Rest of the Pack
There are many other system suppliers hoping for a slice of the North American enterprise communications market pie, including several with strong global presence or name recognition. Among these competitors are those climbing the market share ladder, such as ShoreTel and 3Com; competitors who have fallen down the ladder, such as Ericsson and Aastra Intecom; and those who have not yet been able to grab a firm grip on the ladder, such Alcatel-Lucent.
The company currently ranked seventh among the enterprise system suppliers is ShoreTel. Though it is not yet a global powerhouse or a household name, ShoreTel has managed to survive and succeed in a highly competitive market against many companies far larger in size and resources. ShoreTel had a successful IPO last year and is well known in the industry for receiving more industry press than their size would seem to justify.
The system supplier established itself by targeting a customer market niche characterized by geographically distributed small/medium line size facilities with basic telephony requirements. ShoreTel’s fully distributed design architecture is ideal for this market niche, but its moderate-performance applications portfolio has somewhat limited appeal to customers with sophisticated contact center and unified communications needs.
Many question if ShoreTel has the resources to compete against Cisco, Avaya, and other players with deeper pockets as the unified communications market continues to evolve, especially with someone like Microsoft biding its time before full market entry. Only time will tell if ShoreTel will be remembered as a flash in the pan or an established market competitor.
3Com entered the voice communications market when it acquired NBX Systems in 1999. Last year, 3Com signed a definitive merger agreement to be acquired by affiliates of Bain Capital Partners. The agreement also calls for affiliates of Huawei Technologies to acquire a minority interest in the company and become a commercial and strategic partner of 3Com.
The primary focus of the new 3Com organization will be enterprise networking with emphasis on the growing Chinese market. There is no indication that the company will diminish its interest in the enterprise communications market, although this market may be a cause of concern in the future. In the past few years, 3Com has been able to do reasonably well for a new player in the basic telephony small line size segment of the market, but has yet to establish itself as a force in the more intensively competitive higher end market segment with a greater emphasis on advanced peripheral applications.
For 3Com to be successful in the large systems market, it needs to address three issues: marketing communications; distribution channels; and applications solutions. Regarding the first, 3Com has recently re-established its consultant relations program in recognition of the role consultants play in the higher end of the market. And though the current 3Com website has improved during the past few years (it is one of the cleanest looking, less cluttered websites this writer navigates with frequency), more detailed IP telephony system and product documentation wouldn’t hurt (including diagrams and photographs).
Most of 3Com’s existing dealers are accustomed to selling systems to small size customers (typical 3Com IP telephony system is about 60 stations), and for most of these dealers to compete in the large system market is a totally different ballgame. This is a lesson Mitel and Toshiba both learned the hard way when they first went up market (Mitel eventually succeeded, but Toshiba did not).
3Com was able to expand its distribution network last year through its venture with IBM to sell its VCX solution on the computer manufacturer’s System i Platform. The server-focused dealers need to be trained in the ways of voice communications and will primarily target medium line size customers; addressing the more complex requirements of larger, multi-premises customers will be a somewhat more difficult task.
To compete at the higher end of the market, 3Com must enhance its applications portfolio and provide sufficient dealer training in support of the applications. The system supplier currently re-packages a variety of third party solutions for contact center, mobile communications, and unified communications.
For example, it markets IBM Sametime with the System i™ Platform (although not a particularly viable option if the customer is a Microsoft shop). 3Com still has a way to go to be on par with the leading system suppliers who market and sell a richer applications portfolio of their own design and development.
Ericsson and Aastra Intecom have each seen better days in the North American PBX market. Ericsson has far greater presence and market share in other global market regions and Aastra (through its Matra Communications operations) is a strong player in Europe.
Ericsson’s PBX market downturn in North America coincided with a corporate decision to devote ever-increasing resources to the wireless carrier market. The strategic decision to divest itself of direct sales/service operations was the point of no return for the North American market. This was followed by staff downsizings, delays to replace the aging MD 110 PBX platform with the IP-centric MX-ONE, and a failed attempt to set up a master distributor to create and support a dealer network. There are currently no signs that Ericsson’s stated plans to leverage its strong relationships with cellular carriers to help market and sell its enterprise offerings have borne fruit.
Aastra Intecom was relatively dormant for a few years in the North American PBX market as many original IBX platform customers migrated to competitors’ IP telephony system offerings at an alarming rate. After Aastra acquired the EADS Enterprise Telephony Business unit, including Intecom, at the end of 2004, Intecom’s management staff was harshly downsized over time and press, consultant, and industry analyst contact virtually stopped. A decision had to be made: Continue marketing an existing IP telephony system that could not satisfy the very large port requirements of numerous remaining customers; redesign the system; or start from scratch.
Instead of investing substantial resources in designing and developing a competitive product of their own, Aastra opted to work with Broadsoft to bring to market the new Clearspan softswitch solution. Aastra Intecom will likely have a difficult time attempting to recapture lost market share in the current competitive market environment, and will need to increase its marketing communications severalfold merely to re-establish itself as a market player.
Alcatel-Lucent is one of the strongest enterprise communications system competitors outside of North America, but here, it has failed miserably at establishing a strong foothold. In virtually the same time period it took Cisco to go from a standing start to first place among PBX system suppliers Alcatel-Lucent has barely made a dent in the market.
Its failure to even become a second tier competitor is hard to fathom, taking into account the fact that Alcatel had a very competitive PBX offering with a strong applications portfolio when they re-entered the North American market in 2000. In contrast, Cisco’s initial product offering was, to put it kindly, a mess. Alcatel-Lucent has had some noteworthy (and highly self-promoted) sales successes, such as Clark County (Las Vegas) School District and University of Pittsburgh, but its current North American PBX market share is hovering at about 1%.
It took Alcatel several years to establish a semblance of a viable distribution network, but its relationship with Nextira One went sour and its relationship with Verizon was as an also-ran behind Nortel and Cisco.
The company’s marketing efforts have been like a roller coaster with a series of hirings and downsizing. Alcatel-Lucent recently confirmed its past marketing failures when it stated during a consultant conference call that plans were in place to significantly increase marketing staff and program dollars. The grades Alcatel-Lucent received in the recent consultant survey reflect how badly things have been going, because Alcatel-Lucent’s consultant relations program was ranked ninth and overall support services ranked tenth. Grades for both efforts were below average. Just as startling were lower grades for Alcatel-Lucent product and application offerings than those offerings deserve.
Alcatel-Lucent’s enterprise business is overshadowed by the company’s carrier and wireless operations, a scenario similar to that at other full-line telecommunications equipment providers like Ericsson and Nortel. During the past few years Lucent Technologies decided to divest itself of its enterprise business (Avaya), although following its merger with Alcatel they were back in the enterprise business.
Two years ago, Siemens AG made a momentous decision to totally withdraw from the telecommunications equipment business despite 160 years’ industry experience dating back to early telegraph days. There is no indication Alcatel-Lucent will again divest itself of its current enterprise unit, but unless significantly more resources are allocated to its North American enterprise communications business, the result would be virtually the same.
