Myths or Facts?

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Gamma CEO Bob Falconer addressed delegates at the Convergence Summit in Harrogate earlier this year and looked at the myths and facts circulating in the industry and concludes that the channel will continue to succeed.

Gamma CEO Bob Falconer has recently taken his company through a successful floatation but says there are misunderstandings of the industry in both the city and in our own channel.

For example:

The reseller industry is highly fragmented and ripe for consolidation.

Falconer says that every time consolidation occurs new companies emerge to provide a kaleidoscope of firms.

“We have 725 partners and recruit around 5-10 new partners a month, most of whom we have never heard of. It is a fact that the channel is fragmented and ripe for consolidation but it is a myth that the channel is by nature fragmented and continuously re-inventing itself.”

Only the ‘big’ players have the scale to survive.

Telecoms is a ‘scale’ game says Falconer pointing out that the forthcoming deal between BT and EE is an example of that.

“The high capital costs of infrastructure needs large volumes to support it. So does the world belong to BT, Vodafone, Virgin media and the like?

Well the reality is far more complex. Infrastructure investment has a coverage area, a footprint and volume is needed on that footprint and that volume usually comes from residential customers. This is where the city and Ofcom are both focussed.”

However, Falconer pointed out that ‘big’ can mean slow and defensive and that the consumers themselves are treated as a commodity.

“There is plenty of opportunity in niche infrastructures as firms like Virtual1, Gigaclear and Metronet have shown whilst being smaller can mean being faster with new services such as SIP, hosting and applications. Smaller firms can add value through professional services, installation, support and in vertical markets.

So is big beautiful? Yes it is in commodity infrastructure but in new growth services and specialised markets it is a myth.”

Telecoms is a utility – the only differentiator is price.

According to Falconer a commodity is a class of goods for which there is demand but no qualitative differentiation and the market has no regard as to who produced the product.

“Few actually care who installed the fibre, provided the radio mast, owns the copper or provides the voice or internet service but business communications is a fast changing, high-tech industry that can transform how businesses perform.

So is the telecoms industry a commoditised utility and the only differentiator is price? In my opinion it is for traditional infrastructure based services but for a fast changing software derived sources that statement is a myth.”

The internet is disintermediating the industry and squeezing out the channel

Disintermediation is essentially the act of cutting out the middleman and going directly to the vendor or in the case of the supplier – going directly to the end user customer.

“The common themes for disintermediating the industry include cloud based applications that need no customer premises equipment with no need for a complex set up and generally a one size/same for all product.

The fact is that the channel is being disintermediated in certain markets but it is a myth that large businesses only buy from other large businesses as we have many small to medium sized partners who have landed some large whoppers!”

Microsoft Lync will replace the PBX and all voice.

“This is a myth,” says Falconer. “Lync is a very effective collaboration tool within a business with customer and suppliers but has to fit into the existing customer infrastructure and the way the non-Lync world communicates!

The PBX still provides a range of essential business features (Hunt Groups, IVR etc.) that are not so easy to deploy in Lync.

So in my opinion this is not a question of Lync replacing the PBX, but Lync integrating with the PBX to provide a seamless overall business comms solution.”

So what is the overall message from Bob Falconer?

“At least as many channel players are setting up as being consolidated …but with new business models. The market is vibrant and there’s plenty of opportunity, but the future is not in mass connectivity, commodity services, selling minutes or mobiles, spot products and selling through dealers.

The opportunities are in consultative selling, solution sales, providing full communications services, managed services, local or vertical markets as well as disruptive markets such as hosting and SIP.

70% of firms plan to buy from one supplier – who can claim to do that? Resellers need to understand where they can add value with specific services and a service wrap as they can’t do it all. Resellers need to work with suppliers that are large infrastructure operators that are genuine distributors to the channel.”

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David Dungay

Editor - Comms Business Magazine