Did the First Domino Fall?

Bluewave Buys SinglePoint from Soterra Capital. In 2016, Soterra bought Sky Technology Partners, SinglePoint and Palladium Communications Group. Maybe one of the earliest roll ups of partner agencies. Soterra flipped that to Bluewave.

This could just be a blip. Or this is the beginning of investors seeing very little return on their investment and looking for the exit doors.

Partners are quietly talking with one another about the mess that is the TSB/TSD space.

There is no loyalty left. There is some anxiety.

I have expressed how hard it is to work with my TSBs. How hard it is to get paid from any of these PE-backed firms.

They have too many vendors that they no nothing about, have little contact with and have even less back office support for. How does that work?

At this point the TSB is just an event planner and hopefully a commissions broker. I know they will argue with me about their value, but maybe the top 10% of aligned partners can see it, but the rest of the partners can’t see it.

I can tell you from partner calls that most partners who have sold have disappeared. Swallowed up in a sea of PE dollars, “integration”, “synergies”, “game-changing”, and paradigms that have shifted.

LinkedIn is filled with events that are absolutely worthless for the vendor, the partner, and the customers. Golf, sporting events, dinners, cocktails – WOW! It is fun, but is it getting it done?

I don’t think many are paying attention to the Marketplace chatter, where the partners become Affiliates. Remember the days of Linkshare and Commission Junction (circa 2006)? Yeah, that will be AppDirect. Don’t believe me? Read the press release from the TBI acquisition and notice the verbiage. No mention of telecom or telco. Lots of talk about customers. AppDirect just wants the customers. The partners are just a pain in the ass in the way of the marketplace. They just need the partners to send the links to their customers, so they can go buy a license for Dropbox.

Several vendors are re-examining the MDF spend. What happens when the one of the only three revenue streams of the TSB declines sharply? Trouble.

The TSB has 3 revenue streams: commissions on a 70-92% split; MDF; and direct selling. The largest budget items are payroll and commission payouts.  The payroll has to be obscene with hundreds of programmers (and not a single UX Designer!), back office, vendor relations for  a 1000 vendors, commissions team, engineering, executives and channel management.

FYI, the average UCaaS sale size in 2022 was 13 seats. At $20 per seat, that is $260. The partner gets between $182 to $239. Put another way to process that order and collect the commission the TSB keeps between $21 and $68. Do you know how many of those orders you have to process, project manage and collect on????

My estimate is that at least one of the PE backed brokers breaks in 2023. I don’t see sales growing much in 2023. All the layoffs at the vendors is having a trickle down effect of tripping up sales. The economy is slowing down sales — or the perception of the economy as seen through the grocery bill and the layoffs. Quite a few macro-economics that will slow sales down at a time when the PE firm is watching the numbers.

There is another factor: exhaustion. Partners who haven’t sold, but want to, are about to go through yet another economic cycle. Since 2000, there have been way too many of them – and it is exhausting. Some will likely sit this one out.

I know a few agencies that are just riding it out — not selling anymore, just living off the commissions until they are gone.

None of this raises the oceans.

True, a few new agencies are starting.  They will be selling advanced services. That will move a needle. Yet the number of multi-location and enterprise businesses are less than 75K in the US. Everyone wants to sell to them; not everyone can. Enterprises are NOT moving off Avaya because it is too complicated of a project. Articles have been talking about the cloud migration back to colocation in 2023 to contain costs and control. Mainframes and AS400’s are finally being put to pasture. These are projects for the Big Consulting firms.

SD-WAN in its third iteration is getting cheaper. 5G and satellite are being used instead of terrestrial broadband. Fiber is going in the ground in droves. There are like 40M copper circuits out there.  Layoffs mean TEM projects. Everywhere I look I see transactions that will drive savings for businesses, which the channel is great at! But that doesn’t help the bottom line of the TSB much.

I think we will see big SPIFFs all year for sales because the sales will not be plentiful. Also, there are far too many vendors in every market clamoring for sales. They may need to pay steeply for those sales.

Cisco, who is far behind Microsoft on UC&C, is paying 6X MRC SPIFFs to agents on Webex and Webex Contact Center. Buying the market share.

It is barely February and I am already exhausted by it all.

BTW, Shepstone looks like he is making this video on the TBI blog at gun point. I guess that lowered valuation didn’t get him excited enough for the video.

Scroll to Top