A One Handshake Future

Alastair Mills, CEO of Spiritel, is convinced that there is a long and prosperous future ahead for fixed line services.

“What is less clear cut is who will be selling those services. I think we can expect three particular phases of development in the market for switchless resellers over the coming years.”

1. Customers will increasingly look for a single provider to meet all their converged communications requirements.

This trend poses only a limited threat to traditional resellers today as most SMEs have not moved beyond a single point of purchase for their minutes, broadband and line rental services. However, as many businesses look for the ‘one handshake’ for all their communications requirements, those resellers who are limited to these products are increasingly restricted in their offering. Interestingly, it is the systems resellers who are particularly well placed to benefit in the short term because it is easier for PBX resellers to add the fixed line services (voice/data/line rental) than the other way round!

2. Communications sales will become increasingly complex.

As long as the hosted VoIP market continues its evolutionary rather than revolutionary growth pattern, then a ‘systems + networks services’ model will remain viable in the SME space. It is only a matter of time however, until we see the ‘systems + network services + data + mobility + desktop’ trend, that is already prevalent in the corporate space trickle down to SME customers. Smaller customers will rightly expect all the functionality and cost savings that are available to their larger competitors. This is the point when the switchless reseller, or even ‘switchless + systems’ reseller, will suddenly find themselves out of their depth and losing market share. I know of a number of switchless resellers who have historically sold into large corporates but have recently been squeezed out by integrated service providers.

3. We will see relentless M&A activity as resellers are forced to decide whether they want to be a breeding turkey or a basting turkey.

To be a breeder, companies will need to either possess or buy the expertise and product range required to offer the full converged product bundle. This will prompt ongoing cross-discipline acquisitions as systems/voice resellers buy IT/networking companies and vice versa. As noted above, it’s a tough move for the switchless reseller to move into systems, IT and networking. As such, I think most are eventually prime candidates for the baking tin. For many in the channel, this essential diversification will be beyond the financial reach and appetite of the resellers. Traditional resellers need to assess the optimal time for their exit, based on a range of factors including product set, customer size, customer churn, personal finances etc. Each vendor will make their own judgement on just when they will start to feel the pain of the land-grab from the integrated players and get out before that time.

Mills concludes, “Finally the good news. What is not for debate in my mind is the fact that customer ownership is still valuable and for the right acquirer, the opportunity still exists for a full value exit and for a few, the breeding season approaches …”

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