UCaaS and the Channel: Part I – The Vendors
The UCaaS channel has been full of promise since the launches of Cisco’s HCS, Microsoft’s Lync, and numerous other vendor and service products in the 2010 timeframe. Although a few partners are scratching a living off of their offers, by virtually all measures the UCaaS channel has underperformed its promise and its expectations. This two-part series will take a look at what the UCaaS channel needs to have to develop a robust ecosystem for growth. This particular blog will look at what the UCaaS vendor needs to offer; next week’s blog will look at what a good channel partner needs to bring to the table.
Quick foundational item: VoIP is not UCaaS. The VoIP channel model that is built on Broadsoft, RingCentral, and their like is more mature than UCaaS and relies on a far simpler product offering (voice) than what UCaaS requires (voice, video, text, presence, identity, application integration).
Ground zero on UC as a Service is that is has to be built on a product or service platform that has technical merit. That means it has to work, has to have features and functionality that end-users will pay for, and has to be supportable. A problem in the UCaaS space has been that many smaller enterprise customers have a high affinity for UCaaS but there is a paucity of full-feature UCaaS solutions that are truly multitenant and thus economical to offer. For example, both HCS and Lync fall short in either features or multitenancy and as a result the channel is left selling a high-profile brand that is really only a partial or uneconomical solution. Conversely, offers that do scale into the smaller enterprise market typically do not offer all of the features that customers are looking to buy in a UCaaS solution.And the large enterprise customers are being developed by the vendors themselves or in close collaboration with a select few enterprise partners.
There are also major gaps in the native provisioning capabilities of all UCaaS solutions so relatively expensive and complex 3rd party software (e.g., Parallels, Citrix, etc.) has to be deployed or a home-grown solution has to be developed, either of which lead to higher costs and service offering delays. In addition, dealing with legacy equipment is difficult so many vendor solutions simply ignore or pay scant attention to integration with existing hardware and/or software while customers may not be so inclined to accept this kind of rip and replace approach. To complicate matters, upgrade / integration paths for many of the UCaaS solutions are hard to puzzle out or not disclosed at all, which makes supporting these solutions in the channel difficult and unpredictable.
In short, even after three years these are still early and immature days for UCaaS in terms of technical merit. Early adopters with an affinity for a cloud or off-premise solution may be willing to accept compromises at this point in the game but UCaaS does not yet have a solid channel solution with ubiquitous appeal.
Another core element to a successful UCaaS channel offer is that it has to provide the channel partner a service that will make a profit. Again, we are in early days here. Current licensing models and channel incentives from the big UCaaS vendors do not yet encourage channel investment or development except for some hand-picked large SIs or Telcos that are being offered deals to “go-big” (HP, Dimension Data, AT&T, etc.). Many of the UCaaS channel partners are entrepreneurial pioneers who understand the promise of the service but are struggling with cash flow and capitalization. In spite of their enthusiasm already there have been a large number of failures and consolidations in the channel that is not yet healthy.
The cash flow challenges arise because many UCaaS channel partners are struggling with converting leads to sales and sales to deployments – and they are not getting a lot of help from their vendors. Moreover, lead-times for the sales cycles are taking longer than envisioned and this also impacts cash flow. Vendors like Microsoft and Cisco need to step up and provide more credible partner sales training, project management, and incentives for their UCaaS channel. More critically, these vendors are not doing a good job helping the UCaaS channel sell “UC” as opposed to “voice” and there is precious little investment in demand generation for UCaaS. And there are too many instances where the vendors’ internal sales incentives create channel conflict with their UCaaS partners. Perhaps the newer UCaaS market entrants, such as GENBAND or Siemens, will challenge the incumbants not just on technical merit but on channel incentives.
To round things out, the UCaaS channel requires predictability in order to get the capital and personnel needed to make a successful go of things. The ongoing complaint of UCaaS channel partners is that their vendors are not providing that predictability. In 3-tier channel models, such as where Microsoft Lync or Cisco HCS is white-labeled by a intermediary party like SIPCOM or WestIP Communications, these intermediary parties have stepped up to offer more predictability and stability to their own channel partners but they are assuming a lot of risk in doing so and it is not yet clear that this approach will succeed in the long-run without more attention from the vendors. The big vendors like Microsoft are now sometimes competing againts their channels with their own UCaaS offers (e.g., Office365) and that further destabilizes the channel.
Why is the UCaaS channel underperforming? On one level, it is a combination of immature products, high costs, misplaced or missing channel pricing and incentives, and almost no business model certainty. Next week let’s add the other piece to the puzzle: the channel partners are not really prepared to sell and service UCaaS.