What 2011 Holds for the Telecom Market: A Look Back and Forward, Part 1: Avaya, Cisco, Mitel, NEC, ShoreTel. It’s time to do some guessing

by Jeff Wiener on January 4, 2011

As 2010 quickly draws to a close it has come time once again to make some predictions about where the telecom and IT market spaces are headed this next year. So with that in mind, as I sit at my desk gazing into my crystal ball, here are my 2011 predictions and picks for next year’s telecom winners and losers…and no, the crystal ball isn’t for sale, but the good news is you can keep reading TheTelecomblog.com for free!

But before looking forward into the future, it’s necessary to look back on what has undoubtedly been one of the telecom news intensive years in recent memory. This past year was particularly interesting because of Nortel’s well publicized 2009 demise, as Nortel’s chief competitors spent considerable money and efforts attacking Nortel’s customer base very aggressively, with the likes of Cisco, Microsoft, Mitel, ShoreTel, NEC, and Toshiba all vying for a piece of Nortel’s expansive market share.

All the while, Avaya, the company that bought Nortel’s assets, spent considerable resources—in both development and marketing dollars—simply trying to hang on to both the Nortel dealer and customer base. With Avaya’s ongoing strategy to produce a product wherein 1 + 1 would equal more than 2 for both the company and its customers, its seems that Avaya has managed to contain the initial losses from its Nortel acquisition and effectively transition some of the former Nortel customer base to Avaya’s own hardware.

In early 2010 Avaya announced a new direction for the company, laying out a product road map that saw the impending discontinuation of the Norstar and Avaya Partner in the SME channel, with eventual product consolidation into the Avaya IP Office family of products. The Business Communication Manager’s (BCM) fate will probably follow the same path in the next few months as Avaya releases its much anticipated IP Office 7, which includes support for the older Nortel M and T series sets. But even with IP Office 7 the question remains, with competitors looking to fill the Nortel void, how much of the old Nortel market share can Avaya hang on to?

Most of the larger competitors recognize the market potential of the old Nortel base and to that end have put some very aggressive transition discounts in place to attract potential customers. For Avaya’s part, while it has an excellent product and a sterling reputation in the market, it will take more than that to full capitalize on its Nortel acquisition.

In order to continue to maintain its current market share, Avaya will need not only an excellent product and a great reputation, but the dealer channel to sell its product as well. So even with the majority of the old Nortel dealer base now selling Avaya’s “red” product, Avaya will need to counter its competitor’s aggressive discounts with similarly price offerings keeping the profit margins thin. That being said, Avaya will do quite well in 2011 in both product segments.

This past year saw Cisco become somewhat on an enigma, excelling in the enterprise space while conversely floundering in the SME market space. As this past year drew to a close, however, it finally seemed that Cisco was starting to understand what it needed to do to win the SME space. So a quick note to Cisco for 2011: The SME and enterprise markets are very different, meaning that one standard approach to product innovation and advancement simply won’t do.

With that said, the next release of the UC540 and UC560 seems to have more of what SME business customers are looking for: ease of install and lots of intuitive and easy-to-use features all packaged into a great price point. For 2011 this means that Cisco will continue to fight for market share and will spend considerable dollars to make inroads into the SME market space, and although the Cisco product remains expensive and difficult to engineer, I believe it will succeed.

The California-based provider of commercial, closed-source VoIP products is exceptionally nimble and sports an excellent product that is easy to install, sell, and deploy, all of which has resulted in ShoreTel growing faster than average market growth rates. ShoreTel has traditionally done very well in the small and medium market space but has yet to be able to effectively transition that success into the larger enterprise market, if for no other reason than it takes considerable time to break into the very large (1,000 plus) market and gain its trust.

That said, however, ShoreTel has progressively grown quarter by quarter this past year and will soon surpass $200 million in sales, the “magic” number that I believe will help it gain credibility in the large enterprise market. Unfortunately for the Canadian readers of TheTelecomblog.com, ShoreTel’s success south of the border simply hasn’t translated into a similar achievement in the Canadian market.

The reality is that ShoreTel simply hasn’t made the necessary investment in to the Canadian market…yet. Its success in the Canadian market will depend on ShoreTel securing a local Canadian distributor, opening a Canadian office (a real office, not simply a post office box) with local Canadian management, a Canadian dollar price book, and a local Canadian sales force. I do suspect that all of this will come to fruition in 2011, and if it does, ShoreTel will be the company to watch.

But all the news for 2011 isn’t good, and this next year will certainly see its fair share of telecom losers as well. To read Part 2 of this post click here.

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Written by: Jeff Wiener. www.digitcom.ca. Follow TheTelecomBlog.com by: RSS, Twitter, Identi.ca, or Friendfeed

{ 2 trackbacks }

What 2011 Holds for the Telecom Market: A Look Back and Forward, Part 2: Avaya, Cisco, Mitel, NEC, ShoreTel, and hosted — TheTelecomBlog.com
August 14, 2012 at 8:38 am
ShoreTel Bulks Up, Threatens Avaya’s Dominance — TheTelecomBlog.com
August 14, 2012 at 11:14 am

{ 3 comments… read them below or add one }

John Lyle January 8, 2011 at 8:02 am

I’ve worked with the ShoreTel product in the last past and have been frustrated with it’s performance. I think you’re giving them more credit than they deserve. Otherwise your post, past 1 and 2 is bang on.

John

Contact Centre Solutions January 11, 2011 at 11:15 am

Great post, I was very interested in the info about Shoretel. As an avaya Avaya Partner though, I’m encouraged by the expansion they have made over the last couple of years and am hoping to see further success in 2011.

Stuart Armstrong February 11, 2011 at 10:34 pm

Always good to catch up on the telephony industry on this blog.

Everyone must know by now that Shoretel has hired 3 more people in Canada making that 4, including 1 person in PQ (ex Nortel), I believe. Odd that it took them 6-9 months to fill these positions.

With US territory sales at about $115MM (out of $200MM total), Canada should be a $10MM territory. Shoretel is under pressure from the VC investors to sell more into US enterprise markets which they are starting to do. There are 1,000’s of 1000-5000 emp firms in USA. However the new US based marketing may be already out of sync with Canada. I bet the new Canadian team is being told to “target the FP1000”. Hopefully not. There are only 1,200 “enterprises” over 1000 employees in Canada. 40% of these companies have to call US HQ to buy from new IT vendors. Cisco/Avaya have it locked up. The 100% channel centric market of 100,000 SMBs between 20-999 employees, including 13,000 MULTI-location SMB’s between 50-150 employees and many BPO call centers are ALL Shoretel sweet spots- there should be a business case for VAR’s to add Shoretel to their product lines as Shoretel really is 100% channel, but in Canada the VARs control the SMB CEO and IT Mgr trusted advisor relationships.

Shoretel has some nice testimonials such as Flynn Roofing and BDO -both SMB multi-branch wins right in the “sweet spot”, but I bet that no awareness campaign has been launched yet and US marketing dollars are still hard to get. Their inside sales reps do respond quickly after you go on the website. It will take $100k++ of up front marketing leadgen and busdev to kick start the end user viral awareness in the “ideal customer target markets”, then trigger the distis to stock which makes it easier for the VARs to add in Shoretel.

Why would a telephony interconnect or a “voip” IT VAR owner add Shoretel?
– compelling value, lower TCO, leads, strong end user demand, easy to install??
– how can Shoretel add value to my VAR business? margins, MDF, new tactics to find new markets?

Why would a self made SMB end user business owner be impressed with Shoretel as a company? They make 65% gm and have huge losses.
How many SMBs wish they had a VC suger daddy to cover the tab each quarter.
http://finance.yahoo.com/news/ShoreTel-Reports-Financial-pz-763022415.html?x=0&.v=1

However, with 4 reps, and a new $300k/yr overhead, this should generate more focus from US marketing to the benefit of end users, who need an alternative to Crisco and NAYA.

regards,
SA

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