Source: Comms Business July
They don’t want to share the bandwidth with anyone else and they need the service fixed quickly when they have a problem. Ethernet has become the obvious choice and sales have increased exponentially attracting more carriers into the market, creating a wider choice of products, broader coverage and lower prices. Spiralling prices unlock more pent-up demand and volumes surge again-and so on. This is creating a fantastic opportunity for resellers to up-sell their DSL customers into long term, high value Ethernet contracts.
Current ISP of the year, Griffin has been very active in this market and we asked their MD, Andrew Dickinson for his views on the various products and carriers available.
Q. Whose Ethernet do you re-sell?
A. As a network integrator we don’t really re-sell anything. We interconnect to eight different Ethernet carriers from which we create eight fibre Ethernet products and two copper Ethernet (EFM) products.
Q. Which carrier is the most successful?
A. It varies from month to month. End customers are exceptionally sensitive to price and consequently the proportion of new orders changes monthly between carriers according to the almost continuous stream of price reductions, offers and promotions.
Q. What about the quality of the product?
A. Ethernet from all the major carriers is very reliable and the fault rate is extremely low compared to say broadband. Many of the products are fundamentally different in the way they are engineered and delivered however this is often transparent to the end customer who generally views Ethernet as homogenous and a commodity.
Q. How much do lead times vary and how does this affect which carrier a reseller might choose?
A. Lead-times do vary a lot between carriers which is why our automated online quoting system also tells the reseller both the carrier’s published lead-time and what they are actually achieving. Ordering through Griffin does not add any time to the carrier’s standard lead-time, in fact because of automation and the processes we have set-up with our main suppliers, we can normally predict and eradicate unnecessary delays – bringing the service in earlier. Most carriers that understand the channel would be stupid to prioritise orders from their direct sales-force over Griffin especially given the volume of Ethernet orders that we generate. For most SMEs that are upgrading from DSL, lead-time is less of an issue as long as they are not messed about. Those companies that are either moving office or for whom the Ethernet is part of a bigger project e.g. an MPLS network, will often pick a carrier that has a shorter or at least a more predictable lead-time – even if they are slightly more expensive.
Q. What sort of margins can a reseller expect from selling Ethernet?
A. As always this varies and resellers will price to the expectations of their customer where possible, achieving recurring monthly margins as high as 40% in some cases. In a sale where there are a number of competitors and the reseller does not have a strong relationship with the end customer the margin on the winning bid could be as low as 10%. Against this 80% of customers will opt for a 36 month contract and in this period there will be a number of up-sell opportunities. A cloud-based firewall is far more practical than buying their own for most end customers and is paid for monthly rather than via a high capex charge and support cost. Customers will often want to add Content Filtering and Intrusion Prevention features as well as SSL certificates for remote workers. All of these are maintained and administered by Griffin in the cloud and can more than double the initial value of the Ethernet circuit at much better margins. Subsequent circuits to the same customer and upgrades are often sold at a much higher margin and most multi-site customers will upgrade to a full MPLS network at some time in the future. Of course owning the Ethernet connection into your customers makes it a lot easier to sell in other hosted applications like voice and desktop when your customer is ready.
Q. Why do resellers favour Network Integrators rather than buying direct from the carriers and why is Griffin in particular doing so well in this market?
A. Dealing with just one carrier is hard enough and most resellers do not have the volume to get a great price or to justify putting in processes and automation. Imagine having to deal with eight carriers in a market where the price leader can change weekly depending on current promotions and geographic coverage. Also we have automated the process of generating quotes and a reseller receives one email containing every carrier, every product, every speed and every price a few minutes after having clicked the submit button on the portal.