Another Partner Picked Up

AppSmart finally announced a badly kept secret: they are acquiring master agency CNSG. This is AppSmart’s third acquisition following WCG and Telegration.

Ever since ScanSource bought Intelysis, there has been a driving desire to get bigger in the master agency space. There has been some M&A but I thought there would have been more.

The VADs (Ingram, Tech Data, SYNNEX and ScanSource) have all made moves to get bigger as well. Some of that is driven by the shift from on-premise hardware to cloud services, whereby the hardware bypasses the traditional VAD (and also the VAR or MSP). Theirs was M&A by necessity. And I’m not certain they have done enough to counter-balance the shift to software/cloud. We’ll see.

As network revenue write down continues in the carrier space, it has caused problems resulting in consolidation and bankruptcies. As the carriers get bigger, the larger master agencies want to get bigger to maintain their voice.

This drive to get bigger and bigger is coming at a time when the channel has driven more and more revenue for many providers, especially mid-market sales for UCaaS players. Just check any investor decks. This has increased the awareness and perhaps the significance of the channel. More vendors want to use/leverage the channel. The technology has surpassed the average person’s understanding and cognizance. The channel is aging (and on the IT side is cashing out via M&A).

The bigger the masters get, I am not certain they become as effective. Even VADs aren’t great at distributing the Long Tail. The top vendors – IBM, Cisco, Microsoft, Schnieder, et al – are well represented but outside the top 20% of vendors, there are not any SMEs on the products/vendors in the bottom 80%. There are millions of SKUs; just like there are 400 UC providers powered by BroadWorks. Hard to distinguish and find the best fit for the customer – which is the main job of the partner, who relies on the master agency or VAD for some of that assistance.

The Long Tail creates problems for new vendors. The 23rd UC provider or the 19th SD-WAN player or the colocation company with 2 remote data centers in the master agency portfolio isn’t getting a lot of attention UNLESS they are awesome; spend a lot of money; or are unique in some market demanding way (see: Slack or Zoom for examples).

So I understand WHY we get consolidation in the master agency space; I just don’t know how that will work out for the partner or end user.

In this one particular case, AppSmart is on its third acquisition. It has come with quite a few executives who have held a CEO title, who now have a new organization and supervisory reporting structure. It will be interesting to see how this works out. There are also 4 different cultures that have to meld together – AppDirect, WTG, Telegration and CSNG. No easy task.

The message needs to be clearer as well. I am not certain what AppSmart is besides a portal. It sounds like ScanSource a little. Is there where everyone thinks the channel is going? I will sell this small business owner a laptop, a VPS, cable modem, LTE backup, GoDaddy domain and hosting? For one thing, most of these items are cheaper and easier to get on Amazon. Second, the margin for a partner to sell all of that is still less than the time she would expend doing so. Lastly, as indicated by the investor decks of the UC players, partners are going up-market. So I don’t know how this all works out, but I’ll be watching.

Let me acknowledge that Informa reports, ” Subagents have credited AppSmart for automating the back office and simplifying their day-to-day operations.” Like GeoQuote and DCITRAQ, partners don’t mind using a portal that is easy to use.

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