Increasing opportunities in the indirect channel

11 March 2013 | David James

Cover

David James

Blog Author | Ovum;Principal analyst of wholesale telecoms


An oft neglected opportunity for wholesale services is the indirect channel. Many small to medium-sized enterprises (SMEs) buy telecoms, IT and other office services from local resellers that have greater knowledge and understanding of their needs than larger service providers do. In most cases, large carriers cannot afford to sell to directly these SMEs, due to their diversity as well as their requirements for on-going support, maintenance, and education. Instead, wholesalers should do what they can to support the resellers and aggregators that serve SMEs to capture revenues they would otherwise miss.

An oft neglected opportunity for wholesale services is the indirect channel.  Many small to medium-sized enterprises (SMEs) buy telecoms, IT and other office services from local resellers that have greater knowledge and understanding of their needs than larger service providers do. In most cases, large carriers cannot afford to sell to directly these SMEs, due to their diversity as well as their requirements for on-going support, maintenance, and education. Instead, wholesalers should do what they can to support the resellers and aggregators that serve SMEs to capture revenues they would otherwise miss.   

Several wholesalers, including BT Wholesale and Colt, recognise the value of targeting resellers, aggregators and sub-wholesalers in the indirect channel with specially designed services and packages. These carriers appreciate that customers in the indirect channel differ significantly from their more traditional customers, such as infrastructure-based carriers, mobile operators and ISPs. Aggregators and resellers are often more entrepreneurial, flexible and agile than traditional customers, but earn comparatively thin margins from the services they resell. 

To supplement their basic resale revenues, many sub-wholesalers and aggregators have developed valuable additional services for their reseller customers. These range from bundles of services from different wholesalers to match a particular set of needs, through assistance with training and marketing, to hosted billing and customer service functions. 

Wholesalers that take the indirect channel seriously are themselves attempting to be more flexible and responsive to their demands. For some this consists of providing an efficient, user-friendly and consistent web interface for the purchase, management and billing of services. Others offer associated IT services, training and marketing support by partnering with internal and external organizations. However, large wholesalers must be alert to the danger that adding more intermediaries to the supply chain risks inflating prices, lengthening delivery and repair times, and decreased understanding of the ultimate customers’ needs and priorities, all of which can be an impediment to good customer service. 

In many markets the indirect channel is underserved by wholesalers who continue to regard sub-wholesalers as no different from other wholesale customers. For those who take the trouble to listen to and respond to the different priorities of this wholesale customer segment, it can be a valuable source of long-term revenue. Indeed, some larger traditional wholesale customers were once resellers and sub-wholesalers themselves.