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| Ian Hunter |
Editor Ian Hunter feels that in 2011 there might be a better way ahead for calls and minutes providers faced with high fixed support costs other than selling up and moving out of the business.
Over the last few years we have seen an exodus of entrepreneurs from the voice and internet reseller/dealer market. In many cases consolidator companies such as Adept, Chess, Daisy, Nine and SpiriTel, have bought up these customer bases, integrating them into their own all-expanding organisations.
There have been many reasons for these departures.
Some resellers/dealers have seen their sales plateau and stagnate, whilst the fixed costs associated with their customer service and support continue to rise, ultimately resulting in marginal net profits.
Others have been reluctant to make the necessary investment in time and skill sets required to transition from lines and calls to an IP and mobile-based network services organisation. Many would say that there’s no rush to do this anyway whilst fixed lines and calls revenues decline year on year at the expense of IP and mobile networks, there is still good money to be made in the traditional business.
Many sold up because they considered the time was right, and the multiples of GP being offered, when contrasted with declining net profits, were too attractive to ignore.
Resellers have also found that placing their business with a company that may themselves be a target for consolidation is also very unsettling. The one consistent is that all crave stability in an unstable market, and they are finding that increasingly difficult to find.
There are, however, ways for some of these resellers to re-invent themselves. They can keep the business going and increase net profits, ultimately making their businesses more valuable for a future sale, and a life on the beach rather than one on the park bench.
Makeover
One way is to look at outsourcing all those nasty fixed costs to a third party that has the scale and skills in place to provide them cost effectively rather than continuing to hire your own staff. After all that is what the outsourcing companies do for Local & National Government departments as well as multi-site enterprises. They manage the front end in terms of commercials, relationships and service level agreements at the same time managing their support contractors and partners to deliver the effienciences and experience to deliver service, choice and value for money. Billing, technical servicing, account administration and collecting money immediately spring to mind. Without doubt many people would agree that for a significant percentage of channel resellers, selling skills are their finest attribute. So why not ditch the bits they find more difficult that are, in any case, too costly?
Other alternatives are to try doing more of the same (lines and calls), or to pressure the supplier to lower costs, but if the model is failing anyway, all that will be achieved is a delay of the inevitable knock at their door from the consolidator.
If you look to win more business by being the cheapest in the market, someone cheaper still will always be around the corner.
Another way is to add to the product portfolio with more data-centric and mobile applications.
You don’t need to have all the skill sets in place yourself. That’s never been the case anyway. When I used to run a national channel team for a PBX vendor (albeit many years ago), eight times out of ten it was my account managers that did the product demonstration for the reseller.
Today, when I speak to major carriers about channel sales of MPLS and IPVPN applications the story I get is that the customer presentations and proposals are usually done by themselves. So what’s new?
Well, what’s new is the fact that large carriers and vendors don’t have the resources to scale this kind of support down to the smaller reseller.
What about the distributors then I hear you ask? Well, I would guess I could get a lot of support for taking the view that support at this level is a bit like a curate’s egg. Good in parts.
From a network services point of view however, and correct me if I am significantly wrong here, I don’t see a great deal of activity at the distributor level.
There are, however, more specialist companies available that do understand the voice and data networking market, and that can support the reseller to move in to new markets. To help them identify the newer applications and then help close the deals. Some can even take the high fixed cost operational expenses out of the resellers’ business too.
What about customer ownership I hear you ask. This scenario sounds like someone other than the reseller owns the customer. Mmmm... That’s a problem for many and often a deal breaker.
So, what if you could outsource the expensive difficult bits, fix and control your costs, get help on closing new deals in new markets, be agile and flexible in a changing landscape, build the value of your business and still own the customer yourself?
Now that could be the find of the year!