Truthfully, all the noise around NewCo is a little much. Upstack, Bluewave, Bridgepointe, Amplix, and Clarus all have direct selling teams as well as sub-agents. TBI had a call center that sold direct.
This announcement about NewCo’s agency was a PR disaster. Scansource dropped the ball on this announcement. It is all about the story telling. This was also another sign that Greenville does not understand the Intelisys business and the difference between the VAD and the TSB. THIS is the problem, not NewCo.
For those that don’t know, TD Synnex, Arrow, Scansource and Ingram Micro are VADs – value added Distributors. They are actual distributors, unlike the formerly named master agencies that only distribute commission checks. The way the VADs work consists of a VAR or partner getting credit from them to purchase hardware and software licenses. A VAR would login to a VAD’s portal to find out if teh VAD has inventory close to the client location. This isn’t Amazon; shipping is not free. A VAR would buy from two or more VADs depending on line cards and availability. The bill comes from the VAD. If I procure a Cisco router or a HP printer or an IBM license from TD, TD bills my company. A brokerage doesn’t bill. The vendor does. One big difference.
Maybe someday AppDirect gets into the resell game, but right now the TSBs do not bill for services. They only hold the partner agreements.
[Note: AppDirect may bill for software off the marketplace I don’t know, but they do not bill for telecom.]
The VADs have dipped their toe in telecom; Scansource, TD and Ingram all have brokerages. You can procure 8×8 or Lumen or RingCentral through Ingram going back to before I spoke at a Trust X event for Ingram in 2018.
The VADs do not bill for the telecom services. The service provider does and pays a commission to the VAD, who then cuts a commission check to the partner.
Should a TSB sell direct? I don’t know. It does help them to fulfill contract quotas to the vendors, which would adversely affect every partner. Most contracts between brokerages and service providers have quota in the language. Miss quota and the provider can miss paying the commissions. So in some respect have a direct sales force means a small level of protection.
Most partners are worried about the TSB using their customers’ data to cut them out. Listen, the master agencies had that data for years. so do the vendors. How often has a partner lost a deal/customer that they were involved with? Once in a while/ Not very often.
My worry about the announcement isn’t the NewCo, because if Scansource manages it like they do Intelisys, it is time to short the stock. They are likely going to overpay for an agency (if there are any left to buy!) or they will need to buy Bluewave or another PE-backed agency.
One worry that the TSBs have is that with every channel transaction – like the 70+ MSP M&A deals in 2024 so far and the 30+ agency deals in the last 12 months – they lose sales activity. From partners not actively selling while doing the M&A or after the transaction, all new business moves to the TSB that invested.
Pre-PE days, there was shade thrown at the partners who shopped deals to see which master would pay better. This looks like good business sense at this time.
Speaking with one TSB owner today, I asked him to look at his own base of partners and the years of history to think about how many partners use anything but quoting tools and commissions? A majority of the deals done in the channel are transactions. POTS replacement, Hosted PBX pretending to be UCaaS, network, broadband, 4G/5G, cell phones, SD-WAN to replace MPLS and so on.
Some of the complexity that a partner may see is a design of the TSB. Having 400+ vendors makes it complicated to choose a vendor. And who would a partner go to in order to find the best vendor choice for a customer?
All the talk of CX, AI, etc. adds unknowns, which makes a deal harder to get done — but again this is by design because everyone wants to be invited to the party. They want a partner to find a deal and then they want a partner to invite in the TSB SE and the vendors team to interface with the customer.
If vendors were better at explaining the two things they are really good at, who their Target Customer was, and without keyword stuffing explain what benefit they provide the Target Customer more business could get done with less complexity – and happier customers.
Quest Tech Solutions has a podcast about the NewCo deal on Spotify.