Reselling VoIP Products and Services

By: Richard "Zippy" Grigonis

The financial and operational aspects of today’s communications-related distributors, resellers, Value Added Resellers (VARs), Value Added Distributors (VADs) and integrators can be competitive, to put it mildly. The introduction of IP Communications has transformed the channel from relying on traditional interconnects to a frenetic collection of startup VARs, CLECs, Linux networking resellers, interconnects and more. Start-up companies look upon distributors as saviors who will help promote and sell their product, perhaps even improve it as a VAR or integrator. VADs are often looked upon to provide some education and additional services to the VARs, though a remarkable number of them seem clueless as to the new convergence marketplace. The rise of unified communications (UC) for example, is a complex challenge to any middleman who aspires to become an all-knowing amalgam of solution provider, consultant and educator.

Apptix (News - Alert) provides on-demand, managed messaging and collaboration solutions for Small and Medium-Sized Businesses (SMBs). Their offerings, including Hosted Exchange, Hosted VoIP, Hosted Windows SharePoint Services, Mobile Messaging, and Security and Data Protection, provide SMBs with an affordable, reliable and secure alternative to purchasing and managing software applications in-house. Apptix offers On-Demand services through leading web properties, including ASP-One, MailStreet, Mi8 and SharePointSite.com. Apptix channel partners, including IBM (News - Alert), Bell Canada, Fujitsu, and Savvis have selected the Apptix Service Management Platform, which supports a full range of private-label solutions and is backed by a multi-tiered customer service organization.

Targeting SMBs

Leigh Henry, VoIP Product Director for Apptix, says, “Our focus since our beginning has been to service SMB customers with business communications applications, along the lines of Microsoft (News - Alert) Exchange and related services, as well as providing collaboration services such as SharePoint. We don’t resell old landline stuff. Our customers are very familiar with the concept of allowing and outside party handle the ‘heavy lifting’ of the things that they can’t or don’t want to deal with in-house.”

Apptix is Microsoft Gold Certified for their Hosted Exchange service, a hosted, or outsourced, messaging service using Microsoft Exchange 2000 Server as the core engine. Indeed, Apptix’s Microsoft Gold Certification is oriented primarily around providing private label Exchange solutions for service providers, who in turn offer hosted Exchange to their enterprise clients. Through its solution provider channel, Apptix serves customers throughout the U.S. and Europe, offering them a large application portfolio. Through the Apptix private-label offering, providers that wish to provide branded applications services to their own customer base can profitably deliver fully-branded, value-added application and web services to their customers in 30-60 days. Apptix’s private label solution provides a complete end-to-end application services delivery solution – including the Apptix TECOS technology platform, consulting, design, development, managed services and revenue assurance marketing programs.

Service providers can purchase the entire solution or select components on an ‘a-la-carte basis, quickly deploying incremental, value-added services on top of their core network services. This enables them to leverage their under-utilized infrastructure investment.

“When you’re reselling services,” says Henry, “your key to differentiation is really going to be about, obviously, service uptime. One you’ve got a good solid service to sell, it all becomes a matter about the service and the support that goes around it. I’ve found that, quite honestly, that is truly a major factor and trend. Our customers are scared of two things: First, they’re scared of a lack of quality. Second, they’re scared that if they take a relatively large jump in adopting technology, will somebody be there to hold their hand? If they have a problem or a question they want an answer within the hour, or sooner. So we find that we’re getting tons of referrals from our existing customers for brand-new business, just because we offer superlative quality and support.”

Cbeyond (News - Alert) is a voice and broadband Internet provider that specializes in serving small businesses. They offer customized packages and dynamic customer support.

Brooks Robinson, Cbeyond’s CMO, says, “VoIP resale and VoIP services covers a very wide area of things in the industry. In the case of the Cbeyond model, we are a VoIP managed services provider. How we differ from a VoIP reseller is that we provide an integrated access product using a private managed IP network. So whereas a traditional VoIP reseller would resell minutes over the public Internet, we don’t do that; instead, we have our own softswitches using our Cisco (News - Alert)-powered network, and we deliver VoIP over our private, managed, T1 network. That enables us to ensure that we can provide reliable network services as well as Quality of Service [QoS] across that network. We can make sure that both the Internet and the voice are managed by Cbeyond. Voice packets are prioritized over data.”

“So we have the really strong foundation for an IP network, and we put voice and data over that network,” says Robinson, “and we also layer-on up to 20 applications such as hosted exchange, fax-to-email, web hosting and mobile services too. We’re also a Mobile Virtual Network Operator [MVNO], able to sell Cbeyond-branded cell phones and Blackberries. We offer a very comprehensive package and bundle for small businesses, which we service exclusively. We wake up every morning asking ourselves, ‘How can we help small businesses operate more efficiently?’. We define the small business market as between 5 to 249 employees, but the typical small business with which we deal has about 12 employees.”

“Our main distribution channels,” says Robinson, “are such that 75 percent of our customers come from our direct sales channel. Those are direct sales reps who meet face-to-face with small business decision makers. The other 25 percent are sold through channel partners. A typical channel partner would be a value-added reseller, a telecom consultant, or a system integrator. They represent Cbeyond to the small business decision-maker and they sell Cbeyond services. This goes on while they’re typically selling a phone system or a LAN. This is where it gets really interesting, especially with the adoption of IP PBXs. So whereas a local VAR selling a customer one of the new Cisco UC500 switches, for instance, they will also sell them a new IP PBX (News - Alert) and phones and then turn around and offer them the telecom managed services into the network core. And that’s where Cbeyond really has worked with these channel partners to make sure there’s a seamless interface in the network, which is called SIPconnect, a standards-based approach to direct IP peering between SIP-enabled IP PBXs and VoIP service provider networks. SIPconnect allows our service to connect directly to one of these IP PBXs via SIP, the Session Initiation Protocol (News - Alert). We’ve been working with SIPconnect since late 2004. Our CTO, Chris Gatch, has helped to lead that initiative within the SIP Forum. We brought our initial customers onto that service in the 2005-2006 timeframe, and we’ve been ramping that up ever since.”

“In addition to those next-generation IP PBXs, we also connect to traditional phone systems, such as key systems or digital PBXs, via traditional analog or digital technology,” says Robinson. “But the SIPconnect service is a really innovative, new interface that was born out of our relationship with our channel partners. Back in 2004 we had a lot of discussions about IP Centrex versus the IP PBX. Our channel partners obviously wanted to sell phone systems, so it was beneficial for both of us to develop a SIP trunking product, which we did.”

“We take the 20 different applications – the core being local, long distance and broadband Internet – and ensure that they are of high quality, and that there’s a strong customer experience by using a private, managed IP network, rather than relying on the public Internet for carrying voice calls.”

Communicado (News - Alert) (formerly known as SyncVoice) offers software products that help telecom managers and IT support personnel monitor, control and report on their communications environment and its business implications. Their VXTracker software helps minimize communications expenses and risks, optimize the equipment and services that carry the calls, and analyze the way employees are communicating and collaborating. Their new Communicado Streamline management as a service (MaaS) is said to be the first franchised service management offering that removes availability and continuity risks for businesses while enabling the vast channel of integrators with the platform and services ecosystem they need to play a value-creating managed service role.

Kerry Shih, Communicado’s Co-founder and Chief Strategist, says, “We’ve been marketing for about six years, and about 90 percent of our business has been channel-driven. For resellers, IP telephony is now broadening out in their mindset to include unified communications. Customers are talking more about collaborative applications. They can’t just use Microsoft stuff, they need Avaya (News - Alert) or Cisco gear too. So resellers are very excited about the demand for IP telephony ‘grown into’ UC. However, one of the top strategic problems for them is how to move into services. Whenever they look at a new product they ask themselves whether they can host it and charge $20 a month per user, or whatever. And yet much of UC and all of its corresponding gear will really be running on the customer premise side for a long time.”

“These scenarios tend to be binary,” says Shih, “You either choose hosted voice or premise-based gear, and then you have to manage it yourself. Communicado, however, has a ‘management as a service’ platform that functionally wraps up all of that equipment and enables these VARs to deliver managed services in conjunction with the sale of this equipment, if it’s behind the firewall, or in conjunction with the hosted service, if it’s in their NOC (News - Alert) [Network Operations Center]. The trick is really to get a ‘punchy’ value proposition to wrap around the word ‘management’, and that’s inclusive of operations and performance management and also continuity. In other words, the VAR says, ‘Here’s your equipment and your IT staff may be pretty loaded down, so I can augment your staff by delivering to you this platform, first and foremost, and then deliver to you the 24x7 management, unlimited technical support and scalability reviews, and put you on a continuity path if any disaster recovery is necessary.’ The software to accomplish this in a remote fashion is what we do and we partner with these VARs to put them in market to do so. So the partner doesn’t buy our stuff, they bring the subscription to the customer. It makes them look good and it puts some residual money in their pocket. For many of these guys, it’s a really good strategic answer for how to move away from just selling ‘boxes’.”

“These VARs have rightfully struggled as to determine what services have punch and can wrap around the items they sell today,” says Shih. “And I think it’s a leap of faith for them to build out a NOC and a hosted voice switch and then try to hit the ‘S’ of the SMBs. That’s too aggressive an approach for most of these guys. They’re looking for incremental, high-margin revenue that encompasses what they sell. Our thesis is that the end customer is very likely to say, ‘Don’t give this to me and then tell me that I have to necessarily manage and operate it.’.”

Some companies are specialty distributors, such as cyLogistics (News - Alert), which provides resellers and VARs with enterprise-class VoIP telephony products, integrated solutions, and world-class open source operating systems and applications. Situated in Silicon Valley, cyLogistics offers products having the latest technology at wholesale prices. (Indeed, because cyLogistics has been closely associated with the open enterprise market for years, cyLogistics has been a leading supplier in the Silicon Valley.)

CyLogistics also offers complete configuration and fulfillment services for ITSPs, VARs integrating enterprise clients, and resellers wanting product flexibility without having to own and manage a large inventory. cyLogistics has the good fortune of being situated close to the three major shippers’ airport hubs, and since they’re on the west coast, businesses in the Midwest and on the east coast have a few extra hours in the day to place last-minute, emergency orders.

Specialization in this industry generally involves being able to IP-enable an existing phone system or planning a new VoIP PBX. Another famous name in this category is NETXUSA (News - Alert), Inc. a leading distributor of VoIP products and services. NETXUSA has a distribution channel of independent resellers throughout the U.S. and foreign countries that provide the local end-user installation and support services. The company has two distribution and sales centers situated in the U.S. and east and west coast facilities provide rapid regional response and economical product delivery to the dealer channel. Their in-house certified engineers and customer service staff are available to service the dealer after the sale.

There is no limit to what a niche can be in the modern telecom ecosystem. Take for example AMDEV Communications, originally a well-known supplier of new and reconditioned voicemail systems and which expanded its operations to include voice processing and computer telephony systems, components, software and support services. After Centigram’s CPE division became Baypoint Innovations which in turn was acquired by Mitel (News - Alert), AMDEV continued for many years to provide Centigram customers with products and services for newer Series 6 systems, along with reconditioned Series 5 systems.

Other forms of IP specialization can be geographical, such as CommLogik Corporation, a value-added computer telephony distributor for Latin America with local offices in Brazil, Argentina and Mexico, also attending to Venezuela, Colombia, Ecuador, Chile, Peru, Central America and the Caribbean. CommLogik was formed by the triumvirate of Affinity LAC Group (covering Mexico, Central America, the Caribbean and the non-Mercosur markets), Crandal Telecom (covering Brazil) and Convergencia Telecomunicaciones SA (Argentina and neighboring countries).

CommLogik’s services include technical support, training, technical seminars, warranty services, RMA, and same-day shipping on most products. They also provide consulting services for projects and implementations, including projects involving the SS7 protocol, digital telephony, contact and call centers, PC based PBX systems, corporate telephony communications solutions and VoIP. They even supply fault-tolerant industrial computers and turnkey telephony servers and systems, including call center hardware and software, digital PBXs, network-based IP PBXs, telco-grade VoIP, tape backup servers and others.

As systems become more complex, the consulting and professional services aspect of the industry has been gaining momentum. QualMax, for example, is global, multi-vendor, and product neutral, functioning as a three-tiered, integrated practice that includes QualMax Professional Services. They deploy best-of-breed solutions specialized in VoIP, virtual private networks, turnkey network design, wireless connectivity and web. Their Qualmax Professional services leverages strategic relationships with Cisco, Avaya, Nortel, Quintum (News - Alert), Excel, and other leading vendors to deploy and configure world-class solutions.

And of course, as even smaller resellers aspire to be a “one-stop shop” for both products and support, they have had to bolster their capabilities though such activities as outsourcing. ViTeleTechZone, a provider of VoIP solutions along with services, support, testing, training and knowledge engineering, had the idea to set up “zones” where the need for their services arise. Their model involves creating a “zone” where SMBs can come in to hire expertise that’s outsourced and get their jobs done in distant places such as India, China (Dalian) or any other cost-advantageous location. It’s called a ‘shared resource deployment formula’.

We tend to think in terms of the corporate world when talking about resellers and integrators, but the rise of IPTV (News - Alert) and new forms of entertainment also provide a great deal of business to resellers. For example, TVC Canada, a major integrator/VAR of premium quality, brand label products and services for the cable, wireless, broadband and broadcast industries, specializes in providing advanced communications products, access to industry leading manufacturers, and logistical services to integrators, contractors and service providers. (For example, they sell to the Canadian market the complete line of products and accessories from AVP Manufacturing & Supply Inc., a huge vendor of commercial broadcast, telecom, and satellite equipment, and involved in the design and manufacturing of audio, video, and digital jackfields, connectors, wire and cable assemblies. AVP sells through world-wide distribution, and also partners directly with clients, designing and manufacturing custom jackfield and panel solutions for its broadcast, telecom, and satellite customers and OEM relationships.)

Bigger is Better?

Of course, don’t count out the bigger distributors. Take SYNNEX (News - Alert) Corporation, which has been around since 1980. SYNNEX defines itself as a leading business process services company, servicing resellers and OEMs worldwide. Yours Truly first encountered them in the 1990s when they were simply known as a huge Taiwan-based conglomerate whose services spanned the entire supply chain from manufacturing to distribution and electronic commerce, eliminating the need for its customers to use multiple third party sources. (Distributors live on small margins. Since the Taiwanese have always been known as masters of working with small margins, one expects they would excel in the distribution field, giving American distributors a run for their money – which they did.)

Today SYNNEX is still on the march, providing outsourcing services in IT distribution, contract assembly, logistics management and business process outsourcing. They distribute products from more than 100 major IT OEM suppliers to more than 15,000 resellers throughout the U.S., Canada and Mexico. They particularly focus on IT systems, peripherals, system components, software and networking products. Some of their key suppliers include HP, IBM, Intel, Seagate, Microsoft, Lenovo (News - Alert) and other huge manufacturers. In 2006, their consolidated worldwide revenue was US$6.34 billion.

Although the mention of “reseller” conjures up hardware and software, SYNNEX, for example, has a distribution agreement with 8x8 (News - Alert) to offer their Packet8 Virtual Office Hosted iPBX phone services. In an increasingly competitive environment, distributors and VARs are becoming more flexible than ever.

Another venerable distributor that has been around for over 30 years is Target Distributing (News - Alert), of Germantown, Maryland. They handle just about any kind of telecom product you can think of (just take a look at their 160-page catalog) as well as related items such as blank audio, video and data media, to A/V hardware and office automation equipment. Their telecom division carries four different key system lines – Panasonic, Vodavi, NEC, and Comdial. It’s also one of the largest Plantronics (News - Alert) headset and Polycom audio/video conferencing distributors in the U.S.

But perhaps the great-granddaddy of this business (founded in 1974), is Tech Data (News - Alert) Corporation, formed long before the days of IP Communications to help resellers, particularly computer telephony and non-traditional resellers collectively referred to as “voice resellers”, and who support both hardware and software voice-related products. Today a grand-scale distributor of IT products, with more than 90,000 customers in over 100 countries, Tech Data’s business model enables technology solution providers, manufacturers and publishers to cost-effectively sell to and support end users ranging SMBs to large enterprises. Ranked 109th on the FORTUNE 500, Tech Data generated US$23.4 billion in sales for its fiscal year ended January 31, 2008.

Tech Data was always interesting in that it would regularly devise innovative distribution ideas over the years. For example, it was one of the first companies to make the Extensible Markup Language (XML) technology available to customers wanting to leverage the distributor’s e-business solutions. Tech Data had instantly recognized that XML could greatly simplify access to real-time supply-chain data, including price and inventory information, order submission capability, and shipment tracking status.

Tech Data’s principal challenger is the equally august Ingram Micro (News - Alert), founded in 1979, which lays claim to being the world’s largest technology distributor and a leading technology sales, marketing and logistics company. Ingram Micro prides itself on its ability to create sales and profitability opportunities for vendors and resellers through unique marketing programs, outsourced logistics services, technical support, financial services and product aggregation and distribution.

Ingram Micro’s offers an amazingly broad array of solutions and services to nearly 159,000 resellers by distributing and marketing their hundreds of thousands of IT products worldwide from nearly 1,300 suppliers. Through Ingram Micro Logistics, the company provides customizable services for order management and fulfillment, contract manufacturing, contract warehousing, product procurement, product pack out and cartonization, reverse logistics, transportation management, customer care, credit and collection management services, and other value chain services. Ingram Micro serves 150 countries and is said to be the only global IT distributor with operations in Asia.

Most giant distributor/resellers, such as ScanSource of Greenville, South Carolina, maintain encapsulated divisions devoted to convergence telecom. ScanSource’s specialized divisions are Catalyst Telecom (News - Alert) (which specializes in Avaya communications products) and ScanSource Communications, formed from two ScanSource sales units, T2 Supply and Paracon. The later encompasses T2 Supply’s videoconferencing and telephony products and Paracon’s communications products and services. As one entity, they function as a comprehensive VAD of total communications solutions, including video and audio conferencing products; telephony solutions, including VoIP; and computer telephony building blocks.

But whatever happens, distributors, as always, will not just survive, but endure, as they continue to evolve along with the underlying convergence technologies. IT

Richard Grigonis is Executive Editor of TMC (News - Alert)’s IP Communications Group.

Apptix (www.apptix.com)

AMDEV Communications Corp. (www.amdevcomm.com)

AVP Mfg. & Supply (www.jackfields.com)

Catalyst Telecom (www.catalysttelecom.com)

Cbeyond (www.cbeyond.com)

CommLogik Corporation (www.commlogik.com)

Communicado (www.communicado-inc.com)

cyLogistics (www.cyLogistics.com)

Ingram Micro (www.ingrammicro.com)

NETXUSA (www.netxusa.com)

Phybridge (www.phybridge.com)

QualMax (www.qualmax.com)

ScanSource Communications (www.scansourcecommunications.com)

SYNNEX (www.synnex.com)

Target Distributing (www.targetd.com)

Tech Data Corporation (www.techdata.com)

TVC Canada (www.tvccanada.com)

ViTeleTechZone (www.viteletechzone.com)

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