PARTNER CHANNEL: Safe Haven

Posted: 5/2003

Safe Haven
Agents Partner with Bells to Weather
Stormy Times

By Wayne M. Thomas, D.B.A.

The
telecom hurricane still roars even after blowing virtually every public CLEC
into bankruptcy. However, ILEC revenue rose by 4.9 percent to $122.6 billion,
representing 91.9 percent of total spending, according to the Telecommunications
Industry Association’s 2003 Telecommunications Market Review and Forecast..
Indirect channels are partly responsible for this growth. Verizon Communications
Inc., for example, reports its agent program reached 128 percent of quota — its
best year ever. Many agents are finding such programs a safe and profitable
place to weather the storm.

One of the key reasons is Bell
brands and their associated reliability have renewed importance for customers.
In the late 1990s, pricing was more important to customers than paying extra for
a brand name. After all, in the long-distance market even unknown suppliers
provided reliability and quality. Then, industry overcapacity and overinvestment
burst the telecom bubble. This caused many upstart CLECs to cut back and
rendered them unable to fulfill commitments to customers and agents. As a
result, established brands have regained favor. Today, agents representing RBOCs
share the luster of their brands. For example, becoming a 5-Star Distributor for
SBC Communications Inc. is recognized as an achievement with distinction; it
symbolizes that the agent represents the essence of the SBC brand.

Behind the brand image, there are
other more substantive elements of sales agency programs to consider.
Interestingly, the Bells are scoring better marks in many of these areas than
ever before.

Teamwork. Every agent
interviewed praised the support provided by their RBOC channel management team.
Once it was the role of agents to make the RBOCs easy to do business with for
their mutual customers. Now, RBOCs recognize the value of their channel programs
and actively invest in becoming team players with their agents.

Agents say they no longer are
reluctant to call in a direct team when it will help win the deal.
Significantly, BellSouth Corp. reduces channel conflict by paying full
commission to each party. This has benefits for everyone. It diminishes energy
spent jockeying for position and makes it possible to present both collaborative
and independent solutions. When agents need quotes, BellSouth’s quoting system
customizes service network components instantaneously into an attractive
proposal that includes local, long-distance and international rates. In certain
situations, BellSouth has provided competitive pricing to help its agents win
business.

In another example, Verizon has
deployed partner relationship management software, representing a considerable
investment that testifies to the importance of its agent program.

Partnership. Program
management also is improving, agents report. Verizon’s agent director Cheryl
Martinwhite, for example, has experience in customer service experience, agent
operations and as an agent manager before her promotion to the national
responsibility. For its part, SBC has recruited outside experts to lead its
indirect channel.

In addition, program managers strive
for continuous improvement. Verizon conducts regular agent CEO conference calls
to save travel time. And, instead of a single agent council, it has created
standing workgroups on training, innovation and operations. Verizon did cut half
its agents, seeking better alignment to its mission, but it is actively
recruiting new partners that include telephony companies and VARs with loyal and
large customer bases in its 33-state footprint. Minimum qualifications include
$3 million to $5 million in sales, seven to 10 employees with four full-time
equivalent field sales reps and three years in business. Verizon now calls its
program an agent partner program to emphasize the change.

Exclusivity. Verizon, SBC and
BellSouth require agents to sign exclusivity agreements so they cannot sell or
recommend competing local services. For long-distance services, agents can team
with whatever provider they choose. Verizon also offers optional exclusivity in
their affiliated services programs for long-distance and Web services.
Interestingly, many agents choose to extend their exclusive relationship to
these programs, according to Verizon.

Territory. A primary function of a
channel is providing cost-effective coverage in areas underserved by direct
sales. Qwest Communications International Inc. allows agents virtually free rein
to call on any account within its borders and provides assistance from national
account channel managers to help nationwide. Verizon and SBC are more
traditional; SBC requires agents to focus on "value" and
"selected" accounts, and Verizon to focus on prospects billing up to
$100,000 in total local revenue. As a rule, however, if an agent has a preferred
position in a larger account, the RBOCs will hear the case for an exception or
partnership.

Commissions. Sales
commissions are similar in all programs, although knowledgeable agents say that
Qwest may have a slight overall edge. Typically, commissions average about 10
percent of a short-term contract, less for multiyear contracts and more for
win-backs. The market pressures on RBOCs over the past two years show the strain
in tightened commission schedules. Notwithstanding the groans of agents at any
commission reduction, every agent interviewed agreed the programs still were
desirable and in some areas "lucrative."

The RBOCs pay most of their
commissions upfront. Historically agents have been partial to upfront payment
for the obvious reason that it helps with cash flow. BellSouth now includes some
residual payments in addition to front-loading a lump sum. And, Qwest’s Pat
Lewis, senior vice president of indirect channels, confirms the company will be
moving to residuals and planned to explain the terms and migration plan to its
agents beginning April 1. Residuals likely will be more common in the future.
This is good news for Bell program managers as residual payments provide closer
parity with direct sales and improve cash flow; thus reducing pressure from
internal critics who question the logic of paying commissions before receiving
revenue. Agents may prefer upfront payments, but with residuals they can
demonstrate to their bankers that they have a substantial business with
recurring revenue. As one agent manager notes, "The compounding effect of
residuals can become a sizeable, reliable cash flow."

Convergence. Every RBOC
agency program is becoming more selective. Bells want convergence players that
can offer their customers end-to-end solutions integrating voice, data systems
and networks. Agents looking to represent RBOC should seek industry
certifications from Cisco Systems Inc., Microsoft Corp., Avaya Inc. and TIA to
authenticate convergence capability. RBOCs don’t want to invest in training
agents to become convergence players or solution sellers. These are table stakes
for admission to their programs. They don’t want the risk, delay or expense of
sending agents to school.

Training. The Bells have made
great strides to electronically interface with their channels. Most training is
focused on their products and processes. Understanding how to navigate the
labyrinths of tariffs and service provisioning is enough of a challenge. With
partner-friendly systems, agents now easily can track almost anything from
customer orders to where each employee stands against their training curriculum.

Attention to training is important,
particularly in SBC territory where an agency will not earn commission on
products for which it has not trained.

Not all training is inwardly
directed. Historically, long-distance training was considered trivial compared
to the nuances of local services. However, some Bells now recognize that agents
can understand pricing plans with a day’s training, but still be regular losers
against savvy long-distance competitors. BellSouth, for example, has created a
comprehensive long-distance training program to help agents compete.

Requirements. Successful
agents come in many sizes and shapes. SBC says it has successful agencies
ranging from two to 104 people. Verizon looks for seven to 10 employees at a
minimum. Selection is based on the agency’s individual merits, including a sound
business plan. Bells say good partnering skills ("plays well with
others"), reliability ("does what they say they are going to
do"), ethics ("more than reasonably honest") and an ability to
resolve conflicts ("without whining") also are musts. RBOCs need
good partners today, unlike the earlier program days where the FCC required
them. Therefore, they expect professionalism and respect. Living up to these
standards in addition to hitting the numbers is essential to retain a seat at
the RBOC partnership table.

As president of Thomas &
Company Inc., Dr. Wayne M. Thomas helps sales executives invest in their job
security. Thomas also serves as chairman of the TIA’s Global Enterprise Services
Group. He can be reached at [email protected].