Competition is building among operators as they restructure their distribution channels in a bid to grab more share in the SME sector.
Factors such as Ofcom’s General Condition 23 and the widening of iPhone distribution have caused networks to u-turn on their previous strategies and pull in their indirect partners.
Operators previously had a reputation for trying to sell their products directly to SMEs, but are now trying to move closer to dealers.
O2, Orange and Vodafone, seen by many in the market as the leaders in the SME segment, have in the past created difficult and complex programmes that have tied their partners to them.
But 2010 will be the year of the SME, say industry observers, and operators’ approaches are changing.
There are two approaches in the market – basic reseller and multi-layered. The biggest operators – O2, Vodafone and Orange – are removing complicated layers in a bid to move closer to distributors and in turn, dealers.
Meanwhile, 3 and T-Mobile are creating a more rigid structure to what was previously seen as a fragmented system. T-Mobile is expected to add more layers to its indirect channel in the coming months.
The operator has already split its indirect business into consumer and business arms, and is growing its business focus. The network currently has T-Mobile business specialists and during February, will launch a programme called the ‘BlackBerry Masters League’, which will be tailored for data specialists.
T-Mobile’s national sales manager of independent partners, John Fannon, who has extensive experience in the indirect channel, says: ‘This programme is a deliberately small and specialised unit that supports our partners that deliver high volume and quality connections.’
Fannon believes structures and categories that enable the best support for the specialised area of the business are vital, and that it is important for a partner to be appropriately placed within a sub-channel.
Meanwhile, Orange has also taken a multi-layered approach and has deeply embedded itself in the indirect channel. It primarily has two dedicated distributors, Midland Distribution and Mainline Communications, part-owned by the operator.
In addition, it has 19 business specialists working with the network directly, and federated business distributors that include HSC and Avenir Telecom.
Vodafone has a similar structure to Orange, but is planning to completely restructure its distribution arm. The operator is likely to streamline and centralise its distribution side, raising questions as to what will happen to Yes Telecom, its dedicated airtime distributor.
O2, which has had a tiered partnership programme in place for several years, has arguably one of the market’s most organised structures. Its route to market in the SME channel is diverse in comparison to some of its rivals’ – O2’s partners are a combination of direct and those who go through distributors.
Reaping the benefits
The different O2 programmes perform different tasks for the business, explains head of SME sales David Plumb.
However, the programmes are not just for the benefit of O2. Companies that sign up to the schemes and commit a certain amount of time and business to the operator also reap the benefits.
Plumb is keen to emphasise that it is a two-way partnership. He adds: ‘The programmes mean we can be clear and transparent and there is no favouritism.’
The thinking behind the schemes, which were launched a few years ago, came from Plumb’s experience in the IT industry, where accredited programmes are long established features for resellers of manufacturers and software products.
It all starts with a recognisable brand, Plumb says, and then several layers and benefits are added to build a solid foundation, tying the partner in and making them credible to a prospective customer.
He explains: ‘It starts with the brand – O2 is a UK top 10 brand, so it has a great customer facing proposition. Then we put them on our website, so customers can check up. We do jointly branded marketing material and all the time we are re-enforcing how good our partners are.
‘There is a very clear commercial advantage, and there are financial benefits from the programme.’
Partners also gain access to tailored benefits such as exclusive handsets and the opportunity to look after sections of O2’s customer base.
Plumb adds: ‘Exclusive products are great, but the most important thing is investing in partners for the long term... and it enables them to feel as if they are part of the O2 family.’
The ‘long term’ is a key factor for all the networks. They are looking forward and putting facilities in place to ensure they can continue to attract business and crucially, keep it.
3 is now on the verge of launching its own partnership programme, with its own USP, concentrating on the small business part of the market.
3’s principle is ‘that there is an opportunity in the market place and we are focusing on the ‘S’ in SME’, says 3 head of business Paul Foley.
Similarly to bigger rival O2, 3 will be working with a select number of dealers through their distribution partners. The operator is currently holding talks with a number of distributors, including HSC and Fone Logistics, over the new partnership programme.
Echoing the agenda of other companies, Foley says: ‘Operators need longevity for a long-term, stable partnership and it is about how we make sure they [dealers and distributors] have great foundations.’
However, 3 will be selective on who it works with – a different approach to some of the other networks’ multiple strand strategy.
Foley says: ‘I work on the “vital few” principle because if you give it to everybody it becomes diluted.’
The pillars of 3’s programme will include: dedicated channel management, dedicated channel marketing support – there will be a marketeer for each company – enhanced commercials and base protection.
There may be different approaches to organising dealers and distributors, but all networks are looking to lead in the indirect channel. As operators look towards this market segment as an area of growth, they must find the best model and focus for their businesses quickly.
Competition will be fierce during the course of 2010 and those who have planned carefully and have a clear focus for the future will be the ones who emerge ahead of the rest.