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What's Next for Mitel?
Mitel yesterday announced the completion of its acquisition of ShoreTel, plans that were initially revealed at the end of July. As I've written previously, this move, when paired with Mitel's other acquisition of Toshiba North American telephony seats, makes Mitel a name for itself as a standard-bearer for UC consolidation. But now that these acquisitions are behind us, what's next for the company gunning for cloud UC leadership?
I had the opportunity recently to talk with Mitel president and CEO Rich McBee and CMO Wes Durow about closing the ShoreTel acquisition and the path forward for the voracious acquirer. I also had the opportunity to talk to some ShoreTel end users and channels, as well as some partners that have both companies' solutions in play today. The result is an interesting view of a company mid-transformation, with both a short- and long-term strategy.
We live in an interesting industry in interesting times. For a hundred years, first telecom and then enterprise telecom was an industry that was incredibly fragmented -- through geographic, regional, and size segmentation. This led to an industry with many small players; the dominant gorilla/chimpanzees as anticipated from "Crossing the Chasm" never appeared. However, VoIP and cloud have changed the industry, first eliminating many of the geographic barriers and now eliminating the size segmentation with cloud multi-tenant deployments. The result is that small players are rapidly losing the ability to compete in a market where historical segmentation barriers are eroding.
McBee saw this as both an incredible opportunity as well as a great strategy. With Mitel generally considered as a "Monkey" (chasm speak for a company not one of the top 3 or 4 in an industry), the segmentation of being a North American company focused on mid-sized businesses was disappearing as a defensible segment. McBee and his team at Mitel set out on a strategy to be a consolidator, to aggregate together installed bases from multiple smaller competitors into a market force that can compete with the likes of market leaders Cisco and Microsoft.
With the closure of the ShoreTel deal, the first phase of that strategy seems to be reaching fruition. With Toshiba and ShoreTel, Mitel has achieved a position that has the potential for being in the market for the long term. With this acquisition and the acquisitions that proceeded it, Mitel is now in the third or fourth position globally, No. 1 in Europe, and No. 2 in UCaaS cloud subscriptions.
In any good strategy, there are stages. Clearly, in the Mitel strategy, acquiring many installed bases is great for short-term revenue, but does not ensure long-term success. In talking with McBee and some ShoreTel customers/partners, three things emerged that are the next big part of the plan:
- Keep the Installed Bases Happy -- Clearly the first step is assuring that the installed bases of the acquired products see this as at least neutral and hopefully positively. Assuring the base that their platform is not going to be abandoned is critical. In talking to ShoreTel customers and partners, this emerged as a key factor in their excitement about the offer. One customer indicated that their recent purchase of a multi-user ShoreTel system was its biggest commitment since a Nortel PBX purchase 30 years ago. Another customer said he was excited because he felt that Mitel had the scale to succeed and was committed to maintaining his investment going forward. This was re-iterated by ShoreTel VAR channels -- the relationship with the end customers is highly around protecting the existing investment. Everyone I talked to had heard about the Aastra acquisition and that these products were still available and supported, and that is going a long way to assuring the ShoreTel base that they need not worry.
- Enhance the Premises PBX with New Capabilities -- Another topic that came up in my discussions was Mitel's strategy with CloudLink: enabling new services for any of the platforms in the base. CloudLink is the answer to maintaining different bases and adding value to all through the cloud. One of the ShoreTel customers I talked to, an organization with over 4,000 user seats, indicated that this was where they saw growing, augmenting their existing premises with cloud enhancements.
- No-Brainer Migration Path to the Cloud -- Finally, the handwriting on the wall is clear: Cloud is getting to be a big thing. The key to success in cloud is scale. Just look at the cloud leaders in other industries; Google in search, Facebook in social, Salesforce in CRM. With this acquisition, Mitel is positioned to grow for success in cloud. The ShoreTel and Mitel UCaaS subscriber base combination is number two in the UCaaS market. And, as I discussed previously on No Jitter, the cost of transitioning existing premises customers to the cloud may be significantly less than trying to win them on the open market.
In our discussion, McBee had a clear message: Don't be surprised if Mitel does not make another acquisition in the near term. The focus is clearly on the above steps -- consolidating the platforms, organizations, and channels, as well as driving for CloudLink-based values and cloud migration. If there is a great deal out there, Mitel is interested, but for now is digesting the scale and mapping the direction.
A couple of years ago, McBee openly talked about Mitel becoming the consolidator in our industry. Many in the industry scoffed that Mitel could not raise the funds, find the deals, or successfully bring them together. Clearly, McBee and the Mitel team have risen to that challenge. They have consolidated Aastra and emerged as the largest player in a European market they were barely in a few years back. They learned that going into mobile networks was a step too far and re-focused on the core enterprise market. After reaching a scale that puts Mitel in the top three globally, the focus now is on the operational challenges of delivering value to the customers, both through the existing premises platforms, and, ever more, through the cloud.
While challenges abound, the Mitel team has demonstrated it has the wherewithal to get to this point, giving great assurance to the ever-increasing number of customers that are in the Mitel arena that they picked the right vendor.