Musical Channel Chairs (part 21)

Note that in 4Q-2021 results, Channel bookings grew 7% year-over-year and represented 53% of new bookings at 8×8. In 1Q-2022 there isn’t a notation about channel contribution. In the investor deck for 4Q-2021, the channel gets a section on slide 9:

Channel Momentum
■ Channel represents 40% of total ARR and grew 38% year-over
■ 5 of top 10 new bookings from channel partners
■ 1,264 active channel partners, 22% year-over-year growth* <A far cry from the 9000 one master agency claims & the 5000 another claims.>

But in 1Q-2022 there is no notation about channel contributions. And then 8×8’s Channel chief leaves to run Intelisys for Scansource. This allows 8×8’s CEO to put his own person in. We’ll see how that works out since most Channel heads don’t make it 3 years. Meanwhile for DeLozier, people tell me it so much easier to work for master agencies after working as a vendor.

Scansource had replaced the original Intelisys personnel with Greenville SC people, but now they are back filling with “Channel” people like DeLozier and Sterl. DeLozier succeeds Mark Morgan, who will move to the role of President, Global Business Strategy for ScanSource Inc.

Scansource also has a new President: Tony Sorrentino now serves as ScanSource’s president of North America. Lots of musical chairs at this VAD.

Running a VAD is different than running a master agency. (And yes I understand that people would like to change that term to something else like technology distributor.) Luckily, DeLozier spent many years at Arrow. Channel people “get” partners; VAD people seem to tolerate partners. [An exception being Ingram Trust Alliance.] VADs are more vendor focused. They know they need partners to move all that stuff in the warehouse in order for that stuff to become cash, but it isn’t a worry really. They have partner events but events are vendor oriented. They worry about logistics, margin and MDF. Maybe when the masters get larger, that will be their focus too. [I hope not, but I could see it happening because private capital forces these things.]

I constantly try to figure out how all this plays out. At some point, the quotas, contracts, promotions and MDF will just come to a boiling point. When that happens, hard decisions will get made. Maybe someone can call that guy who was running WIND’s channel so he can tell you how to cut off partners income – and be like NBD!

As my buddy says, “I don’t see a lot of moves that help customers happening.” Me neither. In some ways these moves may help partners, but rapid change and constant musical chairs helps no one. A company needs people in place for 3 years in order for any strategy to execute. It needs to demonstrate stability for partners to sell them. Lots of personnel changes over a short span are not reassuring.

I wonder what moves Scansource will make in the wake of the current M&A environment. Jenne keeps plugging along as a master agency and VAD. Tech Data is merging with SYNNEX just months after Apollo bought TD. Ingram just changed ownership. Upstack just announced another acquisition. It is amazing the number of partners that are taking a deal. I get it; it is exhausting to be doing this for 20 years. And it seems more exhausting the last two years than ever.

Partners think that TD or Ingram have to acquire a master. There were supposedly similar deals ready to ink when Scansource acquired Intelisys in 2016. The other mergers never materialized. CDW, like the other distros, has a telecom department. CDW probably has one of the largest commission wise. Does D&H or Insight finally get in the game?

Would it make sense for them to buy Sandler Partners? I don’t see TBI or PlanetOne selling unless it was Big-F-U money that they could walk away with.

There are a few companies that are working on a platform to make sales easy for buyers and partners – AppSmart, Lightyear, Upstack, COLOTRAQ. One problem: there is no way in telecom to order from the carrier via a “marketplace” or portal. Heck, how do you even place any order with some of these carriers (C-Link)? So if partners can’t do it manually without headaches, how would any of the platforms?

Sure there are some lines of business that can be procured that way: colocation, UCaaS, SaaS, devices, maybe SD-WAN, but most everything else requires human intervention and interaction. That’s where that whole marketplace / platform falls down.

If the marketplace did work, then Amazon would be selling Comcast (it tried that in 2016) and Chime would replace Zoom. Additionally, partners would end up being just affiliates, which would be awful. Affiliate commissions peaked around 2006. Lots of reasons why this wouldn’t work as a model.

But hey maybe if you throw $150M at it (3x the Berkshire Partners’ investment in Upstack) at. I don’t know how much Amazon threw at it but they do still sell cellular service. Software vendors have the ability to sell through a marketplace; carriers and other types of service providers may not be able to due to legacy BSS/OSS systems running their business. If Lumen had brought in a BSS/OSS SaaS vendor when it acquired Level3 in 2017, it is likely that it would have a chunk of business on the new system and could start closing down old systems. Instead the org is at the point where they can’t find anything or access systems, like when FTR took over VZ territories. Who has the keys and passwords? No one?!!

It is amazing that they can make any money at all. (And funny that they blame legacy regulations on costing them money.) Any how…

Now Lumen is trying to unload ILEC copper plant. That should be awful for the consumers. It is unfortunate that Apollo will be late to the game to try to take a share of all the government broadband funding going on the last two years. Despite the billions in tax dollars handed to the incumbents we still don’t have fiber to every household.

Things are a changing. I am just musing here. Any thoughts would be greatly appreciated.

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