AppDirect bought a supplier and the channel has questions to answer

What actually happened

AppDirect acquired CCI Network Services on August 26. The Salt Lake City company provides telecommunications consulting and network services to enterprise and small to midsize business customers and now operates as an AppDirect subsidiary. We found the deal in a private placement database. As of September 11, we hadn’t located a public announcement from either company. Terms were not disclosed.

CCI has roughly 29 employees, but its business goes beyond what a typical agency does. The company describes itself as a multi-carrier provider that designs, provisions and manages voice and data networks using services from a portfolio of carriers. It also describes itself as one of the top wholesalers worldwide. Its catalog includes dedicated internet, broadband, SD-WAN, MPLS, UCaaS (cloud phone systems), contact center, SIP and security, and it has its own agent program. Tower Arch Capital has backed the company since January 2020.

In channel terms, we’d call CCI an aggregator. It packages services from multiple carriers under one contract, gives the customer one point of contact and pays advisors who bring it business.

Two quiet deals that change who owns what

This is the second deal touching the channel this summer to attract little discussion. In June, Digital Realty agreed to acquire Columbia Capital, an investor in communications and digital infrastructure, for approximately $485 million. That put an infrastructure owner in the position of buying a firm that invests in the sector. It drew far less attention than a data center purchase would have.

Neither deal necessarily changes what an advisor sells tomorrow. But both deserve a closer look because they change the relationships between businesses the channel works with.

As distributors consolidate and acquire supply businesses, advisors need to know who owns the supplier being recommended and whether that relationship affects the recommendation.

How CCI fits into the AppDirect acquisition history

AppDirect entered the channel in 2018 by buying master agent WTG and combining it with NeoCloud to form AppSmart. It added Telegration and CNSG in 2019. Last November, it bought NXTSYS, a distributor focused on MSPs. In December, it closed its acquisition of vCom Solutions for more than $100 million. In April, it bought PartnerStack and reported a reach of more than 1,000 technology providers and 14,000 advisors.

The earlier deals expanded AppDirect’s distribution business. vCom and CCI add wholesale buying power and a multi-carrier supply business. AppDirect now has more of its own services to sell through the same distribution business that other suppliers depend on.

What other aggregators will want to know

Aggregators depend on distributors to get in front of advisors. When that distributor buys an aggregator, other suppliers have good reason to ask how things will work:

• Will CCI get preferred placement in quoting tools, catalogs or engineering recommendations?
• Who can see quote and deal registration data?
• Will SPIFFs (sales incentive bonuses), commission tiers or access to solution engineers favor CCI?

These are reasonable operating questions. They don’t require an assumption that AppDirect will favor CCI, and we haven’t found public answers to them.

What it means for advisors

Ownership is worth checking when reviewing a quote. The customer still needs the service that fits. Clear ownership information helps advisors judge the options and explain their choice.