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  1. #1
    Join Date
    Mar 2002
    Posts
    328

    Colo selling to your customers direct

    Found out today that one of my clients has bought 200 Megs of BW and 3 Racks from the colo where I was hosting them (reselling to them ).

    In this case the colo directly went to my customer and sold them BW and rack so now my client is going to move from me. Granted nothing prevents the colo from legally doing this but is this a common practice?

    Jay

  2. #2
    Join Date
    Jul 2003
    Location
    Connecticut
    Posts
    3,038

  3. #3
    Join Date
    Dec 2001
    Location
    Toronto, Ontario, Canada
    Posts
    5,954

    Re: Colo selling to your customers direct

    Originally posted by jay23
    Found out today that one of my clients has bought 200 Megs of BW and 3 Racks from the colo where I was hosting them (reselling to them ).

    In this case the colo directly went to my customer and sold them BW and rack so now my client is going to move from me. Granted nothing prevents the colo from legally doing this but is this a common practice?

    Jay
    The real question is, did the customer solicit services from the colo, or did the colo directly solicit the customer? Thats the only important question in my mind. Your provider cant reasonably be expected to turn down new business if it walks into their lap, but at the same time, its common courtesy not to solicit your customers "end users".

  4. #4
    Join Date
    Jul 2005
    Posts
    30
    Really, I can't think of a reason why someone would buy 200Mb and 3 racks from a reseller. At least there are very few resellers that I would trust if I had a need for that much space and BW, so I would guess it's more an issue of an inevitable upgrade than a behind the back move (unless you were providing them with that much already..).

    In any event, would the colo even know they were your customer? You're reselling to them, so unless they have their own access cards and visit the site often enough (or the colo looks at their traffic in detail), they might not have known they were your customers.

  5. #5
    Join Date
    Aug 2002
    Location
    Seattle
    Posts
    5,512

    Re: Colo selling to your customers direct

    Originally posted by jay23
    Found out today that one of my clients has bought 200 Megs of BW and 3 Racks from the colo where I was hosting them (reselling to them ).
    That's what I like to refer to as "hardcore lame."

  6. #6
    Myles poses the important question. If the colo approaches your customer then you should be upset. If the customer approaches the colo it is a little different. Our policy is to first find out what the issue is and see if we can help their reseller/customer save the business. At least half of the time it was just a missunderstanding and everything stays as it was. If you feel like your provider purposely took them from you it is time to reconsider your provider.

    When a customer of a customer of mine comes to me to get service I pay the a finders fee of 100% of one months MRC to the customer. They brought the customer to the colo. Without them you would have never gotten a chance. In reality our customer was losing the business either way, but if they moved to another provider they would not have gotten a referral fee. Also, if the loss of business means your customer needs to downsize their commitment the provider should let them.

    With my T-1 provider I worked out an agreement that if one of my customers goes direct with them it lowers my commitment to them. I know that if a customer grows to needing 10 T-1s they are going to be able to get them at the same price I can so I worked out this agreement before signing up. Sure, I dont want to lose the business, but in this case my customer saves money, I lose some margin but dont take a loss, and my provider is happy. The alternative is my customer going to another facility to get access to my T-1 provider. Now I am out the revenue on the colo and bandwidth, and I have T-1s I have committed to. Consider working language like this into your reseller agreement. Also try to get the agent fee in addition to lowering your commit.

    This is going to happen no matter what you are reselling. I suggest you address it before you sign up. After that it gets much harder to negotiate it.


    jync, I see where you are coming from when talking about some resellers. Many have forgotten to be "Value Added Resellers." The ones we have that add value to the product never have customers contacting their providers.
    Last edited by pvanmeter; 07-29-2005 at 08:20 AM.
    Looking for next opportunity

  7. #7
    Even if the colo didnt approach the client, if they knew at any point they were your client then Id find a new provider myself. Once they learned he was your client they should have had the client deal with you only. They will get the same money in either situation but to you it has an impact. I wouldnt do business with a colo that accepts clients of mine.
    and what are you looking at?

  8. #8
    Join Date
    Jan 2004
    Location
    Texas
    Posts
    1,556
    It's been said before, but I'll say it again.. The colo may not have even known it was your customer. The customer may have called them up and gotten the price and never said they're in the facility already. Now, if they went to your customer and tried to undercut you, then that's a different story and in extremely poor taste.
    James Lumby

  9. #9
    As a reseller we ought to be adding enough value for this not to be attractive to our clients - if they really want to buy bare colo direct and worry about their own router/security etc etc, good luck to them. I know that for the markup we charge, our customers get to leverage our 2/3 million worth of Cisco gear, expertise etc. 200 megs isn't a whole lot when a DDoS comes in...

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