Mobile and Cloud Will Change the Channel

Will the coming era of cloud-based apps and mobile access change the channel business? It seems impossible to believe otherwise.

As companies embrace anytime, anywhere communications--driven by the ubiquity of mobile devices--has the time finally come (yet again) to toss aside IP hardphones or even softphones? It’s a question at least some are asking.

“Once IP communications take over (if not already), the artifacts of telephony, including digit dialing and wired access will become obsolescent and will be replaced by a range of mobile IP-based communications tools,” says consultant Russell Bennett.

Consider the implications. If the mobile device becomes the object that uses broadband access, what happens to markets for fixed access? If the mobile displaces the desk phone, what happens to demand for hosted PBX services, SIP trunking or even fixed broadband?

To the extent that the typical channel partner, and the typical fixed network services provider, makes money selling fixed network voice and data, a shift to mobile will shift demand to mobile services, and away from fixed network services.

The shift to cloud computing, which is related to growing use of mobile devices and connections, doesn’t necessarily help channel partners or fixed network service providers, either. Consider the use of basic business productivity suites.

Once upon a time, business and consumer buyers purchased such products as “shrink wrapped” physical products, at retail outlets. These days, such purchases are not made, or are made online. In other words, distribution shifted from retail partners to online partners.

At the same time, average selling prices have dropped. In some cases, retail price now effectively is “zero,” when users use Google Docs, for example.

But, you might argue, there also are subscription-based business versions. Yes, that is true.
According to Cloud Sherpas, money can be made iin the cloud-based document suites business, despite the fact that no enterprise or smaller business pays very much for such apps. Business access to Google Apps costs $5 a month, or $50 a year.

But ask yourself whether a typical channel partner can make a living selling products priced at $50 a year.

In the channel partner business, the analogy is mobile-only business broadband and voice. You might argue that the channel partner only has to shift its products from fixed network to mobile product lines. But it isn’t that simple.

In some cases, business buyers will be able to “buy direct,” without a channel partner. In other cases, the retail prices might be low enough that there is little gross revenue or profit margin for any channel partner.

Sam Kumar, CEO of  Denver competitive local exchange carrier Microtech-Tel, argues that CLECs no longer can compete with cable TV operators in the SMB business broadband access business. If the carrier cannot compete, then the carrier’s channel partners will have difficulty as well.

The obvious implication is that channel partners will have to shift product lines to cable high-speed Internet access, and away from incumbent telco or CLEC products.

A major disruption of the hosted PBX or premises phone system business is a bit further off. But if a business buyer can obtain enough of the same call management features from a mobile service, that a buyer would formerly have gotten from a hosted PBX solution, buying ultimately will shift. If the device to be supported is a mobile or a tablet, and if reasonable functionality can be provided, then purchasing should shift to “mobile direct” modes.

What should agencies do? Mobile product lines are a strategic necessity. Cable broadband is a tactical necessity.

In both the telecom and value added reseller businesses, it is harder to sustain revenue earned from traditional products, leading participants to search for better revenue models. Value added resellers generally are looking for recurring revenue streams, while telecom agents generally are looking for products other than recurring communications services.

Whether or not most agencies can diversify into pre-sale or post-sale products distinct from the residuals earned from selling carrier services is the big question.

The answers are not easy, but in all likelihood will revolve around the value telecom agents can add, either pre-sale or post-sale, for services other than the actual communications services. If you think about the traditional distinction between a “consultant” and an “agent,” you’ll get the idea.

The consultant does not represent service providers, does not earn any revenue from any communications services, but is paid for advice. In principle, that is what a commissioned telecom agent would have to learn to do, as well.

Peter Radzieski, owner of RAD-INFO, a consultancy, charges clients if what they want is information about who sells dark fiber, for example. He charges for the advice, whether or not a deal results (RAD-INFO works with about 65 service providers, so there sometimes is commission revenue involved).

He suggests that one way agencies could create post-sales revenue is by getting into the telecom expense managment business, for example, or managing mobile devices, or providing security services.

Another avenue is to “become the outsourced telecom department” for customers,” he says. In other cases an agency might be paid for integration activities. When a wide area network has to be created, it might be necessary to stitch together elements from a variety of suppliers. In those cases, an agency might be paid for integration tasks.

The point is that everything hinges on the “added value” beyond selling a circuit. As always is the case, management, integration, configuration, troubleshooting, monitoring, security and provisioning are some of the time-consuming tasks that a customer might essentially outsource to an agency capable of handling those chores.

But that’s the rub: an agency has to be able to provide those valuable services, credibly. The possible issue is that such services are time consuming. In principle, some agents might take a different tack and simply add on an incremental fee for some of the post-sale chores that inevitably arise around billing issues, for example.

The obvious downside is that a customer might then decide whether to buy direct from a carrier. Another possible avenue could be “white labeling” of carrier services, where the agency gets a wholesale price and then can sell at any retail price.

It won’t be easy to create pre-sale or post-sale revenue streams. But neither, given the difficult revenue model for selling pure communications services, does it seem likely agencies will be able to prosper, longer term, without those new revenue sources.
Will the coming era of cloud-based apps and mobile access change the channel business? It seems impossible to believe otherwise.

As companies embrace anytime, anywhere communications--driven by the ubiquity of mobile devices--has the time finally come (yet again) to toss aside IP hardphones or even softphones? It’s a question at least some are asking.

“Once IP communications take over (if not already), the artifacts of telephony, including digit dialing and wired access will become obsolescent and will be replaced by a range of mobile IP-based communications tools,” says consultant Russell Bennett.

Consider the implications. If the mobile device becomes the object that uses broadband access, what happens to markets for fixed access? If the mobile displaces the desk phone, what happens to demand for hosted PBX services, SIP trunking or even fixed broadband?

To the extent that the typical channel partner, and the typical fixed network services provider, makes money selling fixed network voice and data, a shift to mobile will shift demand to mobile services, and away from fixed network services.

The shift to cloud computing, which is related to growing use of mobile devices and connections, doesn’t necessarily help channel partners or fixed network service providers, either. Consider the use of basic business productivity suites.

Once upon a time, business and consumer buyers purchased such products as “shrink wrapped” physical products, at retail outlets. These days, such purchases are not made, or are made online. In other words, distribution shifted from retail partners to online partners.

At the same time, average selling prices have dropped. In some cases, retail price now effectively is “zero,” when users use Google Docs, for example.

But, you might argue, there also are subscription-based business versions. Yes, that is true.
According to Cloud Sherpas, money can be made iin the cloud-based document suites business, despite the fact that no enterprise or smaller business pays very much for such apps. Business access to Google Apps costs $5 a month, or $50 a year.

But ask yourself whether a typical channel partner can make a living selling products priced at $50 a year.

In the channel partner business, the analogy is mobile-only business broadband and voice. You might argue that the channel partner only has to shift its products from fixed network to mobile product lines. But it isn’t that simple.

In some cases, business buyers will be able to “buy direct,” without a channel partner. In other cases, the retail prices might be low enough that there is little gross revenue or profit margin for any channel partner.

Sam Kumar, CEO of  Denver competitive local exchange carrier Microtech-Tel, argues that CLECs no longer can compete with cable TV operators in the SMB business broadband access business. If the carrier cannot compete, then the carrier’s channel partners will have difficulty as well.

The obvious implication is that channel partners will have to shift product lines to cable high-speed Internet access, and away from incumbent telco or CLEC products.

A major disruption of the hosted PBX or premises phone system business is a bit further off. But if a business buyer can obtain enough of the same call management features from a mobile service, that a buyer would formerly have gotten from a hosted PBX solution, buying ultimately will shift. If the device to be supported is a mobile or a tablet, and if reasonable functionality can be provided, then purchasing should shift to “mobile direct” modes.

What should agencies do? Mobile product lines are a strategic necessity. Cable broadband is a tactical necessity.

Mobile, in a real sense, is inseparable from cloud computing. The reason is simply that mobile devices increasingly provide value as "computers." And the thing about cloud computing is that it means new applications can be launched immediately, upgraded immediately or changed immediately, without little overhead.







In both the telecom and value added reseller businesses, it is harder to sustain revenue earned from traditional products, leading participants to search for better revenue models. Value added resellers generally are looking for recurring revenue streams, while telecom agents generally are looking for products other than recurring communications services.

Whether or not most agencies can diversify into pre-sale or post-sale products distinct from the residuals earned from selling carrier services is the big question.

The answers are not easy, but in all likelihood will revolve around the value telecom agents can add, either pre-sale or post-sale, for services other than the actual communications services. If you think about the traditional distinction between a “consultant” and an “agent,” you’ll get the idea.

The consultant does not represent service providers, does not earn any revenue from any communications services, but is paid for advice. In principle, that is what a commissioned telecom agent would have to learn to do, as well.

Peter Radzieski, owner of RAD-INFO, a consultancy, charges clients if what they want is information about who sells dark fiber, for example. He charges for the advice, whether or not a deal results (RAD-INFO works with about 65 service providers, so there sometimes is commission revenue involved).

He suggests that one way agencies could create post-sales revenue is by getting into the telecom expense managment business, for example, or managing mobile devices, or providing security services.

Another avenue is to “become the outsourced telecom department” for customers,” he says. In other cases an agency might be paid for integration activities. When a wide area network has to be created, it might be necessary to stitch together elements from a variety of suppliers. In those cases, an agency might be paid for integration tasks.

The point is that everything hinges on the “added value” beyond selling a circuit. As always is the case, management, integration, configuration, troubleshooting, monitoring, security and provisioning are some of the time-consuming tasks that a customer might essentially outsource to an agency capable of handling those chores.

But that’s the rub: an agency has to be able to provide those valuable services, credibly. The possible issue is that such services are time consuming. In principle, some agents might take a different tack and simply add on an incremental fee for some of the post-sale chores that inevitably arise around billing issues, for example.

The obvious downside is that a customer might then decide whether to buy direct from a carrier. Another possible avenue could be “white labeling” of carrier services, where the agency gets a wholesale price and then can sell at any retail price.

It won’t be easy to create pre-sale or post-sale revenue streams. But neither, given the difficult revenue model for selling pure communications services, does it seem likely agencies will be able to prosper, longer term, without those new revenue sources.