Telecom-IT Convergence Webinar v10

1Copyright © 2015 Vistex, Inc. Proprietary and confidential. All rights reserved.

Webinar

By Chad Hoke

May 2015

Telecom-IT Convergence


Presented by

Chad HokeTechnology Industry PrincipleVistex Inc.


Agenda

Telecom and IT – Conflicting Views

Convergence

Future of Integrated Communications

Summary – Top Opportunities in telecom

How IT Vendors can Leverage Telecom Channel


Wildly opposing “world views”

“Nothing happens until a sale is

made!

“Brand is everything!”


Telecom

Business Applications

Infrastructure

Communications

Content


Telecom view

Telecom provider is emerging as the main brand to SMB customers

Telecom brand will is extending to other core services such as e-mail, security, storage, e-commerce, hosting and more

Telecom owns the invoicing and customer relationship

Partners must act like agents – focus on selling – not support

“The telecom provider will become the primary SMB brand for basic IT

services.”

Craig Schlagbaum, VP Channels Comcast, April 2015

Telecom view


Business Applications

“Utilities”

Infrastructure

Communications

Conduit


Hierarchy of telecom and IT products%

Usi

ng

100%

0%

Connectivity

Hosting

Voice / VOIP

UTILITY

E-Mail

Security

Storage

CORE

Office Suite

Graphics

Project Mgmt.

PRODUCTIVITY

ERP /CRM

Accounting / HR

E-Commerce..

COMMERCE

INDUSTRY

Real Estate

Insurance..

BusinessImpact

HorizontalGeneric Customized

Telecom


Technology decisions are shifting from IT to business leaders

Ecosystems around industries, platforms, functionality result in massive integration

Globalization and intense competition drives rapid innovation

Partners help extend solutions by industry, geography, functionality and implementation/support

“Software is eating the world.”

Mark Andressen Founder, Netscape

IT view


TelecomWorld View

Telecom will ‘own’ the customer relationship

Telecom will be primary brand –especially SMB

Partner/agent main function is selling - not delivery or support

Business leaders will drive core IT decisions

Business applications will be primary brand

Partners are critical to extend capabilities and complete solutions

IT World View Agreement Areas

Despite differences, there is some agreement

Telecom will extend their product set to include storage, security, backup, hosting and other “utility” services

Telecom will not provide ‘long-tail’ specialized business applications

Partners must adapt to subscription economy


Wholesale drives > 32% of telecom revenue/ indirect channel ~10 – 15%

2014 US Telecom business services grew by over 10% to over $200B

10% greater than total software / 2x computer & peripheral

Growth will slow down to ~8% for software/ ~5% for telecom

Telecom market size & growth

Why?Higher growth rates for MSOs (Comcast), IT convergence products.

Indirect channel is forecast to drive 70% of growth during next

5 years.


Shifting market share predictions

Total MSOs (Comcast, TWC..) increases from ~14% to 23.5% in 5 years

At the expense of traditional ILEC (AT&T, Verizon)

7%

5% 2%

7%2%

11%

30%

36%

2014

Comcast

TWC

Charter

Windstream

XO

Century Link

Verizon

AT&T

12%

8%

3%

8%

2%11%

24%

32%

2019


LOB (not IT) leaders are the primary decision-maker

New customer acquisition is becoming harder and more expensive

Partner categories, merging, rapid commoditization, massive integration

Move to ‘data-driven’ decisions to close the loop on program ROI

A perfect storm is driving change

Shift to cloud deployment and subscription payments

Vendors losing control of sales cycle; buyers in the drivers’ seat

Generational shift in technology adoption, demographics

Powerful new analytics / Big Data tools and processes

INDUSTRY FORCES IMPACT


Gartner and Forrester project 20% - 40%

decline in IT partners and telecom agents

Key differentiator for success growing cloud partners is ability to

understand their business model

Channel ability to sell value to business leaders – rated #1

target for improvement for both

IT vendors and partners

43% of prospects have made their

own decision before contacting a partner

and 90% of customers initiate

first step to purchase

Complex and cumbersome

programs are rated as the # 1 challenge for

both vendors and partners

Key indicators (from 2015 Vistex Survey and Benchmark Study)


Competitors will develop high-potential partners

Will not harness the power of influencers

ROI will not improve

Harder to do business with, higher ops cost

The pain of doing nothing finally exceeds the

pain of change

Prioritize partners based on sales/revenue

Incentives, margin based on transaction

Opinion-driven incentive strategy / tactics

Reliance on manual processes

“Legacy” Channel Strategy Consequences


Leverage telecom agent / master agent channel

Speak their language

Subscription billing

Align with ‘core’ offerings

Compensate to “retire quota”

How to simplify, align, incent

4KAgents

in North America*

* Comcast, Intelysis


What keeps telecom and IT execs up at night?

Price pressure, commoditization

Unpredictable technology changes

Agent ability to sell complex products

High Customer churn rate

Telecom Pain IT PAIN

Shifting to cloud/subscription

Channel ability to focus on new customer sales

Ability to scale and globalize

Profitably acquiring SMB customers

* Walker Study

>20% Churn Rate / YR


28MSMBs in the US*

Telecom brings to the table:

Promotion of brand (not just telecom)

Purchase transaction, invoicing, billing

Provide rich customer data (such as usage, industry, size, contacts et

Access to SMB sales channel

A Quid-Pro-Quo ‘Deal’?

‘Mission-critical’ business products

Access to business decision-makers

Channel capable of selling, implementing, customizing

Integration with telecom products

IT brings to the table:

90%of total

business in the US*

* Forbes

543KNew

businesses start each month*



Usi

ng

100%

0%

Connectivity

Hosting

Voice / VOIP

UTILITY

E-Mail

Security

Storage

CORE

Office Suite

Graphics

Project Mgmt.

PRODUCTIVITY

ERP /CRM

Accounting / HR

E-Commerce..

COMMERCE

INDUSTRY

Real Estate

Insurance..

BusinessImpact

HorizontalGeneric Customized

Telecom Zone IT Zone



Usi

ng

100%

0%

Connectivity

Hosting

Voice / VOIP

UTILITY

E-Mail

Security

Storage

CORE

Office Suite

Graphics

Project Mgmt.

PRODUCTIVITY

ERP /CRM

Accounting / HR

E-Commerce..

COMMERCE

INDUSTRY

Real Estate

Insurance..

‘Stickyness’

Not too painful Like pulling teeth

Telecom Zone IT Zone


Communications – current (awkward) state

CRMContext = Customer

ERP / ACCT.Context = Transaction

COLLABORATIONContext = Content

BPMContext = Process

E-COMMERCEContext = Product

PERSONAL Context = Contact


Communications – future (better) state

CRMContext = Customer

ERP / ACCT.Context = Transaction

COLLABORATIONContext = Content

BPMContext = Process

E-COMMERCEContext = Product

PERSONAL Context = Contact

COMMUNICATIONS (In Context) Voice | Web Mtg. | IM | E-Mail | SMS | Mobile


Win-Win-Win-Win

of Integrated communications

For Telecom:Entangles commodity products with sticky core business solutions to reduce churn

For IT:Buys profitable, practical access to massive SMB customer segment

For Partners and Agents:It provides additional product and service opportunities to ease transition to subscription model

For Customers:It solves a big problem by providing communication in context


In summary:

Two very different worlds – Telecom and IT are unquestionably colliding.

1A perfect storm driving fundamental change - technology and business models in transition.

2

The resulting turmoil is creating compelling opportunities for all

involved.

3Telecom vendors must integrate and entwine products with IT to resist commoditization.

4

IT partners and telecom agents can’t afford not to evolve to broader services and product offerings.

6IT vendors can reach new

channels and provide more complete solutions.

5

If everything was so simple….


Who is Vistex?

Vistex helps companies manage the full life cycle of their Go-to-Market programs through strategy,

software, implementation, execution and analytics.


Copyright: Vistex®, Go-to-Market Suite®, and other Vistex, Inc. graphics, logos, and service names

are trademarks, registered trademarks or trade dress of Vistex, Inc. in the United States and/or othercountries. No part of this publication may be reproduced or transmitted in any form or for anypurpose without the expressed written permission of Vistex, Inc. The information contained hereinmay be changed without prior notice. © Copyright 2015 Vistex, Inc. All rights reserved.

Chad HokeIndustry Principle

[email protected]


Appendix (Misc. Slides – Ignore for now)


Win-win scenarios for IT and Telecom

Reach new customers cost-effectively through telecom agents and IT partners

Help MSPs provide complete telecom-IT solutions

Build alliances between Telecom and IT in 2 ways:

1. Integrate with telecom communications

2. Leverage telecom’s direct conduit/channel to reach SMBs

Placeholder quote.


Margins decline as products commoditize

Vendors encroaching on services, support

Global competitors gaining cost advantage

Why change is finally happening for partners

Focus on reselling branded products

Over-reliance on installed base, services

Majority of partners have regional focus

“Legacy” Channel Strategy Consequences


## of SMB Customers

Telecom brings to the table:

SMB billing relationships

Millions of miles of conduit

‘Core’ communication solutions

Exceptional ability to deliver on SLAs

Is there a possible Quid-Pro-Quo deal?

IT brings to the table:

High impact software products


Rapid innovation, development

Channel capable of implementation, support, integration, customization


Next Steps

Strategic Services Customer Quote TBD

Tie in – this is our view of the world and why – More info on Vistex knowledge and experience, current engagements, how we help.

Vistex has had many engagements to help companies

Content we are sharing is grounded in telecom engagements exploring these same topics to gauge market share opportunities. Coming to us because of our expertise and understanding of IT channel.


The ‘Deal’

Access to SMB sales channel

Promotion of brand (not just telecom)

Purchase transaction, invoicing, billing

Access to customer data (such as usage, industry, size, contacts etc.)

Telecom Provides IT Provides

‘Mission-critical’ business products


Channel capable of selling, implementing, customizing

Integration with core telecom


Vistex

Pricing Price Management Bids and Quotes Deals & Offers

Contracts Contract Management

Trade & Channel Billbacks Chargebacks Co-op & MDF Channel Inventory Tracking

Performance Management Loyalty & Rewards Performance Incentives Patronage

Rebates Sales Rebates Purchasing Rebates

Payment channelPay Cash Application

Benefits channelMarketplace partnerExperience

Rights & Royalties Counterpoint Suite

Increase program performance and lower system management costs with industry-optimized solutions that manage all your Go-to-Market programs


Telecom channel advantages

1. Agents who are already focused on closing new customers

2. Telecom providers highly motivated to differentiate their offerings

3. Existing billing relationship with millions of SMBs

4. Potential for integrating IT-telecom products to optimize performance

5. Don’t need to ‘adapt’ to subscription business model

6. Channels and go-to-market process are far from optimized (lots of room for improvement

“Placeholder Quote..” Curt


Telecom channel roadblocks

1. Demographics – telecom agent channel is stagnant, safe,

2. Lack of IT technical expertise – both sales and support

3. Difficult to ‘translate’ IT messaging to connect with telecom agents

4. IT market is bigger, competition more cutthroat, no geographic boundaries

5. Fundamentally different customer-partner relationship. Telecom partner wins new business and moves on. IT partner must build a working relationship

“Telecom agents have built a comfortable book of business. It’s downright difficult to light a fire under them to change” Need to attribute this quote


How IT vendors can leverage telecom channel

1. Forge alliances and integrate communication functionality

2. Leverage telecom high volume channels to reach SMBs cost-effectively

3. Provide a path for traditional telecom agents to shift to IT/Telecom hybrid products

4. Target high potential telecom agents and master agents that are gaining momentum as hybrid MSPs

“Placeholder Quote..” Curt


Why is it taking so long for channels to converge?

Fundamentally different business models

Short-sighted focus on cross-sell / up-sell

Product lines remained separate but not equal

Internal priorities were not aligned

Underestimated training, time and resources

Didn’t want to risk ‘golden goose’ IT accounts

Transition to subscription model is brutal

“If an IT partner is not willing to do three specific things, I won’t even waste my time talking to them” Curt Allen, President, X4 Solutions (Telecom Master Agent), January 2015

1. Telecom products must retire sales quota

2. Telecom products must be a ‘core’ offering

3. Sales reps must be paid on recurring revenue


Inflection point for IT and Telecom Vendors

“Legacy” Channel Strategy: Prioritize partners based on sales/revenue

‘Command and control’ approach to programs

Organize around traditional categories (VAR..)

Incentives, margin based on booking value

Extensive technical certifications, authorizations

Opinion-driven incentive choices/offers

Convoluted approval and payment process


“The pain of doing nothing finally exceeds the pain of change” Need to attribute this quote

Consequence: Fail to develop new, high-potential partners

Participation, engagement will continue to decline

Programs won’t fit/resonate with changing partners

Products will be isolated from core offerings

Partner focus will not shift to acquiring new customers

Program ROI will lag key competitors

Pay more in incentives for same mindshare/impact

Operations overhead will be significantly more than competitors. Organizational agility will be worse. Ease of doing business will suffer greatly


Why change is finally happening

“Legacy” Channel Strategy: Prioritize partners based on sales/revenue

‘Command and control’ approach to programs

Organize around traditional categories (VAR..)

Incentives, margin based on booking value

Extensive technical certifications, authorizations

Opinion-driven incentive choices/offers

Convoluted approval and payment process


“The pain of doing nothing finally exceeds the pain of change” Need to attribute this quote

Consequence: Fail to develop new, high-potential partners

Participation, engagement will continue to decline

Programs won’t fit/resonate with changing partners

Products will be isolated from core offerings

Partner focus will not shift to acquiring new customers

Program ROI will lag key competitors

Pay more in incentives for same mindshare/impact

Operations overhead will be significantly more than competitors. Organizational agility will be worse. Ease of doing business will suffer greatly


The cloud is changing EVERYTHING

Technology Forces

Cloud Platforms

Application Integration

Big Data / Analytics

Business Forces

Globalization

Commoditization

Demographics

Takeaway: Vistex GTM solutions improve efficiency for both vendors and partners, which directly impacts margins and speed to market.

Challenges

Business Models

Channels

Infrastructure

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Telecom-IT Convergence Webinar v10

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