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Reselling UCaaS: Why This Model Is Gaining in Popularity
The enterprise communications sector is continuously evolving, and one of the bigger changes for the past decade has been the transition from owned equipment to cloud-delivered services. While new technologies and features dominate most of that conversation, the go-to-market changes (or disruptions) are equally significant.
The comms industry was built on a traditional reseller model. The value-added reseller (VAR) purchases components at a wholesale price, configures and delivers them, then resells the solution to the customer at a retail price. The difference between the wholesale and retail prices goes toward operating costs and profits. Reseller models are common with physical products including cars, groceries, and furniture.
The agent model is also well-established. Agents represent the provider and sell, rather than resell, products and services. The customer pays the provider directly and the agent then receives a commission from the provider. The commissions paid are often recurring over the customer lifecycle, and go toward operating costs and profits. Agent models are common with services including travel, insurance, and real estate.
The communications industry has used both models. Traditionally, equipment was sold through VARs, and carrier services were sold through agents. The VARs had local experts that could provide installation, support, parts, training, and whatever else the customer required. The reseller model survived the transition from hardware to software, but cloud-delivered services share more characteristics with the carrier or service model. Partners usually sell UCaaS and CCaaS services through an agent model. That made sense as the cloud devalued many traditional VAR benefits such as inventory and installation — at least initially.
However, the agent model isn’t ideal in all situations. That’s because the larger and more complex implementations (of any size) are where the value-add in VAR shines. The VAR often understands the customer’s business and objectives, and tailors solutions to fit their specific requirements. This includes optimizing workflows and integrations as well as providing end-to-end support across multiple systems.
VARs typically don’t charge for value-add; instead, they include their services in their overall price. The agent model makes this more difficult. As a result, the reseller model is gaining popularity with cloud-delivered services. Here are some examples of how partners can resell UCaaS services.
Last week Westcon signed a wholesale distribution agreement with 8x8. The distributor has other agency agreements, but the wholesale/VAR model gives Westcon, and its VAR customers, more account ownership and control. Agency models reward the VAR for the initial purchase, but inherently transfer account management to the provider.
The 8x8 offerings (UCaaS, CCaaS, and Direct Routing for Microsoft Teams) are the same for agents and resellers. The major difference is Westcon’s VARs can now bundle 8x8’s offers with equipment, enhanced networking services, managed security, and so on. The VARs retain control over both the price and the ongoing account relationship.
The VARs can also be agents if/when the simplicity of the agent model is more attractive. VARs can develop deep expertise in 8x8, and then choose the appropriate model for a given situation.
Westcon provides the VAR a wholesale bill for 8x8 services that it can then use to generate its own invoice to the customer. Both 8x8 and Westcon, though critical, are invisible to the customer. Westcon EMEA announced that it will launch the wholesale program with 8x8 in the U.K. and Ireland, but likely intends to expand it to more regions.
Mitel has provided communications equipment and services for over 40 years and has tens of millions of active endpoints installed globally. Mitel believes a large portion of its base will gradually move to its cloud-delivered services and expects its partner network to facilitate that migration. It has a long history with the reseller model and believes the transition to the cloud should leverage that model along with its existing channel relationships.
Instead of telling its partners to adapt to agent programs, it adapted its cloud services to a partner-first model that supports agents and reselling options. It wants its partners to know that cloud migration doesn’t necessarily equate to customer migration.
Mitel last year saw how its base engaged with its resellers for new solutions for work from home. It expects to see this again as organizations reoptimize their offices for hybrid use cases. Mitel’s VARs typically do more than service the Mitel components; they act as a trusted advisor that improves workflows and collaboration. Trusted advisors work best when they trust their suppliers.
Mitel recently optimized its go-to-market motion with new partner tools and a new Partner Managed model. The entire customer lifecycle including quoting, ordering, and ongoing support services are designed for a Partner Managed approach. Mitel performs the hosting and customer billing, but the partner can set the pricing, and include additional dealer services. Mitel claims its partners are happy to defer the hosting, billing, and tax calculations to Mitel while they focus on the broader implementation and account relationship.
The opposite of an agent isn’t necessarily a reseller; it can also be a provider. 2600Hz offers providers the core components to create their own UCaaS offer. 2600Hz offers a turnkey, brandable wholesale UCaaS solution called KAZOO.
2600Hz offers service providers what they need to create a UCaaS offer or other specialized, communications-savvy application or service. You can look at it as either a UCaaS solution with extensive APIs or as a CPaaS offer with extensive UC features.
With 2600Hz, the provider has full control over the price, the account relationship, and the very service that it offers. The approach makes the provider responsible for customer billing, but 2600Hz also includes a billing application. The solution is particularly attractive for specialized use cases such as verticals.
RevenueWell, for example, embedded 2600Hz’s technology into its dentistry practice management platform. More than 15,000 dental offices use RevenueWell for practice management, automation, marketing, and communications. The application performs targeted marketing campaigns, automated appointment reminders, and displays pertinent details when patients call. It also offers a portal that allows patients to access information, interact with staff, and self-schedule appointments online or via voice, or text.
As systems become larger, more complex, and more integrated, the channel’s opportunity expands, and for many partners, the resale model makes more sense.
These three examples show three vendor types: a cloud-native provider, a PBX-heritage vendor, and a platform vendor enabling UCaaS resale. There are additional options from many more vendors also available. This is important because the agent model, though popular, isn’t right for every partner.
It’s clear new implementations favor cloud-delivered communications services, and that’s expected to continue for the foreseeable future. Partners should choose the right model as it’s as important as picking the right technology.
Dave Michels is a Contributing Editor and analyst at TalkingPointz.