John Malone
John Malone is President and CEO of The Eastern Management Group. He heads one of the world's premier technology consulting...
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John Malone | November 24, 2015 |


Dramatic Shift Coming for Hosted PBX Purchasing

Dramatic Shift Coming for Hosted PBX Purchasing Hosted PBX vendors will overhaul their routes to market as current hosted PBX channel strategies face off against best practices. Customers need to keep watch.

Hosted PBX vendors will overhaul their routes to market as current hosted PBX channel strategies face off against best practices. Customers need to keep watch.

The hosted PBX channel is classically problematic, whether you're a provider or an enterprise buyer.

Over the last five years, hosted PBX vendors' sales have increased -- not soared -- and operating margins have been modest. This can limit a vendor's investment in its hosted PBX offering, hold down business valuation, and may even hurt investor return. My opinion is that the hosted PBX industry operates considerably below its potential. This recurrent situation now may change for the better.

While it is true that enterprise customers may select from perhaps 100 hosted PBX vendors, most must buy through a single channel -- that being the vendor's direct sales operation. This creates a bottleneck.

As we wait for hosted PBX channel strategies to change, and become dominated by partner sales, up to 80% of all enterprises will continue purchasing hosted PBX through a direct sales channel.

Change Is Coming
Change is assured. Eastern Management Group consultants expect vendors' direct sales to customers will drop from 80% to 20% as hosted PBX channel partners come more into play (see my previous post on this topic, "Hosted PBX Channel: More Power Than Meets the Eye").

The channel partner ecosystem for hosted PBX includes roughly a dozen unique partner types and thousands of resellers. Some have novel classifications, such as born-in-cloud partner, cloud brokerage, and master agent. Others like reseller, distributor, and VAR are familiar names.

Hosted PBX vendors should build out channels capable of generating enormous growth (100% year-over-year minimum). Customers must pick wisely from a dozen available channel options.

The Right Hosted PBX Channel
Just as soon as hosted PBX purchasing through channel partners becomes widespread, the practice will be of substantial value to the 80% of enterprises that will use them. They will have improved access to products and services, more architecture choices, and higher levels of customer care.

Here are some of the hosted PBX channels that vendors and customers can tap into right now.

  • Distributors – These are not your father's distributors. Several national and global distributors now have cloud divisions that carry hosted PBX. National and global distributors may have thousands of customers, large sales forces, their own partners, and robust lines of products and services. Because hosted PBX customers experience little churn, distributors are able to support customers as they grow, providing services such as solution planning, design, implementation, and expansion... worldwide.
  • Born-in-Cloud Partners – Several hosted PBX vendors are adding born-in-cloud partners, which include many large national and international companies, to sell hosted PBX. Born-in-cloud partners' expertise is with recurring revenue services, generally not premises PBX equipment (by design). This is an advantage for prospective hosted PBX customers (and hosted PBX vendors) since born-in-cloud company portfolios are wide, deep, and complimentary. Born-in-cloud companies frequently offer customer advisory services such as architecture design, service configuration, and implementation.
  • Enabled Channel Partners – Of three types of channel partners (referral, authorized, enabled), enabled partners may be most valuable to hosted PBX vendors and the customer. Enabled partners should be self-sufficient. Each partner can generate leads, close sales, process orders, and carry broad lines of products and services from multiple vendors.

Next Steps
The estimated life of a hosted PBX significantly exceeds that of a premises PBX. As such, you need to approach the decision of which company to buy from or sell through, depending on which side of the sale you sit, with deliberation.


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