The channel of today is unrecognisable from the first steps made by the independent entrepreneurs of yesteryear. Liberalisation of the UK communications market was a journey that began in the early 1980’s with very small steps in to an exciting unknown. Comms Business Editor Ian Hunter reports from ‘back in the day’.
You could pick from a range of times in the early 1980’s when the UK comms channel came in to being. There was no big bang and no-one fired a starting pistol. I know this because I was there and working as a sales manager for British Telecom in London. I’d come to the Comms market from the more ‘private’ data sector myself having two years previously been engaged in selling magnetic media – early storage discs and tapes.
It was a funny old time at British Telecom, only a few years prior they were called Post Office Telecommunications and their name was not shortened to BT until 1991.
Staff at BT at the time (there were 250,000 of us) were mostly ex-civil servants who were employed at a time when the Postmaster General had a seat in the Cabinet. It was happening a bit too fast for many; not only had the name changed but the market had begun a phased programme of liberalisation in 1981. In 1982, a licence was granted to Cable & Wireless to run a public telecommunications network through its subsidiary, Mercury Communications. And then the company was privatised in 1984.
Andrew Dickinson, former Managing Director of Griffin takes up the story.
“1984 was the year that I started my career in the telecommunications industry, selling analog voice multiplexors to the banking and foreign exchange sectors. Then during ten fantastic years with Mercury I witnessed the disruption caused by the first alternative switched network in May 1986, the introduction of ISDN, smart boxes, paging, Centrex, Mercury One2One, CPS and dial-up Internet access.
By the mid 1990s it became clear that rapid innovation caused by the rate of change in microchip processing power was outstripping the Telcos’ ability to productise. Simply, networks and phone systems (which by then were merely a bunch of computers themselves) were getting faster and smaller but with 2-3 year product development cycles Telcos could not address the needs of their customers quickly enough. Furthermore they were not able to move fast enough to take advantage of productivity innovations themselves (C&W staff were still using ICL terminals when I left to start my own ISP in 1996) and their high overheads meant they could not afford to address anything but the largest average order values.
This created a wonderful opportunity for the channel. Resellers and dealers flooded into the middle business market with hungry enthusiastic salespeople and innovative, cost efficient product offerings. Today, 80% of telephone systems and around 60% of connectivity is purchased from the channel.
For the savvy reseller it is relatively easy to build a recession-proof business in communications. They focus on establishing a bedrock of recurring revenue which helps to smooth out cyclical trends in capital expenditure. They are also very careful about choosing suppliers and partners. Most resellers are small businesses themselves and they cannot justify product managers, pre-sales engineers and marketeers. Most of their sales managers (if they have one) carry a personal target and have little time for sales training and coaching. The most successful suppliers to the channel recognise this and endeavour to fill gaps in their customers’ capabilities. They understand that they are not selling to the channel, rather that the channel is selling their products.
Interested parties have been evangelising convergence and the Cloud (are we all sick of this term yet?) for many years but the final element required to kick this curve off has only now started to emerge. Cheap, fast, reliable business grade connectivity is here in the form of Generic Ethernet Access (GEA). Otherwise known as FTTC tails plugged into Ethernet backhaul networks.
As usual BT are passing residential areas first but when GEA is in every exchange and cabinet most of the 400,000 SMEs in the UK will be using it. Before the end of the decade it will have replaced most broadband lines and the majority of the 9m ISDN channels in the UK business market will have migrated to Ethernet or 4G. Hosted voice will be first choice over PBXs and SIP will have replaced CPS. Desktop applications will be served from the cloud.
With every new innovation there are winners and losers. Those with legacy bases will be tempted to sit on them and preserve margins but historically this has always been a mistake. They become soft targets for new entrants and more enlightened competitors that have proactively renewed contracts and worked to preserve their margins by up-selling complimentary products.
Customer demand usually lags technical innovation so there really is no need to panic. You may want to ensure you are ready when the time comes and you have a plan not only to upgrade your customers but also to attack those complacent competitors that choose to sit on their hands.”
Tim Radford, currently Chairman of Timico, started working in the channel selling Mitel PBX systems for reseller / distributor CML. “Back then leasing systems was very big business – it’s where all the money was being made. In 1987 I started my own company, Project Telecom, selling Mitel SX200 PBX but we kept getting asked about mobile phones. So we started selling mobiles dealing with firms such as Martin Dawes and Millicom. Sales kept growing though to the mid 90’s when on 17th October 1995, a date forever fixed in my memory, Vodafone launched Lowcall to the market. This was revolutionary at the time; £15.00 a month subscription plus 50p a minute for the calls.”
Radford describes the market at that time as ‘going mad’.
“All the pent up demand for mobile phones came out – it was huge! The high cost of ownership had held the market back previously. We met up with Charles Dunstone (Chairman of the Carphone Warehouse) who told us he thought the consumer market would take off. Project Telecom at that time was turning over £30m but the launch of digital pre-pay caused us to expand rapidly. I needed a sales manager and having just bought a new car from Audi I decided to offer their salesman the role managing our new team of four sales people. We sold in to virtually every convenience store chain in the UK and thought we might turnover about £8.0m on mobile in the first year. We ended up doing £96m! and in the second year more than £200m. We had got to the market first.
At that time we were still operating from my father’s house. We didn’t have a warehouse so we put up a load of marquees in the garden. When the first articulated delivery lorries started arriving and asking where our fork lift truck was we replied, ‘Sorry we don’t have one – will a sit on lawnmower be OK?’ I ended up going down to the local auctions and buying a fork lift straight away. Year three we turned over £350m and floated the business in 2000. It was a huge and exciting ride and it taught me a lot. We sold the pre-pay business to John Cauldwell in 2002 and sold our corporate business to Vodafone for £160m in 2003.
We had seen the growth in the internet and formed Timico in 2004 operating once again back at my father’s house. We are now a £50m business with a big vision for the future.
Taking up the reigns is Chris Tombs, Chief Operating Officer at Timico Technology Group, who joined the industry in 1984 at the same time as Tim Radford (albeit in different companies)
“Between us, we cumulatively have 60 years’ experience of working in and with the channel. Of course, our foray into the world of telecoms coincided with the time of liberalisation, and BT being privatised – introducing competition to the market and offering up a world of opportunities for the channel.
While I cut my teeth at Vodafone, supporting Service Providers and Dealer Partners for what was then a B2B only service, Tim was simultaneously setting up his own mobile phone Sales and Service dealer business in the Midlands. In the mid Nineties, both of us became involved in the roll out of Vodafone Centres, across the country – which is how we met, and this programme played its part in transforming the mobile telecoms world as we knew it. The telecoms industry was booming and, in particular with the development of the market for the consumer user, opportunities for the channel meant that business progression was rife.”
The company that is now Oak was established in 1985 and changed its name in 1987.
Recalling the early mays in the liberalised market current joint CEO Phil Reynolds remembers at the time Tiger call logging.
“They had big boxes on the wall for call management of analogue lines. The company seemed to have all the big contracts. I came in to the business to produce a pc based solution – one of the first on the market.
The channel was in embryonic form and not fully established. Sales were a very vertical market based; we had a lot of success here especially with colleges. The market was still dominated by BT but the channel quickly developed although at that time you could not connect to the network without their approval – an unacceptable situation that existed for quite a few years. Growth was gradual as the market was only partially liberalised and still quite restricted. James Emm joined us in 1989.
One of the catalysts for our future success was when BT was forced to let go of lines and minutes.”
James Emm, “In 1991 The Oak sales force, myself and a couple of other guys, went round seeing resellers to see if they can sell some of our products. In 2014 myself and more sales guys go around resellers and see if they will sell our products…. It was more fun then, happy go lucky days, the economy was better and it was less politically correct. It’s still fun today but a bit more serious. We still see the same people too, Richard Dendle, Bahman Rahimi, and Dave Corgat as well as Richard Carter at Nimans.”
Steve North, currently Managing Director of reseller Stripe 21, started in telecommunications with BT in 1988.
“I had one of the first new-livery grey Austin Maestros and I was allowed to take it home! Those were the days… I left in 1992 and started my first company – nine years later I took it onto the NASDAQ! We remained a BT customer for ISDN services and they seemed quite happy to take our money.
When Mercury came into the UK market, PABX software was able to use CLI to hop the call onto Mercury at source in the subscriber. Long before the days of Openreach CPS, cheap calls were a great way to sell a new PABX! Money was being made mainly in the margin on hardware, installation, training and maintenance. You needed BS5750 or ISO9002 to maintain telephone systems, but once you were through the Quality Assurance you could really build a client base.
What am I doing today? From an engineering background, we managed to solve what we had identified as the biggest challenge to the deployment of IP telephony – Quality of Service over an affordable connection. We solved QoS over ADSL broadband in 2002, and we now provide white label connectivity and hosted PBX to many major players in the channel.”
Who did I admire? Tie Communications – long forgotten, but they made the BT Marquis and Marquis II. Tie also built the Onyx under its own brand, the first digital PABX with true DASSII, Euro ISDN Q931, and S0 interfaces which all worked interchangeably. In 1993? Brilliant!!”