AT&T hitting the resale trail
nwfusion.com
By David Rohde
Network World, 08/31/98
Basking Ridge, N.J. - Move over, all you
Cisco resellers, IBM integrators and Novell
VARs. Say hello to a new concept in
data-networking sales and service: the AT&T
value-added reseller.
Marking a sea change in its sales philosophy,
AT&T has since early this year been quietly
recruiting a nationwide army of local network
integrators. The resellers have been training on
AT&T's data services so they can sell them
along with routers, switches and hubs.
The move means users will be able to get core
AT&T services from local VARs and network
integrators that also offer integrated
LAN/WAN management services. AT&T has
never used VARs or resellers except to provide
service to a handful of very large accounts.
Once the quintessential direct sales house,
AT&T has given its managers marching orders
to find new channels for the company's four
principal data services: frame relay, private
lines, the WorldNet Managed Internet Service
(MIS) dedicated Internet access offering, and
the new WorldNet Virtual Private Network
Service (VPNS).
Currently the AT&T initiative consists of two
separate programs. Under the AT&T Data
Sales Agent Program, AT&T is recruiting local
VARs that sell a significant amount of WAN
equipment. Once accepted into the program,
they are authorized to sell AT&T frame relay
and private line services for a commission.
Under the AT&T Alliance Program, the
company is recruiting integrators that specialize
in helping users build IP intranets. Those
companies become agents selling term
contracts for WorldNet MIS and VPNS.
Ironically, AT&T traditionally has not only
operated using a direct sales force but also has
been actively hostile to resale of its services via
other channels. AT&T frequently has battled in
court with telecom resellers that buy AT&T
services in bulk, mark them up and sell them to
small businesses and consumers.
But AT&T officials emphasized their new
program is aimed at a different class of reseller
- network integrators experienced in installing
LANs and desktops as well as routers and
switches. And they are upfront about why
they're taking this approach - because the
company's CEO is demanding more revenue.
"Mike Armstrong's mantra is top-line selling
growth," says AT&T's Director of Global
Channel Management Keith Olsen. Not only is
AT&T looking for more sales outlets, but the
company also wants to find VARs to take over
the installation chores once the sale is made.
"Anything we can do to increase the amount of
selling time of our direct sales force is good,"
Olsen says.
The move is applauded by many in the industry
who say traditional carriers still lack the full
range of data expertise and contacts they need
to meet their potential.
"There are certain user organizations that are
more inclined to buy from those channels," says
one AT&T partner who asked not to be
identified. "Now the telecom industry is trying
to build off the model in the computer industry."
Case in point: SportRack Automotive, a
supplier of vehicle luggage racks and other
automotive supplies in Royal Oak, Mich., has
an AT&T frame relay network it purchased
through AT&T sales agent Ideal Technology
Solutions U.S. SportRack is now converting to
WorldNet VPNS from an earlier AT&T
intranet offering with Ideal Technology's help.
"I'm on the phone with these people all the time.
They know my operation - they're right down
the street from me," says SportRack MIS
Manager Bill Olzak.
In addition, Olzak doesn't face the dilemma of
shelling out more money to purchase one of
AT&T's managednetwork options and then
worrying about integrating it with LAN and
desktop support. He purchases his WAN
maintenance services from Ideal Technology
instead of AT&T.
"It's included in my monthly bill for the rest of
the network support," Olzak says. "Our plan
was to keep things as lean as possible, and now
I have one support agreement for my LANs,
WAN and hardware."
The Novell evolution
AT&T's VAR programs did not just appear out
of thin air. Of the Alliance Program's 375
members, many are Novell Gold and Platinum
VARs that AT&T originally contacted when it
was seeking help selling its now-defunct
NetWare Connect Service.
Those relationships continued when NetWare
Connect evolved into the AT&T WorldNet
Intranet Connect Service supporting both IP
and Novell IPX traffic, the forerunner of
today's AT&T WorldNet VPNS service.
But according to VARs, the
reseller-recruitment effort has taken off this year
as AT&T realized that even its frame relay,
private line and straight Internet access could
benefit from outside help.
"AT&T from the direct sales force does not
have the expertise on the inside of the wall,"
says Bob Skinner, vice president of Ideal
Technology.
"There were some areas where the AT&T
people were not as expert on the data side as
they were on the voice side," says Larry Lane,
vice president at Atlanta Datacom, a Norcross,
Ga., integrator that belongs to both the Data
Sales Agent and Alliance programs.
Besides, Lane adds, "It's an extremely low cost
of marketing for them."
Another factor forcing AT&T to seek indirect
sales: Armstrong's drive to reduce employees
as he whittles away at AT&T's gargantuan
overhead. "A significant number of direct sales
people were affected by [this year's] early
retirement program," Lane says.
What's more, AT&T has its eye on the pending
entry of regional Bell operating companies into
the long-distance market. Most of the RBOCs
have long operated via sales agents because
their direct sales forces cannot possibly cover
their entire territories.
"AT&T is in a catch-up mode," says Manny
Quevedo, vice president of marketing for the
communications group at Inacom, a large
distribution house based in Omaha, Neb. "They
were concerned with losing pace with the
RBOCs, and considering where the RBOCs
may end up, they had to act."
Sharing the wealth
But AT&T is not just counting on VARs to
replace lost opportunities. One of the most
unusual aspects of the programs is that AT&T
not only is asking VARs to generate leads, but
it's also giving some of its own direct sales leads
to the VARs.
ADCom's Lane says AT&T is offering a
dual-compensation system under which the
AT&T salesperson and the VAR receive
commissions for a sale if they both had a hand
in it. Although neither AT&T nor the VARs
would disclose the exact compensation
percentages, AT&T's Alliance Web site
promises the potential of $20,000 to $35,000
worth of commissions for a three-year
WorldNet MIS contract and $30,000 to
$40,000 for a WorldNet VPNS contract.
The integration of the direct and indirect sales
forces goes beyond that. "We sit on all their
national advisory councils for frame relay and
IP services," says Ideal Technology's Skinner.
And support for the two agent programs is due
to be consolidated next month at a special
agent-support center in Kansas City, Mo.
But the agents do not get completely free rein.
For example, most of the pricing work is tightly
controlled by AT&T. Agents send prospective
WAN designs to data-network account
executives in Kansas City, who come back
with a proposed price after asking some
questions.
"Upfront they'll say, 'Who's the competition?' If
there's no competition, we start off with the
best available tariff," Lane says. "But if there is
competition, they massage it and come back
with new pricing."
Other agents insisted that users should not fear
that price negotiations are out of their hands.
"We have the ability to go get the negotiated
special pricing here," Skinner says. "[AT&T's]
been very good coming back to us with
aggressive pricing when we need it." He adds:
"You're not going to be able to play the direct
sales force off of us."
Still, some users with long-time relationships
with the AT&T direct sales force are leery of
this arrangement. They say they're unlikely to
move their WAN-services buying to equipment
vendors.
"Any time that you cut out the middleman,
you're going to save yourself some money,"
says Stan Miller, manager of
telecommunications for Pier One Imports, a
retailer based in Fort Worth, Texas. "They've
got to pay their bills, and the only way they can
do that is to make their money off of you."
Even some agent prospects for the program are
skeptical about the pricing. "The problem with
all these long-distance companies is they want
to tell you what to quote, and that's not
acceptable to us," said one WAN-oriented
network integrator who asked not to be
identified.
After-sales service and support is a crucial
issue, too. "I don't want to lose my network
and not be able to talk directly to the vendor
that's responsible," Miller says.
Certifying the deal
As an alternative for large users seeking
managed contracts that go beyond the WAN
side of the router and don't require dealing with
indirect channels, AT&T Solutions later this
year is expected to introduce a standard
LAN-management offering (NW, April 6, page
1). And AT&T said that customers of sales
agents will still be able to deal with AT&T for
routine service matters.
But the need for service and support opens up
opportunities for VARs that offer their own
network-management programs, says Mark
Nighbor, general manager of the data-agent
program. Instead of selling AT&T's own
Managed Network Solutions, VARs can roll
their own remote-management offer-ings into
the sale.
For that reason, AT&T is even considering a
certification program similar to those offered by
Microsoft and Novell, though on a much more
selective basis.
Currently, the company offers a two-day
training program, code-named Base Camp, that
tours the country, hitting spots twice a month
for two days at a time.
Analysts say such certifications could help
boost VARs in the eyes of users who are
weary of split responsibility for their managed
LANs and WANs.
"All these network integrators appear to have
an incredible number of LAN certifications, but
when it comes to wide-area networks, it
becomes extremely fuzzy," says Kitty Weldon,
a senior analyst at The Yankee Group in
Boston. "So customers rightly ask, 'How can
you really be a one-stop shop?' " |
