IT Purchase Process
Everything You Need To Know About Telecom Agents
All of us can probably agree on one thing: buying telecom sucks. Vendors are hard to deal with. Getting pricing is a pain. Getting contracts is a pain. Implementing services is a pain. Handling renewals is a pain. What if someone could just do all of this for me?
If you’ve ever purchased telecom services or network infrastructure before, you’ve probably come across the handy dandy “telecom agent.” Agents bring up different connotations when brought up to IT experts who’ve been around the block before. Anecdotes often range from “yeah we’ve used an agent before who tried to jam a bunch of crazy overpriced services down our throat!” to “we swear by our telecom agent – he / she has helped reduce our cost and time allocation to procurement by a good 50%” and pretty much everything in between. In this post, we’ll overview the telecom agent ecosystem from top to bottom and help you better understand when they might be a useful tool in the procurement toolkit.
What is a telecom agent and how do they work?
So what is an agent anyway? Telecom agents are similar to real estate agents or insurance agents… for telecom services. When you’re looking to buy services like dedicated internet access, UCaaS, or colocation space, you could either do the homework on your own to identify serviceable vendors, negotiate pricing, and get services implemented, or you can have an agent do some of this for you.
A good telecom agent should be able to take in your specific service needs, canvas the market for vendors who can meet the need, get you fair pricing, and eventually help ensure that your service gets installed properly. Also, most agents will do this for you for free! Agents get paid by the carrier you eventually buy services from – they’ll typically get a 10-20% revenue share of whatever services you buy. Thankfully, this take rate should not impact the price you pay for services. Carriers try to ensure that agent-quoted services are at price parity with what their sales reps will quote directly, and a very good agent will sometimes help you negotiate pricing down even further.
Sounds like a pretty good deal, right? Free help with procurement and a second opinion to ensure you get a fair price seems like a no brainer. This isn’t always the case, however. More on that below.
Why do agents exist in the first place?
Before talking through how the actual agent ecosystem functions, it’s worth explaining why the agent channel even exists. Why are carriers willing to pay so much money to someone for a customer when they could just get the customer themselves?
A few factors are at play here. For one, the carrier market is quite competitive (despite what it looks like externally), and competition continues to heat up by the day. Almost every telecom carrier in the market today has a compelling agent program, and any carrier that opts not to will lose out on a significant quantity of customers who like working with telecom agents. Further, carriers are not the best at customer acquisition and customer relations (see this list of the most hated companies in America and you’ll find a few carriers listed). It makes a ton of sense for carriers to outsource customer acquisition to trusted partners who have good relationships on the ground with the end customers they’d like to work with.
Although the agent’s take rate appears like a large percentage, when you take into account that the agent handles a lot of the sales process on behalf of the carrier, and that the carrier only pays out a commission if a sale successfully installs, the take rate does make economic sense. Keep in mind, a direct sales rep at a telecom provider also gets a commission on any sale, and meanwhile is also collecting a salary and overhead. Agents represent purely variable costs that go away if the customers leave.
Components of the agent ecosystem (master, direct, wholesale, resale, what the hell)
Not all telecom agents are created equal! Different flavors exist, and each can make sense in different cases. This section will give you a few factors to think through when vetting a telecom agent.
First, it’s worth understanding a telecom agent’s service / provider coverage and depth of knowledge across technologies. Most agents will have service areas, regions, and / or vendors of competence and may be poor elsewhere. For example, we’ve come across telecom agents that are excellent in a specific geography (Southeast US, Northeast US, etc.) or a specific product suite (great at UCaaS) but who don’t perform well outside of that product suite or geography. Also, their vendor coverage may be limited by their areas of expertise – they may work with every UCaaS vendor on the planet but only a few DIA or wavelength service providers. This is important to keep in mind – be sure that the agent you work with is an expert on what you’re having them bid on your behalf.
Second, it’s worth understanding how the agent is interacting with vendors on your behalf. Do they have a direct relationship with the carriers they are bidding out to you, are they reselling someone else’s service under their name, or are they working through an intermediary (a Master Agent or other third-party) who owns the carrier relationship? This matters for multiple reasons. If the agent is working directly with the carrier, or through a Master Agent (basically a larger company that manages the carrier relationships for a portion of the agent’s revenue), it’s likely that you’ll sign contracts directly with the carrier itself and should have good access to the carrier’s own sales and support teams during implementation and beyond. If they’re working through a Master Agent, you’ll just need to ensure the Master they work with gives the agent direct access to Channel Managers at the carrier who can help move things along quickly, negotiate favorable pricing, and handle issues when they arise.
If the agent is reselling / wholesaling you the service, you’ll be signing a contract with the agent (not the carrier) and they’ll likely handle invoicing, some support, and eventual service issues. In this case, you’ll need to ensure they’re not taking too big of a margin on the other side of things, and that they have adequate access to the carrier to handle issues, such as service outages, if they are to arise. Sometimes, we’ll come across MSPs or resellers who will buy an underlying service from a carrier, mark it up 25 or 30% and repackage it to an end customer as a “good deal,” while the customer ends up left with an overpriced service and limited access to the underlying carrier if issues arise.
Resale / wholesale agents can be helpful if invoice consolidation is important to you (one bill and one throat to choke rather than many), but you’ll just need to do the extra legwork to ensure that you’re getting fair deals with the actual service providers on the other side, and that you know who to call when problems inevitably come to bear.
As you can probably tell, this whole system is not very transparent and difficult to hold to account. At Lightyear, we’ve essentially created a “virtual” agent that is automation and data-driven – getting you pricing based on API links and proprietary data sets rather than manual process – to ensure that every request gets the most transparent and fair possible treatment. Shameless plug, but I do recommend you give us a try if this whole ecosystem seems a bit frustrating to deal with.
Benefits of utilizing telecom agents
Good agents do a TON for customers.
Completely outsource the process of getting you quotes / contracts while ensuring you’re paying fair prices for services
Project manage your implementations and escalate installation problems when they come around
Post-install, they will stick around to hammer carriers when issues, outages, or billing issues arise
Help you handle eventual service renewal vs. rebidding in a way that’s favorable to you
All of the above, for free!
When an agent does his / her job well, the benefits are very obvious: the customer wins.
Drawbacks of using telecom agents
Unfortunately, agents come with lots of issues as well.
Agents can be incentivized to sell you higher-priced services at times, and it’s hard to know when they actually have your best interests at heart (there is no Amazon to tell you what a fair price is for this stuff)
Agents tend to operate poorly out of their core areas of expertise (geography, specific vendors, specific technologies)
Agents are humans at the end of the day – they operate manually, don’t utilize data often, and can move more slowly than you’d like
If an agent is invoicing you, they may bake in extra margins for themselves, and it’s hard for you to really know if this is going on or not without some investigation
Finding a good agent is hard. No repository / web database exists and most companies go off of referrals.
Alternatives to telecom agents
It’s hard to know whether or not an agent will do a good job for you without being a very experienced buyer who has lots of data and procurement reps to reference. Many buyers we’ve worked with loved agents until they’ve had one or two bad experiences, after which they became permanently averse to using them. As a result, lots of buyers insource procurement completely, and only utilize agents when they’re certain they can hold them to account. Insourcing can work well when done right, but requires lots of effort (tons of vendor outreach, project management, religious data and information tracking).
If that sounds like a ton of work to you, but you’re still unsure of how to find a good agent or determine whether or not they’re doing their job well, I recommend you try us out at Lightyear. We do what agents do with a software and automation approach. You get vendor pricing directly from carriers themselves in a web-based format (a la kayak.com) that is pre-vetted against our database to ensure it’s fair. We automate a lot of what goes on in the back end, so we can give you the same experience whether you’re getting a circuit in San Francisco or Quebec.
We’d love to hear from you if you have thoughts on the agent ecosystem – good or bad. Please get in touch if you do.
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