Brian Riggs
Brian is a member of Ovum's Enterprise team, tracking emerging trends, technologies, and market dynamics in the unified communications and...
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Brian Riggs | August 19, 2012 |


Vertical Communications Hopes to Out-ShoreTel ShoreTel

Vertical Communications Hopes to Out-ShoreTel ShoreTel Fully redundant networking is one of the elements that the veteran VOIP startup is using to stay in the game.

Fully redundant networking is one of the elements that the veteran VOIP startup is using to stay in the game.

Recently, I took a stroll down Memory Lane courtesy of Vertical Communications. It's a company that I tracked back in the day, when an IP-based PBX was both radical and revolutionary, and when it was still unclear if Cisco's acquisition of teeny-tiny Selsius would result in them being taken seriously in the market for business telephony systems. It was a dynamic, exciting time for several years. There seemed to be an endless stream of IP PBX start-ups setting up shop: AltiGen, Artisoft, Comdial, Merlot, NBX, Pingtel, Praxon, ShoreTel, Vodavi, Vertical Networks.

Then Cisco sold its 200,000th IP phone. Then its millionth. Then Avaya, Nortel, Alcatel, Siemens, and the other stalwarts of the PBX industry started to release their IP-based systems. Throw in a couple economic dramas that froze IT spending and made start-ups seem like a less-than-safe bet for companies investing in new voice systems. And Cisco's two millionth IP phone sale. And Microsoft, OCS, no Lync. And Cisco's five millionth phone.... And long story short, the prospects of IP PBX start-ups quickly became less than rosy.

To their credit, several of the developers that first cropped up in the IP PBX heyday are still kicking around. ShoreTel is the most visible one I can think of, and arguably the most successful. AltiGen, which is regularly recognized as one of a handful of developers whose contact center software runs with Microsoft Lync, is still very much a player. The ghost of Pingtel lives on in Avaya Cloud Connect. (Avaya's hosted service is in part based on Pingtel code that came with the Nortel acquisition. And then there's Vertical....

Vertical spent the years following the IP PBX boom undergoing a series of corporate transformations. COO Rick Dell mentioned a set of investors--LG Electronics (whose LG-Ericsson joint venture recently introduced a PBX of its own), as well as Vertical founder Bill Tauscher, and another individual investor from Phoenix. (I would have asked the identity of the latter, but "the investor from Phoenix" sounded wonderfully mysterious and I wanted to keep it that way.) These investors bought out Vertical Networks and relaunched it as Vertical Communications. More or less at the same time Vertical acquired several of its struggling competitors: Artisoft, Comdial and Vodavi.

The Vertical Communications of today is privately held, so no details on revenues were provided in the mini-analyst event the company hosted in California this month. Dell did say that the company has recently become profitable following several years of heavy R&D investments. Sales are mainly through one- or two-tier distribution with the exception of large customers in the retail sector that make up 25% of the company's business and tend to have a direct relationship with Vertical.

A lot of the R&D investment that I mentioned centered around the product line consolidation that necessarily follows significant M&A activity. All legacy voice systems from Comdial, Vodavi, Artisoft, and Vertical Networks have been retired. Vertical Communications still supports existing installations, but sales and development on them have ceased. The Vertical Communications portfolio now centers around Wave IP, a PBX appliance whose code base has its roots in Artisoft TeleVantage but is now a distinct platform. This is Vertical's main go-to-market solution for SMBs, enterprises, distributed businesses, and vertical industries--companies requiring a fairly sophisticated set of communications applications. It can scale up to 500 users, but is typically sold to businesses within the 20-200 user range. MBX and SBX, Vertical's other two platforms, have their roots in Vodavi technology but, again, have morphed into distinct platforms. These are Vertical's key system platforms for SMBs (up to 200 users for MBX) and small businesses (up to 20 users for SBX) needing more of a plain-vanilla telephony system.

R&D activity has also focused on mobility, resulting in mobile client software that makes all voice, IM and other features available on iOS and Android devices. And Vertical has instituted an all-inclusive licensing model that Dell says "has propelled our growth in the past 24 months." Sheila McGee-Smith detailed this when Vertical Communications was in her neighborhood last week, so I won't delve into it. On the product development roadmap: Mobility software for Vertical's contact center and vertical solutions, something that is cloud-related but is otherwise hush-hush, and fully redundant networking for Wave IP that out-ShoreTels ShoreTel at a lower price point than ShoreTel currently offers.

Not on the Vertical Communications roadmap--and this surprises me--is support for server virtualization. Using hypervisors to run its communications software on industry standard servers in data centers doesn't seem to jibe with Vertical's all-in-one appliance-based approach to communications solutions. At least some vendor-sponsored reports are reporting an uptick in virtualization adoption among SMBs. Hopefully these aren't the same SMBs considering Vertical Communications' solutions.

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