Economy’s Effects on Agents Varied

It’s almost become cliché for telecom agents to see the bright side of a worsening economy, just as survival became a badge of honor for those who weathered telecom’s nuclear winter. But optimism does not produce easy revenue. Analysts say businesses’ IT departments are cutting expenses and agents see evidence of that in longer sales cycles and fewer hardware sales. At the same time, though, existing customers are adding or expanding services – bandwidth and outsourcing, in particular.

Consider a tale of two partners. Ed Bernstein and Brad James have worked together for 13 years in Southern California. Bernstein is president of Communication Planning Resources Inc., and James owns master agency James Communications. Bernstein serves as a subagent for James. Each refers his customers to the other, as Bernstein handles the hardware side of telecom and James oversees the carrier and data services aspect.

Since the beginning of the year, Bernstein has lost 25 percent to 30 percent of his business as big-ticket orders come to a halt. He used to profit off the 80-100-phone segment. “That is dried up,” he said, adding, “I do a lot more small [sales] to make the same dollars.”

James’ revenue has dwindled, too, although at a much lesser rate of 2 percent to 3 percent as some customers downsize or close shop. At the same time, James’ sales are growing 5 percent to 6 percent because existing clients add services and new ones sign on for more cost-effective options. For example, they might have been considering adding PRIs or data circuits, but now are choosing something else. This fluctuation has created gains of 5 or 6 percent. “I expect my business to be up about another 7 percent to 10 percent this year,” James said.

The contrast stems from Bernstein and James’ main areas of expertise and analysts’ recent findings corroborate their experiences. So do the experiences of other agents.

Services comprise the fastest-growing vertical in telecom, Compass Intelligence reported in March. Services will rise 5.1 percent in 2008 as IT spending totals $231 billion, the firm reported. However, that increase will come as annual services spending temporarily slows, said Amy Cravens, contributing analyst. “In the past, there has been a strong parallel between total growth in the economy and growth in IT spending,” said Cravens. “IT budgets are vulnerable.”

However, Stratecast, a division of Frost & Sullivan, said there still are ways to make money. The economy will push people to choose wireless over wireline, use VoIP and step up Internet video use, the firm found.

"Every economic scenario involves threats as well as opportunities," said Pete Dailey, senior research analyst of Stratecast. "Some industry participants will stick their heads in the sand and pretend