The Big Squeeze
Players in the middle of the enterprise communications market--Mitel, NEC, ShoreTel and others--are under pressure from both the high and low end as a result of several conspiring factors.
The enterprise CPE voice market is going through a major transition. The pattern of a "Big Squeeze" is clear from Allan Sulkin’s reports of total market share, which are based on actual shipments of the major CPE vendors (his most recent report was last March).
Allan’s data is based on CPE shipments,which means it is missing two major components of the larger telephony market: hosted (non-CPE) and open source (downloads)--both of which are believed to be growing segments. Part of that growth explains why his numbers were 17% lower than the prior year’s report, but the economic situation in 2009 explained a big chunk of that drop as well. It is important to note the shipment data reports do not reflect the installed base. Since the life expectancy of a phone system is 5-10 years, short term shifts in shipment quantities don’t significantly impact installed market share.
In future reports, Sulkin intends to combine Nortel and Avaya. The companies merged earlier this year. As Allan points out, 50% of all CPE sales are likely to be either Avaya or Cisco. That’s impressive. Another impressive component is the sheer size of the "Other" category (stock tip: buy Other). Other includes Alcatel-Lucent, Aastra, 3Com (now owned by HP), Microsoft, Vertical Networks, Iwatsu. some Asterisk offerings, and many other brands with even small shares.
The Big Squeeze refers to pressure on the middle players--those who sit between Avaya/Cisco and "Other". The middle players, based on considerations of their market position and budgets, are Mitel, NEC, ShoreTel, Panasonic, and Toshiba. These companies are under pressure from both sides of the market as a result of several conspiring factors.
1) The Gorillas
Every industry has big players and small players and everything in between. Enterprise CPE voice has more than its fair share of major gorillas--but many of them are not industry leaders (yet). The Gorillas are: Cisco, Avaya, IBM, Siemens Enterprise, and Microsoft. These are enterprise-savvy major players that are throwing their weight into the unified communications battleground. Cisco holds the pole position and is growing; Avaya/Nortel were briefly larger after their merger, but Cisco has eclipsed that. Nevertheless, don't discount Avaya: The company has a huge base, huge channel, and has made huge strides in integrating Nortel.
Siemens is barely out of the "Other" category on the chart, but is serious about growing by leveraging its multi-billion-dollar managed service capabilities. It has aggressive technology and momentum. Sulkin wrote: "Siemens had the strongest relative percent market share gain of any of the top system suppliers".
Microsoft is dead serious about impacting the market. Microsoft is launching its third release (and fourth name) of its Communication Server product, now called Lync.
IBM is taking a very different and questionable approach to unified communications with its Sametime Unified Telephony product for the high end and its Foundations initiative aimed at the SME. It is positioning its Lotus and SameTime systems as critical components to UC (messaging, collaboration, and presence), and is integrating with ShoreTel, NEC, and Broadsoft for the telephony component of the all-in-one Foundations server for SMEs. On the high end, Sametime Unified Telephony shuns the Microsoft approach of entering the market with native call control, instead providing middleware specifically built to integrate multiple vendors' legacy PBXs.
For the other middle players, they need to develop their own technologies or partner with Lotus and Exchange independently. IBM's partners feel the pressure too, as they need to differentiate their solutions while committing to IBM's channel and technologies.
The gorillas are starting to dance, and when gorillas dance, onlookers get hurt! These companies have customer influence, capable channels, big budgets, strong and broad technologies, enterprise focus, and important relationships. ShoreTel, Mitel, and NEC already complain about not being invited to the table enough, and it's going to get harder.