Source: Comms Dealer May 2012
News of the extraordinary rise in demand for Ethernet right now is everywhere but few resellers are immediately making the link with demand for WANs – and planning for it.
Our experience is that 25% of Ethernet contracts turn into much more valuable WAN requirements within 12 months. Great if you have planned for this and can meet your customers’ needs and not so good if you lose the business to someone else who can.
The good news is that 85% of end user businesses are opting for 36 month contracts making it hard for them to just cancel. However your customer probably buys many more things from you and may use that as leverage to get you to agree to cancel the Ethernet contract early because you cannot convert it into the WAN solution they need.
Cloud is everywhere these days and very few businesses will buy a point-to-point WAN, opting instead to connect all their sites to a VPLS or MPLS cloud. Essentially the difference is that VPLS is generally favoured by very large enterprises with large IT departments who still like to install expensive routers on-site; and MPLS is favoured by everyone else. So for most resellers and most of their customers it is all about MPLS. MPLS used to be the domain of large carriers only but all that has changed and there are now a number of specialist suppliers to the channel that offers more choice, features and flexibility, usually at a better price.
Most good MPLS aggregators can supply Ethernet from all the major carriers - often cheaper than you can buy from the carrier directly. If they are also a broadband aggregator they should be able to offer a variety of private broadband products that can be plugged into the MPLS cloud for things like remote workers and retail outlets. An aggregator buys large wholesale layer 2 interconnects from the networks and creates layer 3 products over the top. This means that you can have a mixture of different Ethernet and DSL suppliers all on one customer network, choosing the most cost effective for the location and, where the customer needs resilience, using two different networks into the same location.
Channel or ‘indirect’ partners of carriers are a great source of prospective business for a carrier’s direct sales force. How often have you approached your customer about an impending renewal or upgrade only to find the carrier has already been in there? This becomes more of a problem where the carrier has regular contact with your customer because they bill or support them directly. The carrier may not be actively poaching your business but if your customer knows they have a direct sales force they may ask them to quote.
A channel-only aggregator gives you maximum control and choice and by selecting one with a good track record in MPLS you should have great case studies to support your proposals, even if you are relatively new to the product.
Once your customer gets used to the speed and reliability of Ethernet they start to think about consolidating functions and applications and linking up other sites and remote workers. Taking into account security, space and power issues the only practical solution is often to place the servers off-site in a secure MPLS cloud and convert the internet-facing connectivity to a private network.
This makes your choice of Ethernet supplier now really important. Imagine you resell Ethernet from one of the carriers and after 12 months of a 36 month contract your customer decides to upgrade to an MPLS network. Unless you want to pay a cancellation fee and a re-installation charge you are locked into that carrier for the MPLS solution. What if their product doesn’t have the features your customer requires or your customer’s other sites are nowhere near their POPs and the circuit prices are astronomical? What if they don’t have broadband integrated into their solution or even supply an MPLS product at all?
There are other considerations too. A supplier that has to deal with multiple carriers every day is more likely to invest in process improvement, automation and online tools. The best aggregators will furnish you with multiple prices for every carrier within seconds and their delivery record is often better than the carriers’ own statistics.
One final thought. High value, long term contracts backed off to your supplier can be a double-edged sword. Guaranteed revenue but a big liability should your end customer go bust. Look for a supplier with a scheme that protects you against your customer going into liquidation.