ShoreTel Continues Its Steady Climb
ShoreTel has come a long way on being aggressive, relentless and smart. Why stop now?
ShoreTel may still be a small company, but in many ways it's in an enviable position: It weathered the downturn and returned to profitability in the quarter ending in March 2011 (its fiscal 3Q)--a quarter earlier than it had previously projected. Q/Q revenues have been growing continuously and in the 30 percent range year-over-year, and it seems to be solidifying its market position: In the recently-published research from Eastern Management Group, ShoreTel was one of only two vendors besides the Big Two (Cisco and Avaya) to grow its market share in 2010 (the other was Aastra).
At ShoreTel's annual partner conference in Chicago this week, new CEO Peter Blackmore set the stage for the next chapter in ShoreTel's story, which basically is: More of the same.
"We're gaining every quarter, and I do not see anything to stop that momentum," Blackmore told the audience of partners.
ShoreTel has always positioned itself as the scrappy newcomer, consistently claiming that they can play with the Big Guys; Blackmore continued that by contrasting the smoothness of ShoreTel's recent path, with the travails of Avaya (IPO and debt) and Cisco (missed targets, falling stock price, closing business units, etc.)--"All those boardrooms and management teams are distracted," he said.
The window of opportunity won't be open forever, he added: "Eventually, those competitors will get their act together.... Let's not miss out on this opportunity."
Blackmore laid out a four-part strategy:
1.) U.S.--With an audacious claim that other ShoreTel execs would echo over the rest of the event, Blackmore said his goal is to get ShoreTel to 20% market share. ShoreTel execs were claiming a current U.S. market share of 9%, which is well above where independent analysts like MZA peg them. I'm highly skeptical of their market share numbers (not to mention the reachability of their 20% goal), but it isn't unreasonable to expect that ShoreTel can continue growing its share.
2. International--Here, Blackmore was more low-key, conceding that ShoreTel needs to take a more deliberate approach to growing in existing markets (48 countries currently), with an emphasis on where they're already strong, like the UK, Canada and Australia. "I need your patience and understanding," Blackmore said. "We can't go everywhere at once." As he'd told me earlier this year, Blackmore said ShoreTel will likely move in India before going after China, where he has extensive executive experience. "We're not ready to go into China yet, but we'll get there," he told the audience.
3.) Mobility--ShoreTel already made a big move here by buying FMC vendor Agito last year, just before Blackmore took over the company. ShoreTel kept all of Agito's engineers and its two top executives, and plans a "significant increase in R&D dollars" for mobility in the coming year, according to Blackmore.
In a followup session to his opening keynote, Blackmore said ShoreTel is sticking with its plan to keep its mobility component vendor-agnostic, rather than folding it into the ShoreTel platform and bundling the whole thing as a proprietary solution. The bet is that ShoreTel can gain more business overall if it gets Mobility into a Cisco or Avaya voice account, and builds a relationship that leads to future voice sales--as opposed to relying only on the ShoreTel platform base to sell Mobility solutions. Furthermore, the Mobility platform can scale from 50 to 5,000 seats, giving ShoreTel a quicker path into the Fortune 500.
Another reason for not bundling Agito into the ShoreTel platform was quite astute, and showed that ShoreTel is thinking beyond the current generation, even if most of its products are going into fairly traditional voice scenarios today. As CMO Kevin Gavin explained in a followup meeting with analysts, "We really don't want the ShoreTel brand to stand for PBXs, and certainly not small PBXs. We want the ShoreTel brand to stand for 'Brilliantly Simple'," he said, citing the company's ubiquitous tagline.
4.) Cloud--This was the least-developed theme of the four. Blackmore called cloud "both an opportunity and a threat," but made it clear he wanted to hear from the partners about what cloud strategy makes the most sense for ShoreTel to pursue. Blackmore noted that some partners are selling ShoreTel as a service, but left open whether this was a strategy he expected to be adopted more widely.
ShoreTel's is a 100% indirect sales strategy, so growing the channel is key to its success, especially since it "continues to be under-represented in so many parts of this great country," as Blackmore put it in his keynote. Later, in a meeting with analysts, he added that, "What we need to do is attract the very large Cisco and Avaya channel partners." He conceded that this was "hard," but said ShoreTel was at least starting to build a pipeline of "interested partners."
I still think ShoreTel's pretty unlikely to hit their 20% market share goal any time soon, but the company has come a long way on being aggressive, relentless and smart. Why stop now?