By Brian Ferguson, Digium
The business phone system industry is no stranger to massive technology changes. Consider the move from the traditional key or analog systems to the digital PBX; and then the introduction and adoption of Voice over IP (VoIP) occurred, the telephony world has continued to evolve and value added resellers (VARs) have had to adopt their business model and sales strategies to keep up. The most recent shift forcing telephony resellers to reevaluate their revenue models and business processes is Unified Communications as a Service (UCaaS). The rapid adoption of cloud-based solutions by small and mid-size businesses (SMBs) brings with it both benefits and challenges for telephony resellers. And it is forcing resellers to evaluate new products and cloud vendors a little differently. As a VAR, you not only need to better understand the opportunities that UCaaS offers your business, but also how to choose the most appropriate vendor solution to offer your SMB customers.
UCaaS, which is more commonly thought of as hosted UC, is allowing SMBs to take their phone needs to the cloud. By taking advantage of a hosted or cloud-based UC system, customers can reap certain advantages, such as: increased redundancy, simplified management, and simple deployments in distributed company layouts. SMBs can get started with a full-featured UC system with very little upfront capital expense and a manageable monthly bill.
As you would expect, the month-to-month commission model of UCaaS is very different from that of a premises-based UC implementation where profit comes from the upfront costs of the hardware, software, and support. The question becomes: Where does a cloud-based solution leave traditional telephony resellers who are used to a large cash inflow at the beginning of the project?
For starters, it requires a different way of thinking about where revenue is coming from - and when it’s coming. UCaaS projects can in fact be profitable at the beginning of a project due to the hardware costs for handsets and network equipment needed to make the company cloud-ready. Support contracts also still play a role and can contribute early on to the revenue stream. Admittedly, the biggest chunk of the VAR’s revenue will come from monthly commissions paid directly from the UCaaS vendor or from a Master Agent that works as a middleman between the vendor and the reseller – and those commissions can be quite lucrative. For example, over a typical three- to five-year period that the SMB customer uses the cloud-based service, the profit to the reseller will typically be greater from the monthly commissions than the upfront profit from a premises-based system of a similar size. With yearly contracts available, guaranteed monthly commissions are very valuable.
Given the differences in payment structures, resellers need to tweak the way they choose UCaaS vendors. There are nuances in the contractual relationships that are very different from those with traditional PBX vendors. Here are several factors that must be considered when selecting a cloud-based UC system:
- Commission Amount and Structure: Instead of being concerned about profit margins and distributors, now resellers set out to find high commission rates and reliable pay structures. Commission rates vary from vendor to vendor and are usually non-negotiable. Within the cloud-UCaaS space, resellers can earn commissions directly from the vendor, or from a Master Agent, whose role it is to act as a middleman and can offer special services as well.
- Technical Support: It’s common knowledge that support issues come up even with the most expensive products or solutions on the market in every industry. There is a reason that even a Mercedes dealership has a service department attached. In the world of UCaaS, it’s important to choose a vendor that has the support options that have service standards on par with that of the reseller. Since resellers typically want to be the first level of support for their customer, the reseller needs to ask how the vendor handles support issues in that situation. Is the process different when a reseller is involved in the support process? Is it faster? Or, does it become more complicated?
- Sales Support: Find a UCaaS vendor that provides quality sales support. That support not only includes marketing brochures, videos and other tools, but also one-on-one sales help from the vendor’s knowledgeable sales staff to help win the business.
- Quality Data Centers: Ask questions to find out the quality of the data center(s) that the vendor uses for their service. Make sure that they are taking the steps on their side to ensure as close to 100 percent up time as possible for their cloud-based solutions.
- Robust Features: As with any product, you need a solution with a feature set the is current and robust. Current UCaaS vendors typically include collaboration, UC features, call recording and call center features on top of standard call control.
- Simple Pricing Model: Beware of unruly add-ons. Dig deeper into the vendor’s pricing for the solution and understand how it works. Does it include unlimited minutes? Are the features your customer needs included in that low, advertised rate? Or, are add-ons required to get some of the most sought after UC features? The add-on approach is not uncommon in the UCaaS industry, but that means costs are going to stack up quickly for the customer. Some vendor solutions can end up being less competitive on price than they originally appeared.
At the end of the day, the UCaaS market is a fast-growing segment of the telephony industry and cannot be ignored by VARs, particularly those selling to SMBs. The resellers who embrace the technology, make good vendor decisions, and figure out a way to make the new revenue structure work for their organization will be many steps – and many dollars – ahead of the competition.
Brian Ferguson is a product marketing manager at Digium, which provides Asterisk® software, telephony hardware and Switchvox business phone systems that deliver enterprise-class Unified Communications.
