Last month’s news from ScanSource that it intends to acquire Intelisys Communications, a leading technology services distributor of business telecommunications and cloud services, may be the spark that ignites the IT-telecom convergence trend that’s long been discussed but less acted upon.
And two factors – cloud computing and the Internet of Things – may be the impetus to drive convergence.
“More than any other opportunity, IoT appeals to both the telecom and IT channels,” said Carolyn April, CompTIA’s senior director for industry analysis. “IoT may be the bridge technology trend that both these channels will take advantage of and work together on. Cloud is also one of those technologies.”
ScanSource’s acquisition is the latest aggressive step by a distributor to put cloud computing at the center of their business. Several years ago CompTIA forecast that cloud computing would lead to market upheaval, with one likely result being the emergence of a new type of provider – one that would aggregate multivendor technologies at scale across both physical and virtual boundaries to deliver secure and reliable solutions that meet customers’ business, technological and regulatory needs.
“We also identified the industry’s wholesale distributors as the ones who were well positioned to fill this role,” April noted.
Convergence between the telecom and IT channels has not really come to fruition in a big way.
“Convergence of IT and telco is one of those ideas that seems to make sense, but actually finding people doing it is rare,” said Dave Sobel, senior director, community and field marketing for LOGICnow, now part of SolarWinds MSP.
“On paper, this makes total sense,” Sobel said. “Alas, that has not been the case. Perhaps because of distant cultures or differences in business plans, the two have not come together to a meaningful degree.”
Jeffery Ponts, MSP evangelist for CloudMSP, has a more positive view on the state of IT-telecom convergence.
“I am a master agent with more than 90 percent of our partners being MSPs and VARs,” Ponts said. “The telecom industry historically was a pure sales model with very little technical training. But successful telecom agents saw that there was more opportunity in the channel building long-term, significant books of business across multiple vendors.”
In today’s increasingly cloud-centric market, Ponts expects the teaming of telecom and IT to flourish.
“In a cloud, line-of-business application movement where 73 percent of decisions are being made by department stakeholders, the roles have blurred,” he said. “Not because of disparate technologies, but because of how customers are purchasing the first applications from the solution provider and every subsequent application after that.”
“One event is not a trend, but rapid success of the new combined organization could spark interest, so expect to see a number of organizations watching this closely for success to see if they need to make their own moves,” Sobel said. “It seems like a good idea. Now let’s see if more organizations embrace it.”
“The telecom and IT channels are very different culturally and in how they conduct business,” April said. “But a deal like this may be a driver to move the market forward together. It could be an indicator that things are changing.”
Ponts expects to see a significant uptick in IT and telecom mergers and acquisitions over the next couple years.
“The distributor will be stronger; purchasing or merging with master agents,” Ponts said. “They can converge technical abilities while delivering better training around business acumen and sales efficiencies. Master agents have worked in the recurring income model since the beginning. Their DNA will assist the distributor in positioning and training partners adjusting to reoccurring revenue. Additionally, master agents have hundreds, and some thousands, of existing agents under contract, which helps the distributor create immediate scale. The success of all solution providers and agents moving forward depends on good marketing, business solution training and integrated solutions, which puts a lot of pressure on vendors to stay relevant.”
Five Fast Facts on the ScanSource-Intelisys Deal
1. The all-cash transaction includes an initial purchase price of approximately $83.6 million.
2. ScanSource, Inc. (NASDAQ: SCSC) is a global provider of technology products and solutions, focusing on point-of-sale, barcode, physical security, video, voice, data networking and emerging technologies from approximately 400 vendors and sold to approximately 33,000 reseller customers.
3. ScanSource has approximately 2,100 employees worldwide and is a Fortune 1000 company (No. 685) with fiscal year 2015 net sales of $3.2 billion.
4. Intelisys Communications is a leading technology services distributor of business telecommunications and cloud services. Based in Petaluma, California, the company has approximately 120 employees, more than 130 supplier partners, and over 2,400 sales partners.
5. With 2015 gross commissions of $120 million, Intelisys distributes services for the world’s leading telecom carriers, cable companies, cloud services providers and technology partners through the channel’s top producing sales partners.
