Q and A: Mitel CEO Rich McBee
A wide-ranging discussion includes cloud and virtualization strategies, go-to-market, economic trends, and possible further acquisitions.
In January 2011, Rich McBee became the CEO of Mitel. It seemed like an odd career choice. The stock had lost more than half its value in the past seven months. Just a few months earlier, the prior CEO was honored as CEO of the Year by the Ottawa Business Journal. The prior month (December 2010) Mitel missed its Q2 numbers, causing analysts to downgrade the stock, and Microsoft launched its competitive Lync 2010 solution. McBee would be joining the Mitel board, which included company founder and well-established entrepreneur Sir Terry Matthews as well as venture capital investors.
McBee, a 20-year IT and telecommunications veteran, left his position as president of the Communications & Enterprise Group of Danaher Corp., where he managed revenue of more than $700 million. He had become an employee of Danaher when it acquired Tektronix in 2007. McBee had been hired into Tektronix Product Marketing and over his 15-year term had worked his way up to General Manager.
Prior to joining the private sector, McBee was in the Air Force, having graduated from the Air Force Academy with a Bachelor of Science in 1986. He later received a Master's degree in Business Administration from the Chapman School of Business and Economics.
Although Mitel is headquartered in Ottawa, McBee has set up shop in Dallas, and now several other executives are based out of the Texas office. He has an 18-year-old daughter and 12-year-old son who keep him mobile, including coaching youth football. He enjoys the outdoors, and McBee and his wife Alisha are both master fly anglers.
McBee describes himself as a technology early adopter with an extensive collection of computer and electronic gadgets. He also considers himself highly competitive. When it comes to his views on the industry, our conversation went like this:
DM: As a telecom veteran that's new to our industry, what has surprised you the most about the enterprise UC segment?
RM: One of the biggest surprises for me was how many old systems are out there. I'm a technology gadget kind of guy. I haven't counted recently but I probably have a double-digit number of personal devices on or near me at any given time, and I want to upgrade as soon as the beta is available, but for many of our customers, it takes them a long time to adopt new technology. There are always those customers who want it yesterday, but most are extremely thoughtful and realize the decision they are making, they will live with for a decade or more.
There's a light bulb moment when you realize that our industry is not about technology. It's about what a technology investment can do to drive growth, revenue, productivity, and process improvements for a business. That's the same way Mitel runs. We look at every dollar we spend--and I'll admit we've got some museum-worthy systems in our company (not our UC!) that probably should be upgraded. But at some point good enough is good enough if it gets the job done. My litmus test for spending on new systems is--do they have customer impact, and, will they generate growth? If so, they get spending priority. It's the same for our customers.
DM: Your first external message as CEO was that Mitel won't compete with its channel. Yet Mitel still directly sells both products and its cloud services. Also, Mitel's cloud services compete with service providers using Mitel technology. Can you clarify your go-to-market approach?
RM: I made it clear out of the gate that Mitel needed to align with our channel, and as a result we have made big changes to move the majority of our direct accounts to our channel partners. We were also clear that there would be house accounts, namely certain accounts that we sell direct to and those accounts that have complex financial leasing programs where it doesn't make sense to transition them to the channel. I make no apologies for that. That number is capped and will remain capped, and frankly I haven't heard many, if any, channels confused or complaining about our approach there.
With respect to competing in or for the cloud, I think that's a red-herring created by the overly analytical. Everybody is seeing a portion of their business go to cloud. If you aren't thinking about it, you're going to be left behind quickly. Mitel has been a CLEC for years, which is an advantage, not a threat, for our channel. Truth is, many of our most progressive and ambitious service provider partners are actively planning or evaluating how to offer their own cloud services, powered by Mitel. That we can play both offense and defense is a huge competitive advantage for Mitel, and for our partners.
DM: Mitel has been very aggressive with virtualization, a bit ahead of the market. It's a lot of change for an established channel network. How do you encourage your partners to keep up?
RM: Simple age-old Business 101 principle--follow the money. Mitel channel partners who lead with virtualization enjoy a greater than 20% annual growth rate in their Mitel business, more than double the industry average. Those who don't leverage virtualization are declining at the exact same rate. That's not because of anything we're doing--it's because that is what the market is looking for.
End customers are calling the play for our partners, and they are increasingly asking about virtualization. The interesting part is that customers who give us the full drill on cloud or virtualization are as likely to go with an on-premise solution as they are to adopt a cloud solution, but they want to know how they're going to get to the cloud once they are ready to make the transition, and whether or not Mitel, and our channel, can take them there.
When I got to Mitel, I was really surprised by the longevity of our channel--in some cases, stretching back to the founding of our company 40 years ago. We value our partners and the people we work with, and we know that a change in our business or offering has a direct impact on whether they remain in business. That's a big responsibility, so we do everything that we can to get partners up to speed and current through our certification program.
Make no mistake about it though, to compete and win I need partners that are premise experts, cloud experts and virtualization specialists all at the same time--and our partners need that too. Doesn't matter how big or small you are--it's a hard truth for all businesses that if you're not growing, you're dying. If you're a vendor or an SMB channel, and you're not adapting to that market change, your competitors are going to send you to the wood chopper.
DM: The industry has gone through some big revolutions: TDM to VoIP to UC, mobility, and cloud. What do you see as the next big transition?
RM: At the risk of sounding simple, simplification is the next big transition for our industry. Making what we've got really work seamlessly. The truth is as an industry, we're not there yet.
I'm less interested in chasing theoretical technical rainbows and more interested in simplifying how customers deal in reality. We can try to predict and guess what the next big technology wave will be all we want, but the only true barometer that accurately gets it right each time is customer demand. So, we follow the customer.
Mitel's vision is to enable our customers to communicate and collaborate, anywhere, over any medium, with the device of their choice. And we're passionate about trying to make that seamless, which is easy to say but very hard to do. Pants first, then shoes.
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