On Monday, NEC communicated with its customers and partners that it intends to exit the premises-based private branch exchange (PBX) business in all markets outside of Japan. This is a striking announcement, as it wasn’t that long ago that NEC was generally considered the world’s largest provider of PBX and key systems.
NEC is a remarkably diversified technology company. There’s nothing quite like it in the US, it overlaps with IBM, Boeing, Honeywell, GE, and more. It serves many sectors, including aerospace, agriculture, finance, retail, and of course, telecom. NEC was established in 1899 with some funding from Bell’s Western Electric. It was the first Japanese joint venture with a foreign company.
Although NEC was a giant in the global PBX and key system business, it never directly entered unified communications as a service (UCaaS). It formed a strategic alliance with Intermedia to create UNIVERGE BLUE, and this partnership continues. NEC’s end of life announcement will no doubt reinvigorate the UNIVERGE BLUE opportunity.
UNIVERGE BLUE offers native UCaaS and CCaaS, and a hybrid model with NEC PBX systems via the UNIVERGE BLUE Bridge. The service also includes several features not commonly found in competitive UCaaS offers such as archiving, file sharing, faxing, and anti-virus solutions. NEC is committed to providing comprehensive support for these migrations. UNIVERGE BLUE also natively supports NEC endpoints.
NEC’s journey reminds us how difficult the transition from UC to UCaaS was for the PBX makers. Alcatel-Lucent Enterprise (ALE), Aastra, Avaya, Mitel, NEC, Nortel, ShoreTel, Toshiba, and Unify had limited success with the transition to UCaaS. Cisco and Microsoft were successful, but they made significant acquisitions (BroadSoft, Skype, and Metaswitch).
At first, the timing of this news seemed strange. Premises-based systems are doing better than many expected. On the other hand, there’s a lot of soul-searching occurring in our post-pandemic world. Premises-based UC is generally considered a mature technology. With so many digital and wireless options, enterprise voice communications are not as critical as they once were. Evidently, NEC decided to focus on other priorities.
The challenge for voice today is that it’s just one component in a larger business communications puzzle. IT decision-makers must solve for voice, video meetings, chat, screen sharing, and mobility. UCaaS providers are in a better position to address this larger solution than PBX makers. This is also part of the logic behind the Avaya-Zoom partnership announced last month.
However, not every enterprise needs all those channels. Hospitals, an NEC stronghold, focus primarily on voice. NEC provides them with a highly reliable, premises-based PBX that integrates with other hospital systems (this is probably why Intermedia launched a new healthcare vertical last month).
Many of these NEC customers will choose UNIVERGE BLUE, but it’s surprising that NEC has not outlined a path for customers who want to stay with premises-based systems, they will need to find a replacement PBX vendor. The three big global vendors are Avaya, Cisco, and Mitel, but there are also numerous regional players such as Alcatel-Lucent Enterprise and Huawei, and even open-source options such as Asterisk.
Cisco continues to offer premises-based solutions but is focused on its Webex cloud-delivered offerings. Avaya is primarily focused on contact center solutions.
I would not be surprised if NEC and Mitel strike a deal. Mitel has previously acquired Aastra, ShoreTel, Toshiba, and Unify, and has a global focus on UC. Mitel struck its agreement with Toshiba after the vendor notified its customers that it was exiting the key system business.
End-of-life transitions are unpredictable. I suspect most customers will migrate to UNIVERGE BLUE, but the base is large and diverse. Numerous vendors will target these customers, and NEC hasn’t provided a migration path for those who wish to continue with premises-based solutions, at least not yet.
Dave Michels is a contributing editor and analyst at TalkingPointz.
