IT and telephony channels increasingly clash
Are telecoms and IT provision converging -- or competing? Larry Walsh investigates
For the longest time, the overall channel has predicted that VARs and telephony agents would merge, as each would need to merge or work in a complementary fashion to meet the needs of end users' data transport, networking and application needs. Cloud computing was seen as the medium that would bring these historically siloed resellers together.
At last week's Channel Partners conference in Las Vegas, the exact opposite bore witness. Telephony agents by the thousands appear to be adopting cloud computing products and services as complements to their traditional voice and data transport services. They see the opportunity to add millions in new revenue by selling cloud - infrastructure and applications - to their customers.
However, most are going to the cloud alone. Rather than working with VARs, SIs, and managed services providers, telephony agents are working with master agents - distributors in the telephony world - to identify and bring cloud services to market. In many cases, telephony agents are competing with VARs for share of wallet.
Telephony agents have a fair degree of scepticism when it comes to working with VARs. The IT channel's technical acumen gives it a strength that is unmatched in the telephony channel, which often intimidates the agents that are primarily sales organisations.
The telephony channel often sees the technical bench of their VAR brethren as a liability, as it's a cost they often see as impeding their own profitability.
VARs, on the other hand, are increasingly working with carriers and interconnects to provide data and voice transport services. Likewise, master agents and traditional technology distributors such as Ingram Micro and Tech Data are working with VARs to resell transport services as a complement to their existing equipment and cloud sales.
Convergence, it seems, is happening at the technology sales level even as both channel segments remain incomplete in their ability to take transport, equipment and cloud sales to market independently. Neither channel completely trusts the other channel; they view their respective strengths as threats rather than opportunities.
In fact, some VARs see selling transport and carrier services as a necessary evil -- rather than a strategic opportunity.
As one vendor at the conference described it: "A telephony agent has 1,000 customers they speak to 10 minutes a year; a VAR has 10 customers they speak with 1,000 minutes a year."
Distributors and master agents say an increasing number of VARs are selling or enquiring about selling carrier services. They don't necessarily like selling these services, as they often offer lower margin and slower RoI than their IT solutions.
Their customers are dragging them into the carrier world to consolidate supply points and billings.
Telephony agents, on the other hand, want to add more value to their carrier services annuities through cloud services. Many are offering backup, hosted VoIP, productivity suites and virtual desktop services.
What limits agents is their lower capability in technical support or professional services. What they seek is turnkey cloud offerings that are easily sold and deployed, and they're not afraid or concerned about simply referring cloud accounts to vendors.
How is all this manifesting itself? The CTTA State of the Cloud channel report, a project of the 2112 Group and Channel Partners magazine, found the level of competition between VARs and telephony agents is on the rise. When an IT provider or telephony agent loses a cloud sale, it's typically lost to a peer. In year's past, the lost sale would go directly to a vendor.
This is a tremendous change in the channel dynamics. Given that neither channel has a complete set of skills or resources, increasing competition could lead to accelerated commoditisation and margin pressure in cloud computing.
Cloud, according to the CTTA report, already has the most fragmented margins because of commoditised services and uneven distribution of products.
The irony in all this is that both IT providers and telephony agents see their adoption of cloud services as a means of going beyond preservation of their value propositions to deliver more value to their respective customers.
In the end, what channel convergence actually means in practice could cause more problems than solutions for the total channel.
As part of our special editorial partnership, CRN is republishing this article from Channelnomics