IT and Business Insights for SMB Solution Providers

Selling Against Big Telcos

Competition for Office 365 customers is stiffer now that telcos are offering the software suite, but IT pros still stand to make money from these same SMBs. By Ellen Muraskin

Bad enough that channel pros sometimes find themselves competing against Microsoft for Office 365 customers. Now they’re also going head to head with giant landline and wireless service providers.

In the United States, Sprint and Windstream Communications as well as CenturyLink, AT&T, and Verizon all currently offer Microsoft’s SaaS packages. According to Luke Celente, vice president of sales at Computer Solutions East Inc., an IT solutions provider in New Rochelle, N.Y., these offerings represent a way to recapture some of the revenue lost to Lync and other VoIP services. He notes that the large carriers have always offered email, and suggests that by moving into Office 365 and hosting the Lync voice server as part of that bundle, the telcos can remonetize conference bridges and off-ramps to the public switched telephone network (PSTN), say, that tie into Lync.

The telcos’ main advantages in this market, in addition to price, are in distribution and network integration, says Mike Sapien, principal analyst for the enterprise practice at Ovum, a research and advisory firm. They tend to have preexisting relationships with many SMBs and already provide them with some network service, even if only Internet access.

The Office 365 resellers queried for this story seem to be counting on the telcos’ bad reputation for tech support to discourage customer defection or competition, even at fire sale prices. They also point to the kind of personal attention, responsiveness, and trust that, they say, can’t be pulled off at carrier scale.

Norman Rosenthal, president of IT consultancy Sterling Rose LLC in Morristown, N.J., says he can help his SMB clients buy the right bundle for their needs. “There are so many different SKUs and plans in Office 365, it can be very confusing.” By reviewing his clients’ carrier bills, Rosenthal says he sometimes sees that they start with free offers but wind up paying for tools they don’t use.

Small Businesses Easily Wooed
Celente concedes that his under-20-user customers might be receptive to a lower subscription price, but for clients above that, he says cost savings don’t justify the disruption. And, at this point, he’s also confronting more competition from Web host GoDaddy rather than Verizon.

Further, he points out that a lot of training and cost goes into supporting Office 365. “At bottom, Verizon’s and CenturyLink’s business is not to be SharePoint, Yammer, or Power BI [all Office 365 components] consultants,” says Celente. In fact, he sees a business opportunity in filling the support void he expects telcos to create. “I can recall back when Verizon was selling Cisco UC 500 phone systems. They were positioned specifically for the small business market and Verizon had a terrible time deploying those. We actually built our business servicing that stuff.

“Small businesses’ networks and infrastructure have zero consistency, and it’s extremely difficult to manage them,” Celente continues. “They’re needy.” He predicts that Office 365 will add a level of complexity for carriers that hosting simple POP email has not prepared them to handle.

“Now your stuff is stored in Exchange and all your phones connect to it. What happens when a file is deleted and you have to go into restore mode? Who handles that? Who handles security breaches? It’s a partner opportunity to show their value. Are we more expensive? Yes. But you know who you’re dealing with.”

Ovum’s Sapien doesn’t count the carriers out so quickly. “The telcos still have some work to do to understand the desktop and applications overall. But since becoming large national or global ISPs, they have stepped up their service, expertise, and technical knowledge in these areas. They have also added new service desks for these new services, including online support.”

The 63 Percent Solution
In CenturyLink’s own words, it is “the third largest telecommunications company in the United States.” Like other telcos, however, the carrier is “looking and transitioning to be our small business customers’ IT provider,” says Scott Hamilton, manager of product operations for cloud applications at CenturyLink, headquartered in Monroe, La. The carrier began bundling Office 365 Business Essentials with its VoIP and Internet service in October 2014 at no extra charge; upgraded versions of the suite are also available. Named Core Connect, these bundles advertise “a one-on-one consultation with a technical expert” and include configuring file backup, email setup, and demonstrations of how to activate Office 365 accounts and migrate data for up to two users.

Asked to define his target SMB market, however, Hamilton quotes a Microsoft 2013 data point: 63 percent of small business customers use “unsupported” 2003 and 2007 versions of Microsoft Office. The implication is that these SMB holdouts, having worked without tech support for years by now, should have very low support needs or expectations with their new Office 365 tools. They should also be receptive to upgrading via telcos’ subscription-based cloud, with bundled pricing.

CenturyLink’s Core Connect subscribers do have 800-number support. Customers that go for the telco’s Managed Office service—a more comprehensive arrangement that includes network hardware, phones, network management, and hosted PBX—have an “assigned representative” to call.

The Service Opportunity
While he credits them with upgraded support staff, Sapien sees the carriers’ broad enterprise product portfolio making it hard for them to focus in on Office 365 support in particular. He perceives room for other providers, including VARs and MSPs, to offer better service models. “Since Microsoft is hosting the service for most providers anyway,” he notes, “the difference can only be initial customer setup and ongoing support. In the end, it is primarily customer experience and making sure the SMB knows you are there to quickly respond.”

That applies even if the SMB is already the carrier’s Office 365 customer. Says Celente: “The [channel] partner can still come in and say, ‘Let us help you get your SharePoint going. You’re paying nothing for it now.’ The partner is making money on the services, not on the licensing. That was Microsoft’s whole pitch, anyhow, after license margins in the cloud fell so far below on-premise solutions.”

About the Author

Ellen Muraskin is a freelance writer based in Morris Plains, N.J.


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