Q&A | May 29, 2014

Telephone Interconnects: The Next To Offer Managed Services … To Survive

By Bernadette Wilson, associate editor, Business Solutions magazine
Follow Me On Twitter @bernadeditor

Telephone Interconnects

Selling telephone systems was traditionally pretty uncomplicated. Carriers provided the phone service. Interconnects (VARs who sell telephone and other communications solutions) sold it to their clients along with phone system hardware. Managed services providers (MSPs) handled IT. Each provided a piece of the puzzle, and it all worked together.

Now that carriers and MSPs are selling hosted services, however, interconnects have some choices to make.

Alan Rihm, CEO of CoreDial, says interconnects have to “make a decision to be in the business” and look at transitioning to a new business model. CoreDial, a provider of a Software-as-a-Service (SaaS) platform that includes hosted PBX (private branch exchange), VoIP, and UC (unified communications), has acquired about 40 new partners this year — and 60 percent are MSPs. Because no hardware purchase is necessary to offer the services, MSPs can partner with companies such as CoreDial to provide software, to access tools for quoting, tracking, and managing payments, even to label the services with their own brand. Adding communications services can help position MSPs as total solutions providers, eliminating their customers’ need to rely on other providers — like interconnects.

Interconnects, however, can provide SaaS platforms the same way their competition does. As Rihm points out, though, transitioning from the old business model to a model based on developing a recurring revenue stream takes thought, strategy, change — and work. Rihm says interconnects need to determine how to train their sales teams to sell services or if hiring new representatives will be necessary. They will also have to decide on a commission structure, and pay strict attention to margins when pricing and bundling services. It’s also important to decide who to market the new services to — do you start with existing clients or look for new business?

Rihm says SMBs have been a good market for communications offered via SaaS, but the size of the end user is growing. He comments that a large part of the channel is expected to move to voice plus data in the next three to five years. He adds that premise-based phone service is still there, but sales are decreasing 5 to 10 percent year over year.

He says he sees interconnects reject the idea of changing their business model based on fear, doubt, and uncertainty. And they might even try to sell against it— which could be a mistake with an informed customer who would prefer an SaaS subscription and the integrations it makes possible.

Rihm stresses the as-a-Service business model works. “It improves your position in the ecosystem and it gives you the ability to succeed,” he explains. You have developed long-term relationships with your customers — some of whom are becoming aware of options that can help them operate more efficiently and help them improve their bottom lines.

Rihm says to ask yourself, “Do my customers need this and should I be the one to sell it?”

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