Partner Channel: Framing Up The Opportunities

Posted: 11/2001

Partner Channel

FRAMING UP THE OPPORTUNITIES
By Tara Seals

Newer technologies such as IP-based virtual private networks (VPNs) may win more ink and praise, but frame relay remains the tried-and-true solution that draws customers. Channel partners can cash in on this lucrative data transport service as, more than ever before, small and mid-size companies want to connect remote offices and salespeople.

Frame relay is a wide area networking (WAN) technology that provides dedicated point-to-point private connections with a guaranteed quality of service. Hill Associates Inc., a telecom training and education firm, this year projects a global revenue stream of almost $12 billion from about 57,000 worldwide customers and an annual growth rate of 48 percent in customers and 77 percent in ports.

U.S. Frame Relay Services Revenue
(in US$ Billions)
Source: Vertical Systems Group (www.verticalsystems.com)

Convergence and Collaboration

Frame relay pricing is based on the cost of the access circuit, the number of ports for physical connectivity and permanent virtual circuit (PVC) pricing based on the committed information rate. A frame solution also presents an opportunity for partner collaboration because it consists of service and of products.

"ARG likes to partner with network consultants and systems integrators for most of our frame applications," says Greg Praske, CEO of Virginia-based master agency Association Resource Group. "There's more to the solution than just the circuit and the bandwidth. Usually, there are router, firewall and LAN issues."

Rather than simply providing a connection to the router, by partnering with a system integrator or network consultant, agents can give customers a connection "all the way to the desktop," says Praske.

"We're proficient in working with the frame providers in completing paperwork and tracking the order through the process," says Praske. "It's a win-win for everybody -- the customer gets a complete solution, the network consultants and systems integrators earn business doing what they do best. And, we take care of the portion of the business that we do best."

Ilene Goldschmidt, director of agent marketing for Global Systems Telecom Inc. (GSTI), says this sort of partnering also makes it easier for the agents to sell the service.

"Even agents with no data sales experience whatsoever can sell data products," she says. "Most carriers provide agents with data sales and implementation engineers to help design, sell and implement a data solution. Many agents also align themselves with systems integrators who provide the equipment and design, while the agents provide the solution for the bandwidth needs."

Some say partnering on these opportunities is mandatory. "It is critical that our agents utilize the resources we provide to them," says Brad Miehl, president and CEO of master agency TheAgentsNetwork Inc. "We do not want agents designing frame relay networks when, in fact, that may not be their core competency. It is important to have network design engineers available to assist the agent and customer with the design process."

Applications

Wide area networking is frame relay's signature application. Network design can save customers money by consolidating communications.

"Companies with multiple locations are looking for frame to share information between offices," says Jay Lewis, president of Illinois-based agency VisionCom Inc. "In addition, they can have an Internet T1 at the main office and all the off-site locations can use that one Internet connection via their frame connection. This cuts down on the need to have Internet access at each location."

Also, once a company has access to the local loop at each office, it can add dedicated long distance on the same circuit.

"If the main location has a full T1 of frame and a T1 of Internet," explains Lewis, "each off-site location can have four channels of frame and 20 channels of dedicated voice and only pay one local loop charge."

The most successful agents are ones who can provide solutions to their customers not just the data circuits, says master agent Miehl. "Part of that solution is understanding the customer applications so that the right network design is implemented."

The stability, reliability and inherent security of frame relay continues to drive a strong demand for the service especially for companies with hosted applications, says Scott Yelton, director of data sales at Business Telecom Inc. (BTI).

"We are seeing many organizations that did not have frame services in the past implement frame networks based on centralized application service provider hosting," says Yelton. "Whether the company is hosting their own applications or having someone else host them, they want a dependable service like frame with predictable erform to run applications at their remote sites."

BTI takes a hands-on approach to designing, implementing and serving customers, by assigning a dedicated account and engineering team to each client. In a new beefed-up program, data sales specialists work to train channel partners and to provide support during the installation process.

Competition

"Frame is a very popular point-to-point data product right now," says Miehl, "but do not be surprised if VPN eats into some of that market share. VPN is evolving quickly and I believe it can provide a great customer solution."

Qwest Communications International Inc. focuses on IP VPNs to drive opportunity, but also has national frame offering with best-of-breed SLAs and reporting. The offering however is built to allow customers to easily migrate into a VPN environment.

"Bottom line is that on a national basis when you get into a VPN environment we can really dominate in that space, and it's a much better solution," says Michael McDonnell, vice president of the Qwest business partner program (QBPP). "We're seeing a lot of people that are very interested in moving from frame to VPN."

But while frame relay faces increased competition from VPNs, it serves a different niche in some cases, Praske says. "Depending on bandwidth requirements, frame may be very cost efficient compared to a VPN solution," he says.

"At higher bandwidth, VPNs generally will be more cost efficient if the locations on the network are in major cities, near the PoPs, where the local loops will cost very little," he explains. However, he says, if the locations are outside the major cities, frame may provide higher bandwidth at lower costs. "At lower bandwidths, most VPN solutions have relied on DSL, which has basically imploded outside the RBOCs. So, we're once again finding frame a competitive product at lower bandwidths," he says.

It's not necessarily an either-or proposition; sometimes frame relay complements a VPN installation.

"For larger companies with multiple locations, many need to have a fully redundant network," explains Praske. "In those cases, it's not uncommon to run both a frame and a VPN network."

Or, to run a hybrid one. First-generation VPNs often are built on frame relay networks. Nasdaq, for example, uses a VPN-over-frame network construction. Infonetics Research predicts a $48 billion market for VPN services and equipment by 2005 -- part of that market includes frame relay.

"That frame relay continues to play such a vital role in today's high-speed, high-volume data networks is a testament to the strength and flexibility of the technology," says Mike Walsh, president of industry group the Frame Relay Forum (FRF, www.frforum.com). "The FRF thinks this is a perfect time to look at why frame relay has been so successful and where the technology can still lead us."

Hill Associates does not believe frame relay will fade away as enterprises move to IP-based VPNs. A key to frame relay's longevity is its simplicity, says Hill Associates; frame relay uses a "dumb protocol" that requires no special configuration to run various types of traffic.

Another advantage over IP VPNs is users' reluctance to change from something that works. "People aren't too willing to jump because changing a frame relay network is not the easiest thing in the world," says Randy Berlin, founder and president of FrameRelay.Net. "There has to be an underlying factor-company consolidation or price.

Indeed, despite next-generation IP VPNs increased adoption rates, perceived security and performance issues ward some off. They use the public Internet as a backbone and Internet Protocol Security (IPSec) to overcome security concerns.

"It's new technology, very expensive [and its] applications more limited," says Sprint's Turner. "As it is proven over time it will be shown to be reliable, but it's not now a known quantity."

Markets

While larger customer likely will migrate to IP VPNs, frame relay is finding a new home down market. "Frame is not relegated to any size user. It's not unusual for us to quote a three- to five-node opportunity," says Qwest's McDonnell. "It's a great transport and in-franchise opportunities tend to be more in the SMBs. Frame has been used by a lot of the larger players but those are the guys that are looking at migrating to VPNs.

"Frame is going to have its place. We see it going away with larger customers. It's just adjusting into another market segment, and partners are the driving force behind that. We're going to be pushing more and more into that SMB space as a company and our partners will be our primary focus."

Gary Kloss, senior group manager for Sprint Corp. portfolio management and channel strategy, agrees that SMBs are a primary opportunity. He also cites customers expanding existing frame relay networks and those that are migrating from private line to frame relay as additional prospects.

Jim Turner, a senior program manager for Sprint, estimates that at a compound annual growth rate (CAGR) of 15.5 percent over the next five years, frame relay will be a $15 billion market by 2005.

"For our channel partners that are focusing on data solutions, frame relay is a reliable proven data transport solution that they can offer to their end customers," he says. "The big thing here is that you really have to delve deep and ask probing questions to determine where the customer is today and how you may be able to help them with a new or improved solution that will better meet their needs."

Sprint offers certification programs for channel partners to sell frame relay. In the small and medium-sized business segment, indirect channels sell more than 50 percent of Sprint's frame relay.

It's no wonder as customer reluctance to change data service providers represents a long-term opportunity for a channel partner.

"Agents must realize, customers do not like to change their data providers unless there is a quality issue," says GSTI's Goldschmidt. "An agent can almost guarantee a long time residual by securing a data deal.

For channel partners, frame relay is a high-margin, price-negotiable item, which makes for flexibility in serving customer needs.

GSTI provides multiple options for data solutions. Its product managers request multiple carrier quotes and then negotiate for lower pricing with the carrier with the best solution.

"Successful data agents learn that when requesting data quotes from carriers, the first quote offered is not the last," says Goldschmidt. "Carriers enjoy high margins in data and are often willing to special price to secure the deals. If there is a competitive situation, carriers will often lower their prices on other services such as local and long distance just to get the data."

A new venture, FrameRelay.Net was founded to help agents to sell the service. Launched in October 2001, the portal, which is affiliated with national agency DiscountCall.com, is a matchmaking service that connects leads with agents and salespeople automatically and in real time.

Founder Berlin says it found it couldn't close data leads that weren't in its home area of Atlanta because it did not have prior relationships with the customers. "It goes back to Sales 101, which is the relationship," he says.

FrameRelay.Net visitors can request up to three quotes. Which agent or partner gets the lead depends upon customer needs, geography and other tiebreakers. While FrameRelay.Net does not close leads itself, it makes money from listing fees from partners. The company pre-screens every sales representative listed in the engine.

"We've done our homework. We do add to the process on our side," says Berlin. "We're not a quoting business. We ask them up front if they're consultants. If they just want a quoting service, we're the wrong place."