Should the Mitel Purchase Offer Impact My Consideration of a ShoreTel System?
What impact do the ongoing Mitel/ShoreTel acquisition developments have on an organization’s communications systems procurement?
I'm working on a project in which the client will be acquiring a new UC system. It's done the due diligence and narrowed the field to three contenders, one of which is ShoreTel. Last Monday it hears the news that Mitel made an offer to buy ShoreTel and even though the company's board has since refused the bid, the looming question remains: What impact does this news have for organizations that are considering the purchase of a ShoreTel system?
With most acquisitions, the purchasing company initially says, "We don't want to make a lot of changes." But within a year or so, it usually changes many things anyways. Typically, we changes to personnel, followed by changes to the product and possibly the distribution strategy. Mitel has been making adjustments to its distribution channel over the past 2-3 years, so it's reasonable to anticipate some churn here.
Mitel has had a history of growth through acquisition. It acquired Inter-Tel in 2007 and Aastra early in 2014. Mitel is clearly in growth mode, and its press release regarding the Aastra acquisition stated that it "is driving consolidation in the US$18 billion business communications market." So what can we learn from past performance?
Lessons from the Archives
The Aastra acquisition greatly increased the Mitel market share overseas (now No. 1 in Western Europe and No. 5 globally), so it's easy to understand the strategy behind this move. In addition, the Aastra system, now known as MiVoice Enterprise, is targeted for organizations with more than 7,000 endpoints, giving Mitel a play in the very large system space. Mitel has made Aastra SIP phones available on all systems.
The Inter-Tel acquisition more closely resembles the ShoreTel situation. Today, the former Inter-Tel product still exists as MiVoice Office and is targeted at smaller organizations, while the original Mitel system is now known as MiVoice Business and is designed to serve larger businesses or those that want a virtualized system. The company has continued to develop both products (from a software perspective) while streamlining the phone instruments so they work on both systems.
Is It Likely They Will Do the Same with ShoreTel?
That's hard to say; the ShoreTel product line appears to have a great deal of overlap with the existing Mitel products. With this acquisition Mitel may be going after ShoreTel's customers and distribution network -- which is primarily U.S.-based -- rather than its telephony technology.
So what does all this mean to anyone who is considering a ShoreTel purchase? Practically speaking, at this moment, it means nothing. An offer has been made, and rejected; this doesn't change anything. However, if Mitel doesn't purchase ShoreTel, it's likely that someone else will. Many industry watchers consider ShoreTel as an acquisition target, and the move by Mitel confirms this. So it's likely that changes will be coming to ShoreTel sooner or later.
In that vein, what are the risks associated with an acquisition of ShoreTel (by Mitel or anyone else)?
- Anytime there is an acquisition, there is a time during which the change consumes a great deal of internal resources for both companies. They often are slower to respond to customers during this temporary period of intense change.
- The product may be discontinued due to overlaps in the product line. Although Mitel has a history of protecting the customer in this situation with a migration path, there is no guarantee that Mitel (or any other company that acquires ShoreTel) will continue the product moving forward from the acquisition.
- Software development slows or stops as products are consolidated. In Mitel's case, it's hard to believe that it would continue development on three separate software streams. At some point consolidation would have to occur, and the new kid on the block could be least likely to be funded.
- Customers may be forced to migrate to a new platform or lose manufacturer support. This is most likely to occur in the 3- 5 year time frame; it will take time to integrate ShoreTel products into an existing product portfolio and create a migration path (or not).
- Parts availability could be limited to secondary marketplace in 5-7 years if the ShoreTel product is discontinued.
- Support may be limited in 5-7 years as personnel with knowledge of the system become scarcer.
- The most risk is at the 3-5 year time frame and beyond.
- Expected system life may be shorter than normal.
- There may be possible changes in the distribution channel and partner situation that could impact provisioning of day-to-day system support.
"SCTC Perspectives" is written by members of the Society of Communications Technology Consultants (SCTC), an international organization of independent information and communication technology (ICT) professionals serving clients in all business sectors and government worldwide.