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Is the Gap Widening Between Superagents and Mom-and-Pop Shops?

Jumping a Gap

While uncertainty swirls in the channel around macroeconomic trends and private equity investment, many technology advisor partners see plentiful growth ahead.

The technology advisor (agent) model for B2B technology purchasing continues to gain traction among end users. More and more end users are demanding as-a-service, opex technologies that advisors sell. More customers are also seeing the value and flexibility of the deep technology portfolio agents (and their tech services distributor partners) offer.

And vendors are replicating that adoption.

"When we started 14-and-a-half years ago, there were maybe 30 or 40 companies selling through the channel," C3 Technology Advisors founder and president Matthew Toth told Channel Futures. "Today, there are at least 500 through the various TSDs we work with today."

[Editor's Note: See and hear more than 150 channel visionaries and experts speaking at the Channel Partners Conference & Expo. The event also features more than 375 ICT companies in the massive expo hall. Register now for the world’s largest independent channel event, May 1-4, at the Venetian in Las Vegas.]

The channel does face its challenges, however, as the larger U.S. economy worsens. Although supply chain issues appear to have hit hardware-oriented resellers much harder, many agents report that recessionary pressures are influencing certain vendors to engage in unfriendly sales tactics. In addition, independently held agents are weighing their ability to compete against the so-called superagents. With those trends in mind, the latest Channel Futures quarterly agent survey saw a noticeable drop from in partners describing the industry's health as "excellent" or "good."

A panel of partners will discuss these topics at the upcoming Channel Partners Conference & Expo. The "State of the Agent Market" panel will feature Toth, IQ Wired CEO Darcee Nelan, Kairos Data Communications chief revenue officer and partner Lucas Salvage, and co-founder at RISE Technology Advisors, Eric Ludwig.

Channel Partners chatted with Nelan, Ludwig and Toth about what they're seeing in the industry and in their own businesses. They shared their thoughts on consolidation among agents, generational shifts and changing customer needs.

Channel Futures: Our most recent agent survey found that the majority of partners (72%) stayed put on hiring in Q4, while 25% increased their full-time staff count. Do you see a cultural gap widening between the agents who plan to stay with a proverbial “mom-and-pop” shop and those who are emphasizing scale? What about an achievement gap?

Matthew Toth, founder and president of C3 Technology Advisors: The everything gap will see hockey-stick widening between scalers and the mom-n-pop shops. In an industry that is more stagnant, the gap widening may not be significant or exist at all. In tech, gaps are widened because of the ever-changing nature. Even companies that are attempting to scale have a hard time keeping up. The small guys will have to stay very nichey and focus solely on relationships with end buyers to stay somewhat relevant.

Eric Ludwig, co-founder of RISE Technology Advisors: Yes, no doubt the firms that choose to be mom-and-pop will find they rely on their relationships with the vendor or TSD for the deeper product/technical deep dives. Clients are looking for partners to help them differentiate the market, and while the “mom-n-pop” agents have the telecom know-how, the market is rapidly expanding and evolving beyond the old telecom world. I think there is likely a happy medium, and while larger firms may have wider knowledge, the depth and insight specific to the client may not be there. I think there is a role for both smaller and larger firms to play in this market. The achievement gap is in the eye of the beholder. While some firms are looking at pure growth, others are more targeted in their strategies.

 Darcee Nelan, CEO of IQ WiredYes, the gap appears to be increasing between the “mom-n-pop” shops who are attempting to maintain the “status quo” and agents who are doubling down on their investments. The key in my mind is, are you growing your business by selling services that clients need to run their businesses most effectively in the long-term or are you trying to maintain your commissions in the short-term? If you’re not aligned with your clients’ goals and objectives, and you’re not responding to what’s in their best interests, then you likely not going to make the investments necessary to scale your business for long-term success. 

C3 Technology Advisors' Matthew Toth

Rise Technology Advisors' Eric Ludwig

CF: My understanding is that all of your firms remain independently held, being attractive targets for institutional investors. What has influenced you not to sell?

Ludwig: While we’re newer to the market vs. the other panelists, we too have already seen significant interest in investment. Institutional investment generally means rapid growth, which likely changes the current make-up of the client/partner relationship. We are looking at steady growth with investment to support our clients rather than just growth for the sake of it.

Nelan: I believe that our unique value proposition resonates with clients especially given the current environment of mergers and acquisitions in our industry. Clients are looking for a trusted advisor that is reliable and stable. We are able to fill that need by providing them with the support that they need to evaluate and implement complex technology solutions. Unless and until someone figures out how to eliminate the human element associated with implementing technology, I believe there will be a place for us.

Toth: We don’t want to take orders from anyone on how fast to grow, who to hire, what geos we open. While growth and profit are important (they are the engine that allows us to do this), it’s not everything. Quality of life, fulfillment and just plain ol' fun is just as important to us.

CF: Any insights on how your customer needs are changing? 

Nelan: Yes, customers’ needs are changing. They are increasingly concerned about how to protect their environments, how to do more with less resources, and how to effectively manage their vendors and service providers.  Their needs are more complex than they were in previous years, and therefore the conversations have expanded to include governance, risk, compliance, security, cloud, SD-WAN, rapid response solutions, IoT, collaboration and more. Customers are looking for a trusted advisor who can help them evaluate and implement technology solutions more effectively with fewer internal resources required, as most internal IT organizations are spread thin and finding it difficult to tackle all of the projects that they are responsible for prioritizing.

Ludwig: While the traditional challenges still exist, they’re creating opportunities for the collective agent community to expand share of wallet. We used to be mostly aligned with IT and as a result lived in the reactive world. Now that we’re expanding into the customer experience (CX) space, CMOs, sales leaders and client-facing organizations are more interested in hearing how we can help them better serve clients. We are moving into more lines of business as well given a focus on security and executive committee level positions in both the CX and security space.  

IQWired's Darcee Nelan

CF: Are [customers] asking for different things than they were asking for in previous years?

Toth: Security is everywhere. If you’re not addressing it with virtually every sale, you’re doing something wrong. 

Ludwig: Client needs remain the same: doing more with less, finding ways to optimize, and helping leverage investments across multiple workstreams vs. in silos.

CF: How does your relationships with the suppliers and TSDs compare to, say, four years ago? What’s going well, and where are the opportunities for growth?

Toth: If I answer this question, I’m going to get 20 emails from five levels of people at TSDs. All I’ll say is this – for scaling firms like ours, the value that TSDs bring need to be tailored to our specific needs. There isn’t a one-size-fits-all.

Nelan: Obviously there has been consolidation in the industry, including the service providers, which has forced sales agents out of their comfort zone in a quest to find new alternatives for their “go-to” providers. In addition, as a result of overhiring, many of the service providers have recently reduced their workforces or have seen higher than normal turnover due to the “great resignation,” which has created both opportunities and challenges for sales agents. These changes in the service provider workforce has resulted in fewer knowledgeable staff to support sales agents and has made it more difficult to ensure a cohesive customer experience. Most selling agents and TSD’s/TSB’s are spending more time now than ever, babysitting orders to ensure a good customer experience. Many of the providers have attempted to automate the transactional portions of their business, but that’s been more difficult that then they probably could have imagined.

Unfortunately, midsize and enterprise clients measure their future buying decisions based on previous experiences that they’ve had. Service providers who have struggled delivering basic services, are finding it difficult to crack the code in selling the higher margin services that they are attempting to pivot to. Providers who recognize the importance of relationships and delivering on their commitments regardless of the technology, will position themselves as the new “go-to” providers for selling agents.

Ludwig: TSDs are evolving into much larger organizations vs. four years ago. These firms are looking at where they can evolve their value-add vs. just providing contract protection. While some of the consolidation has come at a cost, added investment has allowed many of these firms to innovate and expand their partner rosters quicker. We do see investment in client-facing tools as a significant value-add, while others are stronger in the back office, eliminating cycles for our support team to resolve issues for both our clients as well as for us. I expect continued consolidation and potentially some blockbuster acquisitions as the traditional hardware/software distributors are eyeing our efforts and looking at ways to get closer to their end customers as well.

CF: All things considered, how are you feeling about the state of the channel? Optimistic? Wary?

Ludwig: Very optimistic. If you look at the largest areas of growth, they’re coming in with more specialized components of network, CX and security. Agents can focus on specific areas and/or more broadly and find lots of places to add value. The smaller growth firms need the channel as a way to gain access to client projects and opportunities.

Nelan: I am very optimistic about the state of the channel. There is a huge amount of opportunity, especially as clients continue to move towards outsourcing components of their services that used to be handled “in-house”.  With many of the service providers downsizing their workforces, they are rediscovering the benefits of having an alternative sales channel and are beginning to embrace the agent community again. While there is consolidation in the agent community, and clients are expanding their expectations, I believe that those who can bring additional value to their clients will thrive.

Toth: This is easy for me. First, when we started 14-and-a-half years ago, there were maybe 30 or 40 companies selling through the channel. There are at least 500 through the various TSDs we work with today. More get introduced every day. This means that more tech companies want what we can provide. Secondly, as long as technology continues to be difficult to research, analyze, procure, implement and manage, there will be space for consulting firms like ours that make these experiences better. 



Channel Partners Conference & Expo, M&A