BT service raises the loyalty question
Concerns have risen among BT's channel partners following the telecoms giant's announcement that it will be selling its Business IT Manager service through its Local Business outlets. Simon Meredith looks at how the service affects resellers
Reports that BT is taking its Business IT Manager service to market through its Local Business outlets (CRN, 9 October), have once again raised the question of whether there is any channel loyalty left among vendors or not. This has been a concern ever since ‘the channel’ as we know it came into existence.
The birth of the channel was a result of the rapid rise in sales of desktop PCs and their associated peripherals and software. Resellers have always argued that it was the channel that helped vendors build the market and that those vendors should remain loyal to their VARs. Vendors that have gone down this route have responded that unless a company is adding real value, growing business or innovating in some way, it is not adding anything for the customer.
It is easy to see both points of view. Resellers expect some support from the companies whose products they have promoted, sold and supported down the years. On the other hand, as technology rolls forward and becomes so commonplace that even Tesco sells PCs and software, it is inevitable that vendors will open up their routes to market.
But most commentators agree that vendors cannot do it without the channel, and BT is no exception. BT argues that people need to realise its Business IT Manager service – a combination of hardware, software, installation and services – is a pilot scheme designed to kick sales off before the offer is made available through the channel, and not as some way of cutting partners out of the equation.
Phil Purssey, sales director for the indirect channel at BT Business, said the service is designed to provide smaller businesses with “a comprehensive IT hardware, software and support package” and BT simply wants to ensure it has got the proposition right before it goes to the wider market.
“Business IT Manager is an important addition to BT’s portfolio and a significant step for us in IT services,” he said. “Ensuring that we take it to market in the right way is crucial and, as such, we are introducing the service through a phased and controlled launch to maximise its sales potential through all of our different channels. Initially it will be available through only one of BT’s direct channels and its Local Business network. We will be reviewing how we can broaden out the base and work with the indirect channel, to the benefit of our partners.”
This approach is the one that will ultimately get the best results, both for BT and its partners in the end, according to Purssey.
“BT manages its multi-channel approach to offer its partners attractive products and services that will drive revenues and profitability for both parties,” he said. “Over the past year we have made significant investments to help the channel profit from growing demand for converged solutions. This includes new proposition launches and improved support.”
BT has recently launched a series of solutions, built around Nortel BCM voice and data switches, aimed at SMEs, which it hopes will be sold alongside connection services such as IP Converge.
Purssey said that since Christmas, sales of this service through the indirect channel have quadrupled and partners are reporting encouraging levels of demand. This seems to confirm that the channel can and does work for BT, but this makes it harder for resellers to comprehend why BT has chosen not to bring the Business IT Manager straight to the channel.
Mark Evans, director at BT partner, ME Consultancy, said: “There are many advantages to working with BT for resellers and their customers and these benefits are felt by all parties concerned. It is a shame that BT will not offer its portfolio on a level playing field to its VARs now that we are all under the ‘Partner Management’ umbrella. There may be valid reasons for the move, but it would be nice to understand these before information is released on such moves.”
The issue for partners seems to be more about communication and consultation than anything else. More clarity about go-to-market policy is needed if resellers are to be reassured, according to Bob Tarzey, service director at analyst Quocirca.
“It makes sense to trial before asking the channel to invest,” he said. “However, there should be limits defined for pilot activity if BT expects to able to pick this up with the channel at a later date.”
The fact that BT is taking a service, rather than a product, to the market may also be a part of the issue. The company could argue that just about everything it provides is a service. But in reality, connections are little more than products that customers can pick from a price list. The Business IT Manager offering looks to be more of a direct attack on the traditional home territory of the VAR: localised service and support.
Phil Mitchell, managing director of VAR IntraLAN, warned that this could have resonance, particularly among larger SMEs.
“SMEs are too wary and time-pressured to deal directly with the major vendors,” he said. “But the bigger customers would be interested. We’ve recently lost a couple of our biggest customers direct to BT, Vodafone and others. As they [end-users] become bigger and more attractive, they can get better rates from the bigger vendors.”
Mitchell added that the customers that become more interesting to the vendors for direct service contracts have more than 100 seats. However, not all will be tempted because: “They still prefer the personal touch that they get from the likes of us.”
This is why, even if it is successful through the Local Business outlets, BT cannot afford to keep the offering away from the wider channel.
John Carter, managing director of DMSL, one of BT’s major distributors, said: “You have to have face-to-face contact with this kind of offering. There may be some customers that will buy directly, but not many. What happens to the people further afield? Who looks after them?”
He argued that, just as it does with broadband, BT will need a network of locally based partners that can service customers on the ground to be successful, because there is more to the support than initially meets the eye.
“We’ve built our success on the partnership we have with BT,” Carter added. “There is no way that BT would have been able to build the presence it has in the SME market without locally based partners.
“Remember that originally, BT started selling broadband direct and customers can still buy it directly from the company. But a lot of the business is going through partners. You have got to look at why that is the case when you look at BT Business IT Manager. If it works, it will come through the channel. That is the only way that BT can reach the entire potential market.”
Also, according to Carter, BT’s own research has indicated that more customers prefer to deal with the channel rather than directly.
Alistair Edwards, senior analyst at Canalys, said: “It is no real surprise to see BT attempting to sell this kind of IT solution directly to the SME market. If I were a reseller I would certainly feel threatened.
“However I think that, without the channel, BT will not succeed to the extent that it hopes for a number of simple reasons.”
Edwards added the channel that most successfully serves the SME market is the local proximity reseller channel. “It’s a basic point, but it still applies,” he said. “No vendor has been successful, in the long term, at selling directly into this customer space. SME customers want face-to-face contact, a quick response and a supplier that understands their needs.”
Also, SMEs that do not have dedicated in-house IT resource often require a lot of support.
Edwards said: “If small-business customers buy the lowest level of support, due to cost, they are likely to find themselves under-served if they experience serious problems. This is where the local reseller channel can differentiate itself from large providers.”
Tarzey said that while some vendors might have to look at finding alternative channels to counter new developments that could be a threat to their business, they will not be able to reach the SME market without the reseller community.
“For small-office/home-office they might respond to other things going on in the market, such as Tesco moving into software,” he said.
“But research shows that SMEs on the whole recognise the benefits of working with partners and the value-added services they provide. BT does not have the services reach of the channel. I would not want to rely on BT or a catalogue supplier if the
business-critical application was not functioning. I need a better SLA [service-level agreement] than these guys would be able to give me.”
Ultimately, it is just too difficult for larger corporations to address the complexity of different needs that the small-business market presents. No vendor that has tried has yet succeeded, Tarzey added.
“IBM has been trying to work out how to sell services to SMEs for a while and largely failed,” he said. “The level of engagement resellers can get makes it hard for large system integrators to compete in the SME market. That is why Cisco, Microsoft and HP [Hewlett-Packard] do not really try to do so. They rely on the channel, and BT would do well to remember that.”
For their part, resellers need to keep in mind that BT’s multi-channel approach is a reality that will not go away. Instead it is something that partners must learn to live with and work to their best advantage. That probably means supporting BT’s efforts while, at the same time, continuing to demonstrate, through their own successes, that the channel is always the best route to the SME market. This is, after all, what the research seems to tell us time and time again. But some people remain unconvinced.
Those close to BT often talk about the divided loyalties among its advisors and influencers and within the organisation itself. BT is a large corporation with a long legacy. It is also heavily regulated and closely watched by government authorities because of its unique market position.
At the same time, it is trying to cope with massive and rapid changes in its market and respond by taking its business model forward. It is at times, highly innovative and was the first major telco to announce plans to make the switch to fully IP-enabled networks (something that is now little more than six months away).
In spite of this, some strategists and advisors may still argue for a continuation of the more direct approach, and others advocating a faster migration to a channel-focused model. BT’s approach with Business IT Manager may be a manifestation of this internal dichotomy of views. While this particular decision may, on the face of it, represent an apparent victory for the direct approach, it is likely to be both temporary and hollow.
Keith Humphreys, managing consultant at EuroLAN Research, said the BT plan to sell the service through BT Local Business outlets will not work.
“They have a remit to sell only BT products,” he said. “There are no networking infrastructure products in the portfolio, so where are the BT Local Businesses going to get the expertise to sell BT Business IT Manager?
“The contact within a small business may well be the same person: the guy who deals with voice guy will also be the data guy. But BT was not involved in selling or supporting the network. Why would I now believe in the folks who have only talked to me about voice and billing to date?”
As the BT Local Business concept was set up to sell voice products, it just will not be capable of selling a more complex and largely data-centric offering, according to Humphreys.
“This is the wrong channel. I don’t think the right channels have anything to fear because it won’t work,” he said. “The channel will be able to deal with BT on its own terms.”
By allowing the more direct approach to be tried before the channel is given the opportunity to show the company just how effective it can be in taking a product or service to the wider market, the conservatives may appear to have won the day.
In the end, the channel’s supporters are more likely to prevail, and in the long term, that may start to change attitudes. If resellers keep on doing a good job for BT when products are offered to the channel, doubters may eventually be convinced that BT should start to take the pilots to its partners at the same time as it takes them to its own sales network.