As World Wide Technology, one of the largest global systems integrators, breaks ground on its new agency practice, the company admits it’s late to the game.
The $13.4 billion company historically sold products through the traditional reseller model, which accounts for the bulk of its tech sales. But behind the scenes the company has tacked on a commission-based agency model for selling carrier services, cloud communications, data center colocation and AI. WWT joins a groundswell of VARs quietly partnering with tech services distributors to represent vendors as agents.
“In all candor, we are relatively new to the TSD/agent model in comparison to CDW and some of those other VARs,” Brandon Echele, WWT’s director of collaboration and productivity told Channel Dive.
Agency is markedly different from resale. Partners in the agency model are paid by vendor partners rather than customers. VARs have publicly frowned on the agency model because they prefer to invoice customers directly.
Yet VARs for decades have operated agency practices that fly under the radar of even their own peers. When Tim Hammer joined Technologent as head of service provider solutions five years ago, he collaborated with about 10% of sellers in the company. The proportion is now closer to 40%, and Hammer expects to get to 60% this year, as resale-based hardware reps increasingly collaborate with agency-based reps to drive multi-product deals.
“We are not mincing words here. This is the future,” said Hammer, who said his company has booked more than a million in vendor billings with multiple TSDs.
The motivations for adding an agency practice are myriad, and they vary significantly from VAR to VAR.
The most common reason given was the complexity of reselling telecommunications solutions. Many VARs have abstained from selling telco, but they face pressure from technology advisors and carriers that are bundling telco and IT together.
Telco is also seeing a resurgence in the AI era, as bandwidth prices rise to handle data-rich cloud workloads. However, a company can’t resell telco without being monitored and taxed by the Federal Communications Commission.
“If it wasn't a hassle to get FCC-regulated, we'd be out there trying to do this, but we have to be realistic,” Echele said.
WWT captures AI vendors
The agency model and the TSDs that support it have become WWT’s avenue to keep up with the proliferating vendor market — particularly in AI.
Channel partners have found customer experience and contact center as one of the most monetizable use cases for AI. But AI vendors are springing up at a rapid rate, and WWT can’t afford to craft reseller agreements with each of them. Developing and vetting a supplier contract is a legal expense, and it also costs money to train and certify engineers on a vendor product. When only one or two customers are asking for a product, the juice isn’t worth the squeeze, Echele said.
“If we had to go direct with every AI startup or new kid on the block that a customer found some interest in, we would never be able to onboard them,” he said.
WWT previously flipped agency deals to a referral partner, but the dynamic created complexity for its back office.
“You still have to go through some negotiation into whatever that agent transaction is going to be,” he said. “If we have a dozen of those relationships, then that's a dozen different processes potentially that internal finance has to figure out.”
High Point’s cloud-based reality
Terry LaPointe joined High Point Networks to help convert a large base of hardware clients to the cloud. He’s still working his way through the queue.
The broader shift in unified communications from on-premise to cloud-based solutions has eroded the market share of hardware providers such as Avaya and Mitel and the VARs that represent them. Cloud-based providers historically went to market through agents, despite more recently opening up resale tracks. However, the resale margins in cloud are often 20 points lower than in on-prem, with resellers still expected to dedicate resources to the deal.
It’s a financial conundrum that hasn’t worked out in favor of a resale model, High Point Networks Cloud UC/CX and Carrier Services Specialist Terry Lapointe said. In resale, LaPointe said he has to argue with the vendor’s reps for a better discount and then run through a gauntlet of approvals with his distributor and his own inside sales team.
“I absolutely hate it at this point,” LaPointe said. “We've already had so much interaction with this deal that our margins are shrinking by the minute.”
High Point does resale cloud-based UC through a white-label vendor, as well as reselling Mitel hardware. But if the company wants to position itself as a true consultant, it needs to offer a full portfolio of vendors. That’s not achievable without agency agreements, LaPointe said.
“Before I got here, they couldn't consult because they're either going to sell you Intermedia as a white label cloud solution, or they're going to sell you Mitel,” he said. “Anything else you want, they can't sell you. Is that truly being a consultant? No, that's me trying to sell you the product I have on the shelf.”
There’s an element of inter-team trust involved. High Point’s white label and hardware resellers need to send their deal to LaPointe when the client’s needs point to a UCaaS vendor, and he needs to do the same. VARs have often struggled to incentivize this collaboration between sellers.
“I have to be mature enough to say, 'Hey, we're consulting. I get paid enough that I don't need to scrape for every nickel, and I need to be part of the team.'”
Presidio feels the downstream impact of AI
Presidio, one of Intelisys’ largest partners, has used the agency model to navigate increasingly complex customer demands.
AI is only intensifying that, according to Presidio Partner Go to Market VP Raphael Meyerowitz. Clients are demanding a partner that isn’t tied to a particular sales model, but is rather concerned with guiding them from strategy all the way to ongoing operations.
"AI is placing new pressures on enterprise IT as businesses are already struggling to navigate increasing complex hybrid environments,” Meyerowitz told Channel Dive in an email. “This has caused a massive shift in the traditional reseller model in recent years, moving away from just product fulfillment and toward a solutions- and services-led approach with an emphasis on business outcomes.”
Technologent wants a unified approach
Different technology often requires a different sales model, and Hammer said those models are too often estranged from each other at partner organizations.
For example, Technologent resold data center hardware to a client and brokered the data center space. However, Technologent designed the hardware solution with 165 kilowatts of power in three racks — a power requirement required a particular type of data center facility.
“If the customer is doing these separately, and they buy the infrastructure from us, and they buy the colo from Equinix, that gear is going to show up to a facility that can't actually serve the power requirements of the infrastructure, and they would have had a huge ‘holy crap’ moment,” Hammer said.
Hammer believes partners need to break down the siloes that exist between the reseller reps, agency reps and managed service provider reps within a company.
“I've kind of landed on this is this idea that we are the control plane that helps to ingest all of the various outcomes that are desired, all the personalities, all the technologies, all the vendors and bring it all together in a way that gets the outcome without missing a bunch of steps along the way,” he said.
