In advance of the 2022 Channel Futures MSP Summit, James Anderson published a preview of “The Future of the Agent Model,” panel in this Q&A below.
Agents Ponder the Future of the Technology Advisor Model.
Is brokering enough for partners? The debate rages on.
Written by James Anderson, August 29, 2022
The technology adviser partner, more traditionally known as the telecom agent, is going through an evolution of its model.
Agents have quietly been picking up momentum in the world of business technology procurement over the last decade. These firms historically built loyal client relationships by serving as their carrier-neutral intermediary to a variety of network and voice providers free of charge. Those efforts have helped them amass a wealth of residual commissions from vendors that continue to this day.
Channel Futures: What’s one way you think the agent model is changing or has already changed?
Darcee Nelan: The agent model has been changing for years. As the convergence of telecommunications and IT services has progressed in recent years, we no longer have clear swim lanes that guide our positions in the marketplace. Customers, now more than ever, are overwhelmed with the amount of choices they have available to them when considering technology changes. This situates us as agents in an enviable position to leverage our roles as trusted advisers in helping customers vet their service options.
Yet, unfortunately many agents, find the trusted adviser role challenging because they no longer feel like a subject matter expert when having business conversations with their clients. Numerous agents who have been in the business a long time lack confidence in their technical knowledge, which prevents them from proactively engaging their clients in strategic discussions that involve technology road mapping. This gives their competitors a foothold into their accounts and could ultimately shift the dynamic of who owns the customer relationship.
Randy Jeter: The growing need for professional services and managed services surrounding sourced services is vastly changing the agent model. Additionally, the ongoing need to manage the desired outcomes is a growing requirement, which comes with added costs. These changes are directly related to the way companies are purchasing IT now “as a service.” In the go-forward model, the IT buyer will see billing both from the IT sourcing company “agent” and from the providers they sourced the IT service or engagement through. The systems build, management and scalability of resources and systems needed to have a successful agent model are no longer what they once were.
Marko Spremo: Much like the VAR model changed from traditional VAR to systems integrator, the agent model is transitioning from brokering “simple” services such as network transport and voice to helping clients drive business outcomes by consulting around more complex services. The traditional services are becoming commoditized, and agents must become much more technically astute to help clients implement and utilize new technologies to drive their clients’ business objectives and outcomes. With the changes, the market opportunity for agents can move from focusing mostly on SMBs to expanding to enterprise/global targets.
CF: What’s one part of the legacy agent/broker model that you don’t think will exist in five years or be particularly common?
MS: As more technologies are required for a client to meet their business objectives, it may become more challenging to present value to a client by simply transacting/brokering a deal between a provider and client. This model will always exist in the marketplace, but it will become more difficult to succeed without providing value-added service and expertise.
DN: As service providers and marketplace providers create digital bundled and unbundled “self-service” procurement options, many clients will begin buying directly from these providers, forcing agents to find new ways to add value in order to remain relevant. For many agents who haven’t established their own value-added services, this new buying trend could be problematic and likely will further drive agent consolidation in our industry. In order for agents to differentiate themselves in the marketplace, they will need to have a unique value-added service offering that clients either can’t or don’t want to perform themselves.
In recent years, we have seen an increasing number of agents offer services outside their traditional scope including network monitoring, Tier 1 helpdesk, TEMs type services, etc. It is imperative that we educate ourselves as agents, on not only new technologies, but the underlying cultural changes that are impacting our clients and ensure that our service offerings reflect what’s most important to them. Traditional agents who can’t differentiate their services will likely not exist in the next 10 years.
RJ: Sourcing revenue and not managing the desired IT cost and performance outcomes via data-driven decisions. The decisions IT teams will make five years from now will be far more data-driven and industry-specific. What I often tell agents looking to sell or merge is you have two assets today, and tomorrow you will have one. Today, you have the value of your customer data that is going into the systems build and your BoB (“book of business”) value, both of which are driving seller economics and investor value. This will not be the case in five years.
CF: Many companies making this pivot are backed by private equity or have a headcount of more than 30 people. Is there a chasm opening up between the partners that have the size and capital to build extra services and hire more people and the smaller shops?
RJ: Building a self-sustaining agent business has multiple points of influx, which require significant investments in people, process, and systems along with being expensive and extremely time consuming. This is what is driving the value of the technology solutions brokers and end user IT sourcing companies.
Because of the influx of changing buyer dynamics and value able data, private equity is heavily investing in this space. And it’s just the start of capital coming into the space via very successful private equity companies.
DN: Most agents took financial risks to fund their entrance into the agent world, and over time, have developed a healthy book of business that enables them to maintain a specific lifestyle. Many agents aren’t prepared for the new level of competition brought about by investors that will transform our industry. These new players understand that customer buying preferences are changing and are creating value-added services that will allow them to position themselves to be a one-stop shop for any and all technology needs.
It is becoming more apparent that many of the competitors who are backed by investment money will be able to bring new software and services to the marketplace faster and more
efficiently than agents who don’t have the capital. With the convergence of telecommunications and IT, it’s now more than ever it’s important to assess your strategic relationships and make sure that you are in alignment and that your partners have the same goals and strategies that you do. Ultimately those who maintain their knowledge and skillsets, leverage their relationships, and make sure that they are in alignment with their client’s goals will continue to thrive in our industry.
MS: Historically, successful agents have built their businesses upon developing trusted relationships with their clients. However, as more and more knowledge, expertise and value are required of an agent to succeed, it will be challenging to compete with organizations that can provide additional value-added services. Those organizations that can help manage the client’s entire technology life cycle while continuing to focus on the client success and trust will make it much more difficult for the smaller agent as time goes on. There will always be room for smaller agents, but it will become tougher for small agents to compete with those larger agents that provide a great client experience plus value-added technical and business acumen.
CF: Is there anything else you’d like to add?
MS: The opportunity for agents continues to grow and is bigger than ever. Pure brokerages are going to find it more and more difficult to succeed. Agents will be required to provide more value-added services, resources, and technical knowledge. While there is still a great opportunity, the industry is maturing and demanding more from agents and partners. It is expected that VARs and systems integrators obtain certifications allowing them to sell services on behalf of a vendor. I could see a time soon when agents have technical certifications and leverage technical expertise as a competitive differentiation vs. focus on selling carrier products, especially as agents try to sell to the larger enterprise.
RJ: The result of the research and work I’ve done with private equity firms is that an agent’s book of business and data have optimal near-term value.
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