Nortel has seen better days in the PBX market. Although sales of its small system solutions (Norstar and Business Communications Manager) are strong and lead the domestic KTS/Hybrid market, enterprise system shipments have fallen the past two years, and Nortel has lost several market share points to Cisco and Avaya. Nortel’s CS 1000E has certainly seen some major design improvements during the past two years, and Nortel’s close working relationship with Microsoft should have enhanced its market position, yet Nortel’s domestic PBX market share last year was at its lowest level since the late 1980s.
Nortel has not offered any reasons for its declining PBX shipments, but one can speculate that the financial difficulties they experienced a few years are still lingering in the minds of many customers and that some of their largest dealers have been pitching more Cisco voice product instead of a Nortel offering.
Nortel has undergone several major reorganizations the past few years, especially within in its executive management team. The current executive management team includes many recent hires and few with extensive enterprise communications market experience.
The migration of many experienced Nortel enterprise communications employees, especially in the middle management ranks, to greener pastures has not helped the company’s market position. Nortel once had the industry sector’s best marketing team, but times have changed, and recent product announcements and marketing communications efforts have not lived up to past efforts.
Mike Zafirovski, Nortel’s current President and CEO, has made it clear that he wants to restructure Nortel’s revenue base by expanding its services businesses, hence its Integrated Communications Alliance (ICA) with Microsoft focused on the marketing, sale, installation and servicing of unified communications solutions (Microsoft’s, not Nortel’s). ICA results to date appear to have favored Microsoft, because Nortel appears to be sacrificing its own 5100 MCS unified communications solution to promote and sell the Microsoft OCS solution.
Nortel is effectively planting the seeds for its own destruction in the enterprise communications market, because Microsoft has made it clear that OCS will evolve into a full-featured telephony offering that can replace today’s standalone PBX systems, such as CS 1000E. The more OCS systems Nortel helps to sell, install, and service, the fewer Nortel IP telephony systems they are likely to sell in the future.
Perhaps Nortel believes some services revenues will be better than none down the road, but unless Nortel greatly expands its field services operations (especially outside the North American market) this strategy may prove less than successful. Microsoft is also chummy with many of Nortel’s major competitors who also expect to leverage their relationship with Microsoft.
Mitel Networks is like the little engine that could, because while Avaya and Nortel have lost market share points to Cisco, Mitel has managed to slightly increase theirs (exclusive of Mitel’s acquisition of Inter-Tel). The Inter-Tel acquisition doubled Mitel’s revenue base and also enhanced its market position in several ways: a stake in the small system KTS/Hybrid market segment; a nationwide U.S. direct sales/service dealer network with proven success in the marketing/sale of managed services; and an installed base of Inter-Tel digital PBX customers that will potentially migrate to Mitel 3300 ICS platform. Mitel is currently in process of pruning the Inter-Tel product portfolio, but remaining offerings, such as the Inter-Tel 5000 series, will help strengthen the overall portfolio.
During the past few years, Mitel has strengthened its market position by expanding 3300 ICS port capacity and improving redundant design options. They have also implemented several excellent vertical marketing programs, such as hospitality, K-12 education, and retail.
On the downside, Mitel has not been able to establish itself as a strong player in the important contact centers market segment, and needs to strengthen its overall applications marketing efforts to raise customer and consultant awareness levels. Although Mitel had strong showings in the STC/CTCA survey rankings for core IP telephony system and desktop telephone in instruments--fourth and second, respectively--they placed lower in each of the application categories (sixth for contact center; seventh for messaging; fifth for unified communications).
