What 2011 Holds for the Telecom Market: A Look Back and Forward, Part 2: Microsoft, NEC, and what’s Mitel doing?

by Jeff Wiener on January 5, 2011

This post has been broken into 2 parts. You can read yesterday’s intro here.

While this next year will hold great things for the likes of Avaya, Cisco, and the surprising upstart ShoreTel, the unfortunate reality is that 2011 will not be as kind to others, meaning that this next year will certainly see its fair share of telecom losers as well.

This past year saw an interesting new comer to the enterprise voice market, as computer giant Microsoft rolled out its new Lync voice solution. But 2011, I suspect, will bring nothing good for Microsoft, as the product remains expensive, difficult to engineer, and even more difficult to install and maintain. I suspect Microsoft, with its current offering, will have an incredibly difficult time capturing any significant market share, meaning that in 2011 it will experience the same initial disappointments it saw in 2010. In my mind, it’s got 18 months, tops.

Unfortunately, I see continued market struggles for Mitel this next year as well, although I’ll admit this one has always baffled me. Mitel has an excellent product…just not excellent enough I suppose. As one who makes a living knowing the current SME market needs, quite frankly I’m just not sure why Mitel hasn’t done better than it has. As a Canadian company, especially in light of Nortel’s disappearance from the Canadian market, one could have reasonably expected Mitel to capture a significant portion of both the Canadian dealer and customer base…but it hasn’t.

But the question is why? Where is Mitel in the great Nortel market vacuum? Why isn’t it going after the market more aggressively with a competitive product geared to the small end market with aggressive price points with lots of “feet on the street”? To me it seems that Mitel simply lacks that competitive drive, the desire to get in there and work hard to capture new market share, a point supported by the fact that Mitel, a company with sales 5 times that of ShoreTel, has a market cap 60% that of ShoreTel’s!

The fact remains that while Mitel’s products are good, they’re simply not good enough; its reseller base is large, simply not large enough, and its products are sexy, just not sexy enough in this current market. The reality is that while Mitel’s product works well in the SME space, those products just don’t scale to the same price points as Mitel’s competitors and aren’t “cheap” enough. Unfortunately for Mitel, I don’t see things changing in 2011.

NEC, for its part, is a company that clearly understands the market and what it takes to win in the cutthroat world of telecommunications. This past summer I wrote a piece about NEC and discussed its increase in market share and its surprising growth in the hardware market in general despite the difficult times NEC’s competitors faced.

Its newer products, SV8100, 8300 and 8500 (released in 2008) are well-positioned to capture significant market share for NEC for years to come. The product is well priced and works well in both the key mid market and enterprise spaces. With such a product, it’s really no surprise that NEC did so well this past year and has set itself up for a strong 2011.

Asterisk, an open source product, will continue to make headway into the market. Asterisk, although a threat, isn’t taken that seriously within the enterprise market – yet. It seems that customers need a “manufacturer” to scream at.

While in 2011 hosted voice solutions will continue to chip away at the market and will continue to garner market share, in my experience with hosted voice solutions and from feedback from clients, I would wager that it will maintain its roll as a niche product with relatively minimal growth. Companies have very little appetite for packet loss, echo, and network related issues both on the LAN and WAN side and this has been something that has plagued hosted voice solutions since their inception.

Although hosted voice comes with a very compelling story, one that promises a painless install and transition that many customers are deceived into believing, duped customers are often left with a very frustrating end result. The reality is, while Digitcom lost many deals to hosted voice over this past year, we have taken out even most hosted voice solutions and replaced them with premise based solutions. Further, our post follow-up audit calls with the customers we have lost to hosted voice has produced a variety of responses, with many speaking about broken promises and frustration.

Simply put, there are many things that can go wrong on a voice install, many of which are outside of the hosted voice provider’s control. The LAN is always an issue in a VoIP deployment, but hosted voice also has the WAN side to address when dealing with network related IP issues, a fact that often complicates the diagnostic process and repair time leaving customers very frustrated. While I consider myself very open-minded when it comes to new products and solutions, in my mind the hosted voice solution is just not ready for mainstream. That being said, I will continue to keep my eye on the market, this will change one day.

In the meantime, suppliers will continue to push hosted voice, customers will continue to purchase it, and although hosted voice isn’t yet a threatening solution, it nonetheless remains a viable competitor and one that the more mainstream hardware providers need to watch out for; a point that is particularly true for hosted providers like Skype and Google, who hang over CPE vendors like a dark cloud.

The world is, of course, gravitating toward an IP-centric model and the “cloud” at a rapid pace. Over the next few years there will be a gradual adoption of cloud telephony. In time, the technology will be widely adopted as the technology evolves and becomes more reliable.

As a CPE vendor, I view the threat posed by companies such as Google and Skype to the CPE market with some trepidation, not so much for today, but certainly for what they will do in the future. Cloud telephony represents a paradigm shift – something to be watched, and, in very short order, feared, and I have labelled this next generation shift of telephony, “Telecom 2.0”.

What does Telecom 2.0 look like?

While the impending paradigm shift will rock the current telecommunications market, don’t expect a revolutionary change. The next generation of phone systems will be a highly intelligent server, much as they are now. The talk/communication medium will not necessarily be the bulky phone on your desk, but rather a variety of end point devices.

Skype, Google, Android, Facebook, iPhone, Blackberry – these all-in-one appliances will be the talk/communicate path, and the server at the back end will bridge these technologies together.

So what should we expect from 2011?

Avaya, Cisco, and NEC will continue to dominate the market place; ShoreTel will make some excellent inroads and will continue to chip away and earn market share; Mitel will flounder, while Microsoft wilts away; and all of these traditional players will watch as the market changes into a cloud offering dominated by non-traditional players like Google, Skype, and Facebook. So with that said, bring on the New Year!

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

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What 2011 Holds for the Telecom Market: A Look Back and Forward, Part 1: Avaya, Cisco, Mitel, NEC, ShoreTel, and Hosted — TheTelecomBlog.com
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Contact Centre Solutions January 11, 2011 at 11:31 am

Disappointed to hear that Mitel is suffering. Many moons ago I worked for a call centre that utilised the SX2000 and whilst the day to day administration was clunky and complete overhauls a nightmare, I was always impressed with the overall package and the support was outstanding!

Paula Hays January 24, 2011 at 12:28 pm

My focus at ECSI is the Altigen IP phone system. This product is amazing, but not marketed very well. It has a huge market share on the west coast, pretty big on the east coast, not much in the midwest. Check it out….it’s a great alternative.

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