No Jitter is part of the Informa Tech Division of Informa PLC

This site is operated by a business or businesses owned by Informa PLC and all copyright resides with them. Informa PLC's registered office is 5 Howick Place, London SW1P 1WG. Registered in England and Wales. Number 8860726.

Mergers and Acquisitions in the UC World

In light of the announcement this week about Mitel proposing to acquire a key competitor, ShoreTel, it seems timely to discuss mergers and acquisitions--or in other words: How to Get Away With Getting Rid of a Competitor.

I'm all in favor of mergers and acquisitions when they make sense and are done for the right reasons, and where the result is synergy and customer value. Acquiring a company to bring in supplemental capabilities that would be too time-consuming or difficult to build in house is a great way for a company to move forward quickly and remain competitive.

Mergers and acquisitions that provide this kind of synergy can benefit the companies involved and their customers. For example, I consider Mitel's acquisition of Oasys and PrairieFyre as "no brainers," as they provided the company contact center capabilities that they didn't otherwise have.

Similarly, I believe that ShoreTel's acquisition of M5 was also a smart move, as it helped ShoreTel get into the cloud business quickly with a strong product that already had significant market share and presence. Microsoft's acquisition of Skype was brilliant, although I'm still scratching my head about Nokia. Alcatel-Lucent's acquisition of Genesys didn't work out too well, but at least the goal was to bring in contact center capabilities and customers that ALU didn't have. Even Mitel's acquisition of Aastra made sense, in that the companies have strengths in different geographies, providing Mitel with a greater presence in Europe.

However, when a company acquires a main competitor to gain market share or to essentially reduce the number of competitors, it doesn't always work out so well. While it may make shareholders happy, it doesn't do anything to help the company's customers or partners, and most likely hampers innovation.

We can all learn from the Avaya/Nortel experience. Rather than focusing on bringing new products and solutions to the market, the new Avaya was forced to focus on aligning the competing product sets, determining which products to keep and which to kill.

Instead, many customers saw this as an opportunity to switch to a new vendor, generally Cisco or Microsoft. It was sad to see the Bell heritage of innovation slowly slip away as the new Avaya became more focused on integrating the overlapping product lines and turning the Avaya Red and Nortel Blue to a neutral purple.

While many people expected Avaya to establish solid relationships with Nortel partners and capture more market share globally, that didn't materialize. Instead, many Nortel partners jumped ship and switched to other vendors, rather than becoming Avaya partners. Avaya hasn't fully recovered from that costly purchase, and it is in a weaker position than it was prior to the acquisition.

Most analysts and industry observers certainly expect the UC industry to go through a period of consolidation, with more mergers and acquisitions down the road. Consolidation is certainly in order when it comes to the cloud, as the market can't support the current 100+ hosted or cloud-based UC vendors. Some will get acquired, merge with each other, or simply go out of business.

As we're still in early days of hosted UC, acquisitions make a great deal of sense when they provide companies with capabilities they don't currently have, and there's plenty of opportunity for this to happen. For example, I'd like to see RingCentral acquire a hosted contact center vendor to enhance its offerings. In addition, hosted providers such as Comcast and Vonage, which currently lack many UC capabilities, could benefit from acquiring companies such as Fonality or Star2Star. It would also make sense for some of the smaller Broadsoft-based service providers to join forces and have a larger market presence in order to more effectively compete.

Along a similar vein, there can be tremendous value for traditional contact center vendors to acquire WebRTC companies such as Zingaya or Bistri to enhance their offerings. WebRTC will have a significant impact on the contact center market.

Certainly I'd like to see business process and application vendors such as Salesforce.com, SAP, Oracle, and others be more aggressive in the UC arena by acquiring vendors that can UC-enable their applications. Google can and should get into the game more aggressively by acquiring a WebRTC vendor that can communication-enable its applications (Switch Communications comes to mind).

Acquisitions are important and can help companies attain capabilities and channels to help them to be more competitive while providing enhanced value to their customers. Companies that embark down this road need to learn from the past, and to use the acquisitions as a way to enhance their offerings and provide greater value to customers and, of course, to shareholders.

Follow Blair Pleasant on Twitter and Google+!
@blairplez
Blair Pleasant on Google+