Siemens Enterprise Communications is currently in a state of limbo, because corporate parent Siemens AG is in process of looking for someone to buy the communications business unit. There are rumors of an announcement coming any day, but until that day comes, Siemens Enterprise Communications must bear the burden of being an unwanted child. When this is combined with the fallout from last year’s corporate bribery scandals in Germany, it’s a wonder Siemens Enterprise Communications is still the leading European market CPE system supplier and is holding its place (if barely) among the leaders on this side of the Atlantic.
The Siemens product portfolio includes several highly competitive offerings in a crowded field, including the carrier-grade HiPath 8000 SIP communications system capable of supporting up to 100,000 line stations, and OpenScape--a high-performance unified communications solution that can also be deployed as a middleware server for other software vendor application packages.
During the past decade, Siemens Communications, the US-subsidiary of Siemens Enterprise Communications, has lost North American market share and stature, though it remains a strong global competitor. A few reasons why Siemens has been in a protracted slump: delayed product introductions; Euro-centric product development and marketing programs; and a distribution strategy that needed more “feet on the street.”
Siemens would likely have retained market share if its HiPath 4000 and HiPath 8000 IP telephony systems were faster to market with full performance capabilities: the HiPath 4000 initially required circuit switched connections between IP endpoints and had too many types of gateway board options; the early releases of HiPath 8000 did not have the same level of generic software features as the HiPath 4000 and lacked a full feature survivable remote media gateway option.
When Siemens did announce or make available new product offerings, the European market was usually the first recipient; the North America roll-out was usually delayed a few months, despite North America being the leading-edge market for IP telephony systems and associated applications.
Siemens Communications was also hurt by a distribution strategy that relied heavily on Norstan Communications to cover a large geographic area of North America. Norstan was the largest Siemens dealer going back to Rolm days more than 20 years ago, and for years Norstan sold only Siemens PBXs for enterprise customers. Times changed, however, and Norstan eventually added Nortel and Cisco product to its portfolio.
Blackbox’s acquisition of Norstan in 2004 did not have a major effect on Siemens, but Blackbox’s subsequent acquisition of Nextira One in 2006 did create problems. Nextira was one of the largest Nortel distributors and also sold Cisco product. The Siemens product offering was suddenly no longer the one at the top of the totem pole for Blackbox. Siemens had to scramble to add new dealers to sustain its sales efforts, but still cannot match the third party distribution network of its strategic competitors Avaya, Nortel, and Cisco. Fortunately for Siemens it never abandoned its direct sales/service operations. This remains a competitive advantage they should promote and leverage more than they have.
During the past few years NEC Unified strengthened its position in the small system KTS/Hybrid market while concurrently losing a sizable percent of its enterprise-level PBX market share. NEC claims it is the global enterprise telephony market leader based on 2005 and 2006 line shipment data released by Gartner, although NEC will not confirm the Gartner data to this writer. Based on North American shipment data only, NEC has about 10% of the total CPE market (ranked fourth) and less than 5% of the PBX market (ranked sixth).
There are at least three reasons for its weaker showing in the higher end of the enterprise communications market: a very weak marketing effort for its UNIVERGE SV7000 roll-out a few years ago; virtually no upgrade migration path from its large installed base of NEAX2000 and NEAX2400 PBX models to the purer IP-centric SV7000; and relatively weaker application solutions (contact center, unified communications) than several of its strategic competitors.
NEC failed to learn the lessons experienced by Nortel when it introduced its Succession 1000 platform: a large number of customers want to migrate their paid for digital line circuit cards and associated telephone instruments to the newer generation IP telephony system platform. It has taken a few years, but NEC will very soon offer its customers smoother upgrade migration paths for its customer base to its next generation intermediate and large market IP telephony system offerings. The upcoming announcements should strengthen NEC’s enterprise market position after several years of decline.
NEC is also in process of addressing its marketing shortcomings. For the first time, NEC’s enterprise communications business has established a revamped marketing organization that will coordinate activities on a global level. Someone may finally have recognized that NEC’s competitive position in North America is not comparable to its home market position in Japan, where it is the undisputed market leader and where its announcements and activities are closely followed by customers and competitors alike.
NEC has tended to get lost in the North American market where traditional competitors, such as Avaya and Nortel, and newer competitors, such as Cisco, get most of the media attention. Shedding its techno-centric approach to the market in favor of more innovative marketing activities is necessary for NEC to reverse its decline at the higher end of the market.
Regarding applications solutions, NEC has worked hard to improve its contact center solutions and recently announced several major enhancements to its unified communications offerings, including stronger relationships with Microsoft and IBM. Several months ago NEC acquired Sphere Communications, a mid-1990s startup that initially designed an ATM-based telephony system that later morphed into an IP-centric platform.
Sphere’s new role is to provide a variety of unified communications and SOA-based application options working behind NEC’s IP telephony system offerings. NEC may have to go into marketing overdrive to educate customers and consultants about its new and improved communications application offerings, but at least it has real product today to back up its claims.
