What Happens When a Vendor Quits the Market?

What Happens When a Vendor Quits the Market?

Vendors are dropping like flies. Many, including legacy PBX manufacturers, have survived this long through partnerships and M&As, but Panasonic’s slow exit and Avaya’s multiple profit warnings are signs that their tacked-on cloud strategy may be too little too late.

Things are no easier for the cloud-first vendors. Just this month, RingCentral was listed as a “zombie” stock by equity research firm New Constructs, who warned that the company is a “cash incinerator” in real danger of its share value dropping to $0. Even more concerning, StarLeaf, a vendor that owned and managed its own cloud servers, ceased trading this month after entering administration in July.

And this is just the beginning. Rising interest rates, shrinking margins and a change in consumer trends mean this is a particularly volatile time for companies with a pile of debt and little available cash. As consumers settle on their provider of choice and investors become savvier, we’ll only continue to see vendor growth slow, as with Cisco and Zoom, and share prices dip, leading to more providers going bust or choosing to leave the market.

The Effect on Partners

What does this mean for you? As a reseller or MSP, when any vendor quits the market, you are affected. If you’ve chosen the right provider, it could translate into new opportunities. If you haven’t and it’s your partner that ceases trading, prepare for a bumpy ride.

You Get Little Notice

When Panasonic announced it was pulling out of the UK communications market in 2020, its partners found out only a few hours ahead of industry news outlets. In fact, Matt Dansey, Senior Solutions Specialist of Readycrest Ltd, recounts:

“Half an hour before that meeting, I got an email cancelling it. I had no idea why. Later that morning, they informed me what was happening. My immediate thought: What do we do? We were in the process of installing two 1,000-user systems, and we were waiting for crucial information. While they claimed they would give us enough time to let people know, it was only about 3 ½ hours before Comms Weekly found out, and at that point, everyone knew.”

Whispers, rumors and share prices may give you a hint at what is coming, but since companies explore every last avenue to stay in business, they’re unlikely to give you much notice. Once the official announcement is out there, your customers will come straight to you for answers and reassurance. You’ll need to figure out quickly how the change affects each client, especially in the case of a staged exit. Most businesses will want or need to change providers right away, so be prepared to reach out to a new vendor without delay.

Risk of Severe Exposure

If you are reselling products and services on a CapEx model, cutting financial ties with your ex-vendor will not be a simple process. Considering that your clients will have licenses that renew at different times — and that some will have paid for services in advance while others may be in arrears — you will need to review every contract case by case.

The defunct provider will try to collect whatever outstanding balance it can from you and your clients, but it won’t necessarily have enough cash to pay you for any incomplete contract. If a company continues trading while it goes through the administration or bankruptcy process, as StarLeaf did, you can be assured it’s doing so to get as much money from you as it can to pay its creditors. If somehow through this process you find yourself in money, you’ll need to use that cash to migrate your customers to another service.

Parts Become Scarce

When you install hardware, whether it’s a physical PBX, desk phones or mobile headsets, you know that they’ll eventually become obsolete. Every piece of tech has a shelf life, and as long as customers receive the expected value from their purchase, the system will work. But when a vendor pulls out of the market, that expiration date moves up. In some cases manufacturing immediately stops; in others, it’s a few years down the line. In either scenario, the price of parts and replacements is going to increase.

That’s assuming you can even source what you need. You could find yourself promising you’ll continue servicing a system only to discover you can’t find a replacement part anywhere. This means that operating the abandoned system becomes less and less sustainable, with customers furious that the system doesn’t work as it should and your business taking the financial hit, or worse, losing the client.

Support Disappears

When a company goes through liquidation, everything stops. R&D, tech support – even the website is abandoned. If you’re lucky and the company still operates in other markets or in other industries, you may still have support for a set amount of time. Other than that, you’re left on your own to tinker and develop integrations or just coax the aging system to continue functioning.

Because even the integrations provided by the vendor may suddenly stop working without their updates. Third-party solutions will keep adapting to new trends and technologies, and they will not waste their time on patches for a system they know is no longer viable. So, if you keep your customers on the old system, you will become your own tech, IT and R&D department, putting more demands on your time and cutting further into your margins.

Security Issues Increase

The lack of updates not only affects integrations — it leaves hardware and company systems open to attack. The longer a system or technology is available, the more time hackers have to learn how to exploit its weaknesses. With no appropriate patches or updates available, there is no native solution to keep your customer’s system safe. This means you’ll have to install and manage firewalls, VPNs and/or SBCs, increasing the likelihood that integrations with third-party devices and software will fail.

But wait, what if you made sure you chose a vendor that was known for its security? Well, unless it’s secure by design and uses a large global provider, like AWS, you may still be in trouble. StarLeaf attracted large government and commercial customers on the basis that their self-hosted cloud system was secure, but at the end of the day, it could not handle the sudden increase in demand during the pandemic. Now their independent cloud system, however good it was, is no longer active.

You Lose Trust

Customers come to you because you are an expert in your field. Considering the number of options in the UC&C market, they expect you to have the knowledge to connect them with the best and most reliable solution that fits their unique needs. Finding out that their provider will no longer exist may cause them to doubt your expertise and business-savvy, especially if they experience any downtime or loss of features.

Choosing a New Vendor

First of all, if you find yourself in this situation, don’t panic — all is not lost. Remember that your focus should always be on the customer experience. Reach out to your clients and reassure them that you are there to help them move to a new supplier. Then do so with the least amount of disruption possible.

The real trick, however, is finding a new vendor that is going to make it through the twists and turns of the current market. So, when vetting a new potential vendor make sure they have:

  • Low or no debt
  • Cloud-first technology
  • OpEx, not CapEx, pricing
  • Easy porting
  • Integrations
  • Unique offerings
  • In-house R&D
  • A consistent track record of innovating

In short, you need a company that is scalable, flexible and forward-facing with ambitious plans for the future.

Wildix ticks all these boxes. As the first WebRTC UC&C solution, we have seen where the market is heading and we prepare our products, and partners, accordingly. With open APIs and a plethora of readily-available integrations, we give you the flexibility to create custom solutions for your customers. Additionally, our sales are 100% channel-led, so we are never competing with you.

Don’t wait till you find yourself scrambling for a new solution. Check out our partner page today and future-proof your business.

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