The telephone equipment channel is one of the few forms of distribution not largely impacted by national chains or Internet distribution houses. The channel remains predominately independent local firms that specialize in voice systems and related services. But several factors in play today suggest big changes are coming--partly due to technology changes and partly due to obsolete models now under competitive pressure.The voice equipment evolution from digital to VoIP resulted in some retooling and new skills, but had actual little impact on the voice channel model. The bigger change afoot is coming from the evolution from hardware to software based phone systems. When systems were hardware based, the dealer possessed specialized knowledge (and inventory) of how to combine various components to create a custom solution. The systems were highly esoteric, both in design and in programming. A channel emerged of authorized dealers that specialized in specific systems, maintained parts inventory, and possessed in-depth knowledge of a vendor's line of products.
Today's systems are largely software based, and the predominant IP based systems require no specialized port hardware. System configuration is much more intuitive with increasingly friendly web based interfaces. The equipment is trending toward a solution which places less importance on local services, inventory, and knowledge (trending yes, but not there yet). Internet houses are capturing a larger portion of the device market, particularly SIP phones and headsets. Plus several new OEMs are following a different playbook challenging old assumptions.
Consider technical training and certification. For decades, factory training has been restricted to authorized dealers and nominated end-users. The original motivation was to control or contain the gray market of used hardware. Used equipment undercut new parts from authorized dealers and potentially damaged the reputation of the manufacturer with improper implementation. The manufacturers stifled the gray market by restricting access to support and training through authorized dealers.
This was a reasonable solution until the likes of Cisco and Microsoft brought a different model to the world of voice. These companies, protected by software licensing practices, make their training and certifications readily available to the public via third parties. With 2009 unemployment so high, training and certification organizations are booming as engineers seek to improve their qualifications and hire-ability. This means both dealers and customers can hire pre-certified staff, at least with Cisco and Microsoft skills--not so with Toshiba, NEC, Aastra, ShoreTel, or Mitel. The traditional dealers must still fund certifications after hire. Suddenly this 'protection' is a disadvantage.
Another big assumption under fire, particularly this year, is extending discounts by purchase volumes. This practice is as old as distribution itself, and effectively offers lower prices to dealers that sell the most. Many organizations will be seeing their prices increase after 2009, while still trying to recover from the recession. Additionally, dealers need to learn/invest in a slew of new technologies such as cloud computing. An alternative in tough times is to reward dealers based on certifications instead of just sales. This increases the dealer's commitment and skills while rewarding dealers for such a commitment. Microsoft, for example, grants points to dealers based on a broad set of activities--including sales, customer references, and certifications.
But the biggest change coming is around gross profit margin. This channel is one of the few that still earns 30+ gross profit points on most implementations. This may sound highly lucrative--especially to computer system resellers--but voice systems have a much higher cost of sales. This goes back to the complexity of the solutions--sales staff have long on-boarding periods, long sales cycles, and significant upfront design work (unbilled) to create system proposals. Companies such as ShoreTel and Digium are changing the model with simplified options and proposals. This allows quotes to be generated with very little pre-sales activities (costs), making lower margins a sustainable option.
But it isn't just margins that are dropping, transaction size is falling as well. The causes are multiple, including; Internet houses for some components, reduction or elimination of specialized ports, soft phones costing less than hard phones, and more intuitive software based solutions that simplify training. Also, the simpler quotes are turning many of the add-on options into standard features. The dealer simply can't afford to work with vendors that are keeping solutions overly complex. This is forcing some vendors to rethink the complexity around their product portfolios--Mitel is relaunching its pricebook in January, Siemens Enterprise is considering a webstore concept. The trend is clear, the impact to the channel is not.
The voice channel is about to enter a profound phase of re-invention. Imminent changes to the existing model, plus several new technologies, will change how voice systems are evaluated and implemented--and will change the dealer skill set as well. This includes new technologies such as cloud computing, hosted voice 2.0, video conferencing, mobility/FMC, custom APIs to other systems, and more.
