Why VARs must get connected
With myriad offerings out there, it can be difficult to know which path to take when selecting a broadband service provider. This is where resellers can step in and take advantage, says Mark Dye in the first of our three-part series
In an age where business is driven by the information superhighway, it seems unthinkable that every company doesn’t have a good working knowledge of the internet and what it really means to business capabilities.
The small-businesses sector – traditionally the sweet spot for VARs – has various ways of selecting a broadband supplier. Some SMEs opt for connectivity from broadband suppliers because they think that it sounds like a good deal. Others are swayed by what supplier their friends’ or peers’ companies were using at the time. While there is nothing wrong with recommendations and referrals, it seems odd that firms are still hooking themselves up to providers on a whim or without proper due diligence.
Such ignorance has left an opening for smart resellers to bring some clarity to the situation.
Clive Longbottom, service director at research firm Quocirca, says that VARs have a responsibility to educate and change the perception of broadband. He adds that resellers must also explain what contention rates really mean to customers before many of them get to a point where they feel they can’t trust anything they are been told.
“There’s a lot of noise in the market,” he says. “Too many vendors make promises they can’t keep and they cloud the issues with messages that are misleading. There’s also a high amount of churn, and users are wary of choosing a provider that could go out of business very quickly.”
Andrew Dickinson, sales and marketing director at Griffin Internet, says that providers need to be challenged at every point and forced to justify claims with regard to performance and reliability.
“No stone should be left unturned when researching a suitable network provider,” he says. “Questions should be asked of past and ongoing investment in the network and product innovation, of the company’s track record and management structure, of contention rates available and of user profiles. It is only when this due diligence is carried out that one can really sort the wheat from the chaff.”
Perhaps rather naively, most firms still believe that a 1Mb Asymmetric Digital Subscriber Line (ADSL) line is the same as 1MB.
In addition, contention rates provide a way of selling broadband in such a way that it is easy to move people from 20:1 at a low price to 10:1 then 5:1 and 1:1 (uncontended), so that it becomes easier to move people to the higher priced options.
Longbottom says: “As an example, taking a 50:1 contended 1Mb line, it is theoretically possible that a user could end up with a 20kb connection, which is slower than the earliest acoustically coupled modems.”
Once VARs have translated this to the user, it is then vital that they communicate the ‘always on’ nature of broadband.
A dial-up connection, whereby users connect a modem to their telephone line to connect to the internet, is widely accepted as being slow and costly, but many SMEs that still use ISDN do not realise that ADSL or Symmetric DSL (SDSL) will offer them a connection that is faster and always there. The majority of connections are free for data volumes, which ISDN is essentially charging for, by being costed by the minute.
It is perhaps a little too easy for VARs to get bogged down in jargon such as ADSL, SDSL and VDSL [Very high rate DSL], because it all boils down to faster speeds.
Steve Powell, product manager for connectivity at Viatel, says: “There are certainly a lot of acronyms floating around the market.” He adds that perhaps those wishing to differentiate themselves should be focusing on providing guaranteed voice services.
This would be of particular interest to organisations where calls cannot be dropped, including those with multiple offices, where communication between sites is key and where they can benefit from free inter-office calls, Powell says.
Resellers should make it clear to customers where voice services are guaranteed – uncontended connections – and where they are not.
“Although uncontended broadband is a flat-rate service and cheaper than leased lines, for some, 25:1 and 10:1 will be enough, but VARs should focus on premium, guaranteed services to stand out,” he adds.
What resellers should really focus on is the benefits of faster speeds and what this means for their customers.
Rob MacKinnon, product manager of networking vendor Zyxel, says faster speeds mean that it is easier for remote workers to connect and use cheap voice and data services when they work from home.
“VARs should not compromise on elements such as support in an effort to cut costs, because the customer has always been, and will always be, king,” he says. “Extra margin can be made on additional hardware such as routers, Wi-Fi voice over IP [VoIP] phones and modems, emphasising the need for resellers to consider additional services that can be added to the deal, such as support, software or hardware.”
Applications that were traditionally run on hardware that the customer needed to buy, install, own and manage, are now also beginning to be run across the broadband network, according to John Carter, managing director of distributor DMSL.
He says this will be a strong area of growth as complex voice and software services are rolled out later in the year. One key thing for resellers to remember is that selling the connection on its own will not deliver as much reward as selling applications with the connection.
“The channel is used to doing this anyway,” Carter says. “Nobody simply sells the network connection on its own, people sell voice calls, PBXs, servers and applications on top of the network connection, so it should be business as usual. The only difference is that, in time, the majority of applications will be built and delivered through the network.”
Of course, this is all about matching customer needs with appropriate products. Smaller customers may simply want safe and secure internet access, with the ability to remotely backup their data and the ability to make UK local and national calls free for up to an hour.
Larger customers may want a secure non-internet network to link their sites together to be able to pass telephone calls and data around their sites with guaranteed QoS.
“Customers may be hosting their own web site in-house and want uncontended internet access and very high speeds [up to 1Gb],” Carter adds.
Tim Davies, marketing director with IDNet, says that QoS is important for high-end VoIP solutions, so VARs must ensure that their ISP partner can support it.
“It pays to be cautious with LLU [Local Loop Unbundling] providers because many haven’t yet been through the learning curve that BT has been through, so they are still suffering teething problems,” he says. “On the other hand there are some competitive deals to be had with LLU compared with many BT Wholesalers.”
Dickinson says that VARs should also think about finding multi-site opportunities, particularly where there is a chance to introduce a converged voice, data and video solution. He adds that very few integrators and VARs have the capabilities to bid for and deliver such solutions on their own, which is one reason why they should look for an expert ISP partner to help them.
“It is very important to find an ISP that knows what they are doing, and that has the experience and track record to bid on large tenders,” he says. “These are high-value tenders so resellers should ask prospective partners for partner references and for examples of solutions they have delivered to multi-national organisations in the past. VARs need to make sure the ISP will not try and cut them out of the deal when they realise the size of the potential in the account.”
But Dickinson believes that the biggest opportunity for integrators and VARs could come from multi-site, private broadband VPNs.
“In the retail sector alone, more than one million electronic point-of-sale and chip and PIN dial-up lines will need to be converted to IP over the next two years,” he says. “This is a fantastic opportunity to introduce truly converged solutions to a sector with a compelling need to change. Resellers are able to justify the increase in cost of broadband compared with dial-up by replacing separate exchange lines that have been used for fax, voice and security, with one or two broadband lines carrying voice, data and video.”
In addition, new Multiprotocol Label Switching (MPLS)-based broadband VPNs are far easier to install and manage than traditional internet-based VPNs. As such, this represents a rich source of high-margin recurring revenue without significant management overhead.
“The capability to provide easily deployed and maintained enterprise class VPNs to the SME market at a reasonable cost is something new that has a great opportunity for resellers,” adds Longbottom, before pointing out that MPLS backbones are also useful for fully managed services where end-to-end QoS is required.
With IP being the best delivery mechanism, and business demanding ever-greater levels of information availability, emerging technologies such as Wi-Fi and WiMax are gaining momentum.
A number of players see WiMax as the big threat because having full wireless capability at very high bandwidth could mean a way to escape rom the need for good-quality copper lines to the premises, to an easier and more cost effective manner of service provision.
With BT OpenZone hoping to establish 12 Wi-Fi cities this year and The Cloud planning to extend its own coverage beyond 7,000 hotspots in the UK, data access levels will be driven up. However, statistics show that more than 40 per cent of Wi-Fi access is being applied to VoIP, which is further driving demand for Wi-Fi/GSM handsets among business users.
This, according to Darren Farnden, marketing manager at Entanet, a business-to-business voice and data services provider, requires delivery of a simple, roaming capability so that users’ experience is seamless.
“This also has implications on service quality,” he adds. “So the need to partner with a provider that has the capacity, commitment to ongoing investment and support becomes even more critical.”
The biggest challenge for VARs can be backing the right horse. Over the past year the broadband market has seen a lot of consolidation and this looks set to continue both this year and next. This means VARs that are selling broadband have to work with the right ISP.
Carter says: “If that ISP closes or is taken over, how does that make your brand look to your customers? More important, what happens to any ongoing payments owed to you by the ISP?”
Powell says it is also easy for business broadband resellers to be sucked into the consumer broadband market, which provides very small margins and is becoming increasingly high risk.
“Over the next year, we will see many providers either consolidate or run the risk of going out of business,” he says. “So resellers need to make sure that the ISPs they work with do not solely provide broadband to consumers, but instead focus on business broadband, where the margins run higher and deeper.”
Dickinson adds: “In a market where consolidation and acquisition is high and where providers are here one day and gone the next, the benefits of choosing a provider that not only has a good track record, but also forward thinking investment plans are clearly significant.”