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Q3 Tech Advisor Survey Shows Shift in UCaaS Sales
Partners' reported third-quarter UCaaS sales results stood out compared to other technologies.
![Channel Futures Q3 2023 Tech Advisor Market Outlook Channel Futures Q3 2023 Tech Advisor Market Outlook](https://eu-images.contentstack.com/v3/assets/blt10e444bce2d36aa8/blt919ccb9d4c06ada7/6537d52bb2100bbf54596f28/Change-Just-Ahead.jpg?width=700&auto=webp&quality=80&disable=upscale)
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Forty-six percent of partners said customers were more willing to spend money on tech in the third quarter of 2023 than a year prior. It's the highest increase tech advisors have ever reported in the six quarters of Channel Futures' partner surveys.
Moreover, the data lines up with anecdotes TAs have been sharing about the 2023 sales cycle. Numerous agents and other channel partners reported a slowdown in purchasing at the beginning of the year. Concerns about the economy paired with new questions about AI led many IT buyers to press pause on their decisions.
However, many partners said they've seen purchasing speed up following the July 4 holiday.
“We have since seen those budgets loosen, and decisions are starting to get made,” ATC chief technology officer Nick Enger told Channel Futures earlier this year.
A look at partners' reported sales shows increases across different technologies. Connectivity (51%), cybersecurity (48%) and contact center as a service (47%) saw the largest overall year-over-year increases.
Although UCaaS did see an increase in sales for 28% of respondents, 19% said sales decreased. Those mixed results show a very different picture from recent years, in which partners sourced UCaaS en masse during the pandemic. Following widespread customer adoption, some TAs say the dynamics have shifted.
Adam Clark, technology consultant at ETS Solutions, said many clients are interested in developing platforms they've already procured.
"I see a shift in businesses wanting to explore expanded features with their current UCaaS solution provider," Clark told Channel Futures. "Rather than seeking a new solution provider, businesses want improved support and functionality from the current solutions deployed in their environment."
Some partners drew a distinction between what they see in total UCaaS bookings verses overall revenue volume. They've report pricing per seat declining in 2023.
"There is still strong interest in UCaaS; however, overall price compression is leading to reduced UCaaS sales revenue," said Paul Storella, president of TechChoice. "There is also a volatility factor in the UCaaS industry, very public mass layoffs and concerns around M&A have extended sales cycles."
Telarus in its recent Tech Trends Report found that 86% of its partners sell UCaaS, making it a top solution in the portfolio. Although the report does observe some level of "saturation" in the market, chief revenue officer Dan Foster said he sees strong opportunities in UCaaS.
“While there has certainly been a consolidation of the UCaaS and CCaaS technologies, we continue to see growth in the amount of revenue and number of orders in the UC space. Our partners are still finding success migrating customers from premise-base systems and upgrading antiquated hosted PBX's," Foster said.
Moreover, UCaaS is growing both as a standalone technology and as part of an integrated solution with CCaaS framed as customer experience (CX) or digital experience (DX), Foster said. New AI and analytics capabilities are driving those opportunities and outcomes, he said.
"We are very bullish on the continued success of this category. Perhaps the specific moniker for each of the categories becomes less relevant as we focus on the totality of the communications stack, and the endless possibilities with the continued innovation for a better customer experience," Foster said.
Channel Futures each quarter asks agents whom they're competing against the most. The question was adjusted to accommodate a persistent "other" response partners have been giving: the customer not doing anything.
Forty-four percent of respondents named "the customer not doing anything" as a top-three source of competition. Just edging out direct sales teams from vendors, customer inactivity stands as a big challenge to agents.
One cause for the customer inertia is hesitancy to embrace the as-a-service model that agents promote. According to Telarus' study, 85% of clients seek out a new solution from a tech advisor because they want to replace legacy technology. In many cases, that legacy technology is on-premise hardware that the customer manages themselves. Agents encourage to bring customers out of do-it-yourself, capex model and into a managed service, but not all customers want that yet.
Clark also pointed to vendor sprawl that businesses don't want to further complicate.
"I feel businesses are wanting to maintain status quo within the technology environment, potentially due to the myriad of solutions coming to market at a rapid pace," Clark told Channel Futures. "Technology can be enigmatic, leading to ‘analysis paralysis’ in making a decisions."
Omdia's Adams pointed out the quarter-over-quarter rise of marketplaces as a source of competition for partners.
“Marketplaces was ranked the sixth highest competitor by TAs which to some may not feel like a big threat at all, but it should. Why? Because marketplaces made the largest leap (plus-14 percentage points) in the competitive threat ranking from last year’s third quarter results," Adams said. "The risk that marketplaces pose to TAs should not be overlooked as they can encourage a new way for customers to search and buy IT products and services, which may significantly reduce or eliminate the role TAs play.”
A full year after from two big acquisitions in the tech services distributor (TSD) market, a consolidated field of TSDs is working on organic growth.
Tech advisors listed how their share of business with different TSDs is shifting. The results show significant increases for many of the TSDs, with Avant seeing 29% of respondents increase business with the company, Telarus seeing 23% and Intelisys seeing 20%.
Telarus bought TCG last June, and Avant bought PlanetOne last May.
In the "other" category, partners gave shout-outs to ForgeOS, CX Effect and OTG Consulting.
Twenty-six percent of partners said their reliance on TSDs increased year-over-year, while 70% said it remained the same. Only 3% said reliance decreased.
The previous quarterly survey showed partners' commitment to cross-selling and upselling into their existing customer accounts. Q3 showed similar ambitions. When asked to identify their top three go-to-market enhancements, 46% of partners selected "coss-sell or upsell with existing customers." The second most chosen answer was "targeted customer engagement with existing accounts."Agents often describe a tightrope they walk between hunting – bringing in net-new accounts – and farming – nurturing a customer base after a sale in hopes of renewing the services or cross-selling at a later time. The survey responses show an increasing focus on the farming side."These top data points illustrate the shift in nurturing and cultivating the relationship with existing clients, from ‘landing and expanding’ in new vertical markets for partners," Clark told Channel Futures.
The percentage of partners leveraging generative AI inside their businesses ticked up quarter-over-quarter. Thirty-three percent of partners in Q2 said they were using generative AI for business processes. That number ticked up to 44% in Q3.
For those using generative AI, email was by far the most popular application of the technology.
The percentage of partners leveraging generative AI inside their businesses ticked up quarter-over-quarter. Thirty-three percent of partners in Q2 said they were using generative AI for business processes. That number ticked up to 44% in Q3.
For those using generative AI, email was by far the most popular application of the technology.
At a Glance
- UCaaS sales decreased for 19% of partners, with 28% reporting growth.
- Partners report customer inactivity and inertia as the biggest sources of competition they face.
- The results come from Channel Futures' survey of 64 agent partners.
Members of the tech advisor community say their customers are increasingly willing to spend money on technology, but demand for the tech portfolio could be shifting.
The Channel Futures Q3 Market Outlook showed increasing optimism in the technology advisor (agent) channel. After a start to the year that saw a slowdown in the sales cycle, partners report customer budgets opening up for tech investments.
The survey took responses from 64 tech advisor (TA) partners, who offered observations about hiring, sales and their distribution partners.
Ninety-five percent of technology advisors offered average-to-excellent approval ratings of the channel.
Today how do you think the channel industry is performing?
Excellent | 23% |
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Good | 41% |
Average | 31% |
Poor | 5% |
Terrible | - |
Devan Adams, principal analyst for channel at Omdia, said that sentiment stems in part from 46% of partners see customer appetite for tech spending increasing. (Omdia's parent company, Informa, also owns Channel Futures.)
![Devan_Adams 130x185.jpg Devan_Adams 130x185.jpg](https://eu-images.contentstack.com/v3/assets/blt10e444bce2d36aa8/blt70b8af75c4a54e8d/655d13059876cf040a5f573a/Devan_Adams.jpg?width=NaN&auto=webp&quality=80&disable=upscale)
Omdia's Devan Adams
“The correlation between these two key data points is obvious and shows that TAs feel confident they can adapt to the current landscape and capitalize on the market opportunities presented by economic conditions like IT layoffs, high interest rates, etc., especially as more businesses increase their spending on outsourcing services and need TAs to help facilitate those efforts," Adams said.
At the same time, some partners are rethinking their strategic emphasis on unified communications as a service (UCaaS) in the face of price compression, market saturation and vendor sprawl.
Kairos Data Communications chief revenue officer Lucas Salvage told Channel Futures that "UC sales have absolutely slowed."
![Salvage-Lucas_Kairos-Data-Communications.jpg Salvage-Lucas_Kairos-Data-Communications.jpg](https://eu-images.contentstack.com/v3/assets/blt10e444bce2d36aa8/bltda84fc3e245c7b90/6537d3ede7941102fe2c1902/Salvage-Lucas_Kairos-Data-Communications.jpg?width=NaN&auto=webp&quality=80&disable=upscale)
Kairos' Lucas Salvage
"That's not to say we don't still love UC. We're presently doing a 2,000 seat deployment," Salvage said. "However, it just seems that with the onset of COVID in 2020, so many companies rushed to move toward a cloud-based UC strategy, that we're seeing that cool off a bit. I can't honestly say that this is a true 'slowdown' or just a more normalized cycle rather than that of the pandemic and short-post pandemic rush to move to the cloud."
In the slideshow above, several partners weighed in on the state of UCaaS, customer spending and other trends in the agent channel.
Check out Channel Futures' Q2 and Q1 survey results for the tech advisor channel.
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