program ultimately saw fruit in the form of entering different TSD “universities.” However, Radizeski said partners needed more incentive. Moreover, a larger cross-section of the industry needed to embrace it.
“A few vendors and several TSDs pushed employees to certify. Almost 200 people got certified. It is a challenge. They need to see a monetary or personal benefit. And an all-volunteer board of nine people could not push that rock up the hill far enough,” he said.
The technology advisor has evolved its value far beyond telecom brokering, but will its profile in the market keep rising?
The agent channel has enjoyed increased attention from the vendor, investor and media community in the last two years. Distributors are honoring more $1 million monthly recurring revenue (MRR) partners, and advisors themselves are boasting of more and more enterprise logos. Agents have told Channel Futures in 2022 that they’re spending less and less time explaining their commission- and cloud-based business model to customers and more time helping them with solutions. And they hope their influence will grow.
“IT executives in the future will be deemed negligent if they don’t use an advisor to make their decision,” Bluewave Technology Group CEO Seth Penland said. “That’s where we need to get to.”
Bluewave’s Marko Spremo
Premiere Worldwide’s Randy Jeter
KeyStone Solutions’ Jay Morris
Bluewave’s Seth Penland
Yet the industry is still making its way forward in the larger B2B tech purchasing space. A study by recently founded advisory firm Amplix found that the agent model has penetrated 15% of the available market. Another estimation, made by Bridgepointe‘s Scott Kinka, puts that number at 25%.
Sumo Communications’ Bret Hickenlooper
IQ Wired’s Darcee Nelan
Rad-Info’s Peter Radizeski
Top Speed Data Communications’ Allan Jaffe
At the same time, traditional sales-focused agents struggle with scaling. They’re competing with vendors inside and outside the industry for top talent. Commissions are shrinking in different technology categories, and not all of them have developed a secondary revenue stream. Some admit that they don’t know how to move to the next level without inorganic growth.
A group of eight leaders in the technology advisor channel sat down for a discussion at September’s Channel Partners Leadership Summit in Orlando. It was our Channel Futures Technology Advisor (Agent) Roundtable. They included:
Bret Hickenlooper, Sumo Communications
Ashley Rowland, Adaptiv Advisors
IQ Wired’s Darcee Nelan
Rad-Info’s Peter Radizeski
Bluewave’s Marko Spremo
Bluewave’s Seth Penland
KeyStone Solutions’ Jay Morris
Top Speed Data Communications’ Allan Jaffe
We also polled a handful of other top agents in the tech advisor channel.
The 12 images above recap an in-depth discussion about topics such as hiring, professional services and certification.
Want to contact the author directly about this story? Have ideas for a follow-up article? Email James Anderson or connect with him on LinkedIn. |
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