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Beefing Up SIP Distribution Channels
SIP is available from hundreds of providers, and through thousands of channels. The growth rate of SIP, as discussed in our previous No Jitter post, is faster than the IT industry in every world region. This is contributing to the explosion in new SIP routes-to-market for sellers, and it's a boon to buyers. However favorable that may seem, though, it's a bit like drinking from a fire hose.
The competition for selling SIP is intense. Many providers have broadened their distribution channels to make more choices available for customers. Ecosystem partners are now one of the fastest-growing channel segments for SIP providers. They contribute to differentiated solutions, and ideally a competitive advantage for some vendors. ShoreTel, for one, has more than 30 SIP trunk ecosystem partners, in addition to its own ShoreTel SIP, to tee-up customers for its SIP-supported PBX and hosted PBX business. For ShoreTel's SIP trunk partners, such as BT, it's a win-win. Broadening of the SIP distribution channels has also benefited customers looking for choice, expertise, and maybe solutions, if not just point products.
Many large SIP technology providers are now emphasizing architecture sales, managed services sales, and numerous support services. In our interviews with dozens of these companies for our new syndicated research report, SIP Global Market and Analysis and Forecast 2016-2020, we found many drivers for this trend. Pull-through products and services, for example, grow more than just the total sales value. Pull-through increases the margins on SIP products that are constantly eroding. In another pull-through example, the additional revenues that come from plan, design, and implementation of networks and solutions are high-margin sales. These services then become the groundwork for future sales. And because the large SIP providers have deep pockets, they offer things that are unavailable from most competitors.
23 SIP Distribution Channel Types
SIP prices decline 5% to 7% each year. We are seeing this in 2017 already. The pressure on vendor margins is enormous. This, plus many new competitor types in the market, increases the breadth of channels that providers use. Our latest research shows that SIP providers, on average, utilize six different channel types in their routes-to-market -- and rely on many partners within each one.
We classify 23 SIP routes-to-market, as listed in the chart below. This large number of channel types is good for all, since the options for both vendors and IT managers are many. But it increases the mandate for channel due diligence.
For one of our clients, a multibillion-dollar vendor, we created a five-year SIP distribution channel strategy. We chose a different quantity of partners to recruit in year one than we did for years two through five. But in all, we used 12 different channel types for our client's routes-to-market. This broad selection provided the means to reach different classes and sizes of prospective customers. The number of partners chosen varied by channel.
What Is Your SIP Channel Strategy?
Whether you are a SIP provider or customer you need a SIP channel strategy to be efficient. How should you get your SIP services and products to market, if you are a vendor? Or bought if you are a customer? You have many things to puzzle through when you are dealing with SIP products and services like SIP trunks, VoIP phones, services, IP PBXs, session border controllers, cards, video, and applications. The channel strategy is what gets you there.
For questions about our new syndicated research SIP report please ask our researchers at the Eastern Management Group.
John Malone is writing on behalf of The Eastern Management Group, a communications industry market research company of which he is president.