Dave Michels
Dave Michels is a Principal Analyst at TalkingPointz. His unique perspective on unified communications comes from a career involving telecommunications...
Read Full Bio >>

Dave Michels | February 27, 2012 |


ShoreTel and M5: 10 Talking Points

ShoreTel and M5: 10 Talking Points There are some big issues here, but all in all it was an astute move for ShoreTel and M5. It should also provide some interesting responses from competitors.

There are some big issues here, but all in all it was an astute move for ShoreTel and M5. It should also provide some interesting responses from competitors.

Earlier this month, ShoreTel announced its intention to acquire M5 Networks. The highlights of the deal include an M5 valuation of $160M (estimated to be about four times revenue), of which about half will be paid in cash. ShoreTel intends to operate M5 as a subsidiary, with key M5 management remaining. This was, in my opinion, a fairly significant announcement for ten reasons:

1) Acknowledgement of Hosted Voice
Hosted voice, enabled by VoIP, has been around for a little longer than a decade. Until VoIP, telecom was severely limited by geography. There were workarounds, but VoIP is naturally geo-independent. Now, a service provider can serve the nation from just one data center. A recent report by Gartner shows the IP Voice-as-a-Service market growing at a 36 percent compound annual growth rate in North America through 2015, to $2.2 billion. But, as Gary Kim points out, when compared to the entire sector, hosted voice could represent less than six-tenths of 1 percent of US industry revenue.

The major premises-based vendors have been slow to acknowledge hosted voice. ShoreTel is the first among them to acquire its way into the hosted space. Mitel and Siemens Enterprise offer hosted solutions based on their own technology. Microsoft appears poised to enter the space as well. Service providers use the products of numerous vendors to create a hosted offering, but for the most part the premises-based providers have remained on the periphery of this emerging sector.

2) Mergers and Acquisitions Likely to Continue
The M&A activity appears to be accelerating. Most hosted voice service providers continue to experience double digit growth, yet the market remains highly fragmented and ripe for further consolidation. Here's a snapshot of some recent activity:

* Cbeyond acquired Aretta Communications in 2010
* Comcast acquired New Global Telecom (NGT) 2010
* Warwick Valley Telephone acquired Alteva in 2011
* Broadsoft acquired iLync Communications (2011)
* West Corporation acquired Smoothstone IP (2011)
* Stage 2 Networks acquired the hosted division of CTI (2011)
* Microsoft acquires Skype (2011)
* Megapath acquired 5280 (2012)
* Shoretel and M5 (2012)

3) Hosted Voice isn't just for SMB
8x8, as a public company, reveals hosted voice is largely adopted by small businesses. 8x8 has on average about 9 lines per customer. M5 appears to be servicing larger accounts, with an average customer size of 30 lines per customer.

Larger companies are embracing various forms of cloud computing and outsourced services at an accelerated rate. As a result, the larger carriers, including AT&T, BT, and Verizon, have entered the sector. Hosted voice and hosted UC are becoming legitimized rather quickly--the sector may see some explosive growth as the average customer sizes head north.

4) Technology Matters
Although M5 initially purchased its platform, it migrated to its own technology. ShoreTel stated that it valued many aspects of M5, including its revenue/customers, technology, and management. ShoreTel determined that acquisition outweighed building its way into the market. To become a hosted service provider, one must either purchase or develop a platform (or purchase wholesale capacity). Most purchase the software, but some including M5, Fonality and Thinking Phone Networks built their own (as did Mitel and Siemens Enterprise).

Whether the software is purchased or developed internally probably doesn't matter much to the end user, but will have a significant impact to the buyer and valuation. For a premises vendor, ownership and control over the platform will be critical. Carriers and peers will want to consolidate their platform, thus a purchased platform will be preferable.

5) Marketing
One key opportunity ShoreTel intends to seize upon is the branding opportunity of a highly fragmented hosted market. Other than a few carriers that are targeting large enterprises, very few hosted providers are well known nationally. One of ShoreTel's key strengths is marketing and branding--there are various indicators that the company has much broader awareness in the market than its size might otherwise dictate. ShoreTel intends to rebrand or expand the M5 brand with the ShoreTel name, as well as likely expand internationally. Conceivably, ShoreTel/M5 could become one of the best known brands in the hosted sector.


Check out this recap of Enterprise Connect Orlando 2017, and register now to join us in 2018 and save $200 off or get a Free Expo Plus Pass.

Enterprise Connect Orlando 2018
March 12-15 | Orlando, FL

Connect with the Entire Enterprise Communications & Collaboration Ecosystem

Stay Up-to-Date: Hear industry visionaries in Keynotes and General Sessions delivering the latest insight on UC, mobility, collaboration and cloud

Grow Your Network: Connect with the largest gathering of enterprise IT and business leaders and influencers

Learn From Industry Leaders: Attend a full range of Conference Sessions, Free Programs and Special Events

Evaluate All Your Options: Engage with 190+ of the leading equipment, software and service providers

Have Fun! Mingle with sponsors, exhibitors, attendees, guest speakers and industry players during evening receptions

Register now with code NOJITTEREB to save $200 Off Advance Rates or get a FREE Expo Pass!

March 7, 2018

Video collaboration is experiencing significant change and innovation-how can your enterprise take advantage? In this webinar, leading industry analyst Ira Weinstein will present detailed analysis

February 21, 2018

Business agility has become the strongest driver for enterprises to begin migrating their communications to the cloud-and its a benefit that enterprises are already realizing. To gain this benefit

February 7, 2018

Enterprises are starting to grasp the critical importance of security and compliance in their team collaboration deployments. And once the risks are mitigated, your enterprise can integrate these n

February 16, 2018
What trends and technologies should you be up on for your contact center? Sheila McGee-Smith, Contact Center & Customer Experience track chair for Enterprise Connect 2018, gives us the lowdown.
February 9, 2018
Melanie Turek, VP of connected work research at Frost & Sullivan, walks us through key components -- and sticking points -- of customer-oriented digital transformation projects.
February 2, 2018
UC consultant Marty Parker has crunched lots of numbers evaluating UC options; tune in for what he's learned and tips for your own analysis.
January 26, 2018
Don't miss out on the fun! Organizer Alan Quayle shares details of his pre-Enterprise Connect hackathon, TADHack-mini '18, showcasing programmable communications.
December 20, 2017
Kevin Kieller, partner with enableUC, provides advice on how to move forward with your Skype for Business and Teams deployments.
December 20, 2017
Zeus Kerravala, principal analyst with ZK Research, shares his perspective on artificial intelligence and the future of team collaboration.
December 20, 2017
Delanda Coleman, Microsoft senior marketing manager, explains the Teams vision and shares use case examples.
November 30, 2017
With a ruling on the FCC's proposed order to dismantle the Open Internet Order expected this month, communications technology attorney Martha Buyer walks us through what's at stake.
October 23, 2017
Wondering which Office 365 collaboration tool to use when? Get quick pointers from CBT Nuggets instructor Simona Millham.
September 22, 2017
In this podcast, we explore the future of work with Robert Brown, AVP of the Cognizant Center for the Future of Work, who helps us answer the question, "What do we do when machines do everything?"
September 8, 2017
Greg Collins, a technology analyst and strategist with Exact Ventures, delivers a status report on 5G implementation plans and tells enterprises why they shouldn't wait to move ahead on potential use ....
August 25, 2017
Find out what business considerations are driving the SIP trunking market today, and learn a bit about how satisfied enterprises are with their providers. We talk with John Malone, president of The Ea....
August 16, 2017
World Vision U.S. is finding lots of goodness in RingCentral's cloud communications service, but as Randy Boyd, infrastructure architect at the global humanitarian nonprofit, tells us, he and his team....
August 11, 2017
Alicia Gee, director of unified communications at Sutter Physician Services, oversees the technical team supporting a 1,000-agent contact center running on Genesys PureConnect. She catches us up on th....
August 4, 2017
Andrew Prokop, communications evangelist with Arrow Systems Integration, has lately been working on integrating enterprise communications into Internet of Things ecosystems. He shares examples and off....
July 27, 2017
Industry watcher Elka Popova, a Frost & Sullivan program director, shares her perspective on this acquisition, discussing Mitel's market positioning, why the move makes sense, and more.
July 14, 2017
Lantre Barr, founder and CEO of Blacc Spot Media, urges any enterprise that's been on the fence about integrating real-time communications into business workflows to jump off and get started. Tune and....
June 28, 2017
Communications expert Tsahi Levent-Levi, author of the popular blog, keeps a running tally and comprehensive overview of communications platform-as-a-service offerings in his "Choosing a W....
June 9, 2017
If you think telecom expense management applies to nothing more than business phone lines, think again. Hyoun Park, founder and principal investigator with technology advisory Amalgam Insights, tells ....
June 2, 2017
Enterprises strategizing on mobility today, including for internal collaboration, don't have the luxury of learning as they go. Tony Rizzo, enterprise mobility specialist with Blue Hill Research, expl....
May 24, 2017
Mark Winther, head of IDC's global telecom consulting practice, gives us his take on how CPaaS providers evolve beyond the basic building blocks and address maturing enterprise needs.
May 18, 2017
Diane Myers, senior research director at IHS Markit, walks us through her 2017 UC-as-a-service report... and shares what might be to come in 2018.
April 28, 2017
Change isn't easy, but it is necessary. Tune in for advice and perspective from Zeus Kerravala, co-author of a "Digital Transformation for Dummies" special edition.
April 20, 2017
Robin Gareiss, president of Nemertes Research, shares insight gleaned from the firm's 12th annual UCC Total Cost of Operations study.
March 23, 2017
Tim Banting, of Current Analysis, gives us a peek into what the next three years will bring in advance of his Enterprise Connect session exploring the question: Will there be a new model for enterpris....
March 15, 2017
Andrew Prokop, communications evangelist with Arrow Systems Integration, discusses the evolving role of the all-important session border controller.
March 9, 2017
Organizer Alan Quayle gives us the lowdown on programmable communications and all you need to know about participating in this pre-Enterprise Connect hackathon.
March 3, 2017
From protecting against new vulnerabilities to keeping security assessments up to date, security consultant Mark Collier shares tips on how best to protect your UC systems.
February 24, 2017
UC analyst Blair Pleasant sorts through the myriad cloud architectural models underlying UCaaS and CCaaS offerings, and explains why knowing the differences matter.
February 17, 2017
From the most basics of basics to the hidden gotchas, UC consultant Melissa Swartz helps demystify the complex world of SIP trunking.
February 7, 2017
UC&C consultant Kevin Kieller, a partner at enableUC, shares pointers for making the right architectural choices for your Skype for Business deployment.
February 1, 2017
Elka Popova, a Frost & Sullivan program director, shares a status report on the UCaaS market today and offers her perspective on what large enterprises need before committing to UC in the cloud.
January 26, 2017
Andrew Davis, co-founder of Wainhouse Research and chair of the Video track at Enterprise Connect 2017, sorts through the myriad cloud video service options and shares how to tell if your choice is en....
January 23, 2017
Sheila McGee-Smith, Contact Center/Customer Experience track chair for Enterprise Connect 2017, tells us what we need to know about the role cloud software is playing in contact centers today.