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Jim  Burton
JIM BURTONFounder and CEO, CT Link, LLCCo-Founder, UCStrategiesJim Burton is Founder and CEO of CT Link, LLC. Burton founded the...
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Jim Burton | January 21, 2014 |

 
   

The Channel in 2014: The Perfect Storm

The Channel in 2014: The Perfect Storm 2014 promises to be an exciting year for the channel and a challenging year for many vendors. Those that plan for the perfect storm have a better chance of survival and success.

2014 promises to be an exciting year for the channel and a challenging year for many vendors. Those that plan for the perfect storm have a better chance of survival and success.

Technologies evolve, converge, and consolidate, and so do the channels that sell and support them. The channel of 2013 looks nothing like the channel 25 years ago, and the channel in 2014 will be markedly different. In 2014, we'll start to see a shift that will have some vendors enjoying a channel evolution that brings them new channel partners, while other vendors scramble to retain and grow their channel in what will feel like a channel revolution.

Several storms have been brewing in the channel for the past few years. These storms, along with several new weather fronts, will create the perfect vendor/channel storm in 2014. Since the first UC Summit in 2007, an invitation-only event for channel partners, UC consultants and UC vendors, UCStrategies.com has surveyed Summit attendees and observed several industry trends that reinforce the concept of a vendor/channel partner perfect storm in 2014.

Perhaps the biggest trend we discovered is that loyalty to a primary vendor is quickly fading as channel partners carry multiple call control solutions. In 2007, most channel partners attending the Summit had a primary call control vendor, and very few carried the Microsoft UC solution. Over the past 6+ years, things have changed. At last year's Summit, more than 60% of the channel partner attendees indicated they were authorized to sell and/or support Microsoft Lync. On average they sold CPE call control solutions from 3.5 different vendors, and more than 70% also sold cloud/hosted telephony. This trend will continue in 2014, creating opportunities for some vendors and a major challenge for others.

Historically, channel partners had primary vendor partners in each major product category, mainly because of the cost to support a product. In a proprietary hardware environment, specialized training and dedicated resources are required for sales, installation, support, customer training, and inventory, making it inefficient and costly to support multiple vendors in the same product category. As hardware products shift to software solutions, these cost can be significantly reduced, which has given many channel partners an opportunity to broaden their product portfolio.

In addition, as call control moved from dedicated proprietary hardware platforms to standard "off the shelf" servers, costs came down on several fronts, including the overall cost for the solution and the support costs. Cisco proved that when call control technology shifted from TDM to VoIP (IP-PBX), loyalty to a primary vendor shifted as well, as channel partners wanted to be associated with a market leader in the IP-PBX and closely related converged networking market.

We're starting to see the same thing happen in the cloud world, as cloud providers such as 8x8, CallTower, Cbeyond, Fonality, PanTerra Networks, Thinking Phone Networks, RingCentral, and others pick up channel partners that were once loyal to a primary vendor. These vendors are well positioned to benefit from the perfect storm.

Expect to see another big shift in the channel as major vendors change strategic direction. Since 2006, when a new market category called unified communications (UC) was introduced, every major PBX/IP-PBX vendor has been re-inventing their business. Now, in 2014, most will be in a position to deliver the complete solution they have been working on for the past 7+ years.

Alcatel-Lucent has a "shift plan;" Avaya continues to evolve; HP has a refocused effort on UC; Mitel continues to innovate; NEC will be making some exciting announcements in 2014; Polycom has a new CEO; ShoreTel is under new management (at many levels); and Unify (formerly Siemens Enterprise) has a new product area--Project Ansible. All of these companies have been reinvented over the past few years. Most are (or need to be) looking for new channel partners to match their new product offerings. However, most of the current channel partners are confused by the vendors' evolving and shifting strategies and are considering new vendor products to add to their product mix.

In addition to changes at the vendor companies, 2014 will see a major shift in channel partner business models. In the past, most channel partners based their business on one-time sales, and over time, most added some recurring revenue from maintenance and ongoing support. 2014 promises to be the year when channel partners shift from one-time sales to recurring revenue from the products they sell (not just service and support), notably cloud services. This shift has already started for most of the top channel partners as they have balanced their cash flow between one-time and recurring revenue sales.

Channel partners are also looking for ways to provide value added services and are adding new products and services on top of their existing ones, such as network management and monitoring products and managed services as well as UC applications. As network costs come down based on Software Defined Networks (SDN), expect to see vendors like Microsoft add networking (once again) to their product portfolio, creating a new opportunity for channel partners who have historically opted to partner with other channel members for specialized data networking solutions.

Channel consolidation will continue in 2014 as major channel partners look for acquisition targets to help expand their reach, and as the smaller channel participants see attractive (or necessary) exit strategies. Channel partners of all sizes will look for ways to add new capabilities and expertise.

2014 promises to be an exciting year for the channel and a challenging year for many vendors. Those that plan for the perfect storm have a better chance of survival and success than those that continue the old course that got them home safely in the past.





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