This week, NEC announced its new channel program, Cloud Cash. NEC's new program allows its UNIVERGE BLUE channel partners to earn commissions for UCaaS and CCaaS sales upfront rather than over time. The program is designed to assist channel partners to adapt from traditional hardware sales to cloud-delivered subscriptions by creating a similar revenue model.
Enterprise communications tend to be sold in one of two ways: reseller or agent. The reseller model is associated with physical products such as phones and network equipment. The agent model is associated with services such as carrier services. The two models have significant legal and financial differences, but the issue that gums up the works has to do with compensation .
As the name implies, a reseller purchases and resells products to its customers. The mark-up between their purchase price and the resale price provides income to the business. Resellers make most of their earnings when the sale closes. Reseller models can be found across multiple sectors, including cars, furniture, and groceries.
The agent model is different. Here, the provider pays the channel partner a commission for facilitating the sale. In the case of recurring services, the commission is often recurring as well. Agent models are the norm with many services including travel, real-estate, and insurance.
Both revenue models are proven and familiar. Both can deliver riches: resellers can get rich quicker, while agents can get rich longer. Solutions often require combining the models, for example, a phone system with circuits. However, things get complex when competing solution components have different compensation models, such as phone systems and UCaaS.
Resellers that mix and match upfront bigger commissions with small recurring commissions on similar products can bias which solutions are recommended to the customer. Many resellers resolve this by effectively borrowing from the future and pay out upfront, larger commissions on cloud services. It’s an unfortunate remedy as it means that each new sale costs the partner. With luck, they won’t sell too much in a single month.
NEC’s Cloud Cash is a better idea. NEC takes the temporary hit instead of the channel partner. Under this program, NEC will pay its partners all their commission (for the term of the contract) upfront, plus any related incentives (SPIFFs) that may be due. This way partners get the favorable upfront economics of selling hardware while providing their customers the benefits of UCaaS and CCaaS.
The program was devised by NEC Financial Services (NFS), a wholly-owned subsidiary of NEC Capital Solutions. NEC is not a charity. It’s done the math and is willing to trade the upfront payment for the long-term rewards of happy customers and partners.
NEC Cloud Cash is available to all NEC UNIVERGE BLUE channel partners. To participate, partners must first sign up for the general program . Once approved, the partner has the option to select Cloud Cash on a case-by-case basis. The web portal shows the upfront commission calculation before applying.
Of course, the program has some rules, such as a minimum term commitment of three years, but overall, Cloud Cash should make offering cloud services more appealing for resellers. The program transfers most of the risk of the cloud to NEC. For example, if a customer terminates early, NEC won’t ask its channel partner to return funds. At least that’s the intent—there’s the usual small print. Partners can also earn additional commissions should the customer purchase more seats or services in the future.
NEC UNIVERGE BLUE has several unique characteristics that address the needs of its channel partners. It has a nice overlay model that allows cloud services to supplement premises-based solutions. It offers partners both an agent model and a reseller model, as well as a unique wholesale model. UNIVERGE BLUE also extends into IT services, such as shared storage and email, that creates differentiation and stickiness. And now, Cloud Cash removes one more barrier.
UNIVERGE BLUE continues to expand both its features and global reach. It was designed for NEC partners but has attracted many other resellers as well.
Dave Michels is a contributing editor and analyst at TalkingPointz.
