ShoreTel runs among the UC giants
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The demise of Nortel has helped unified communications veteran grow marketshare, but there is still plenty of formidable competition in the space
The unified communications industry was the scene of one of the most calamitous financial collapses of the recent downturn. The threat of bankruptcy forced Canadian telecommunications equipment manufacturer Nortel to sell its UC assets to competitor Avaya for $915 million, creating a new 800lb gorilla overnight.
As is often the case, however, trouble at the top has proved fortunate for some of the industry’s smaller suppliers, among them US IP telephony vendor ShoreTel, which sells UC infrastructure and desktop clients, the tools with which end users manage calls, messages and contacts.
Having sold IP telephony equipment since 1996, CEO John Combs considers ShoreTel a veteran of the UC industry. “We had UC before it was cool to have it,” he says.
Today, ShoreTel is the worldwide market share leader in UC desktop clients for small and medium sized businesses, and sixth among large enterprises, according to telecommunications market analysts Synergy Research Group.
The company has, according to Synergy, “optimised on current market conditions with Nortel’s market challenges and the company is moving ahead aggressively with channel build out and international expansion”.
Combs acknowledges that the misfortune of its near-namesake has played to ShoreTel’s advantage. Organisations seeking to reduce their dependence on the Canadian company have adopted ShoreTel kit and subsequently expanded the relationship. “Over time, they move everything over to ShoreTel in a very cost-effective fashion,” he claims.
But the company’s modest success – its revenues grew 4.5% in its last full financial year to $134 million – is really down to its “brilliantly simple” products, Combs insists. “We can deliver UC in a manner that is no more complex than the telephone,” he says, adding that its CallManager client application is designed for the employee “without a PhD in IP telephony”.
ShoreTel will need more than just simplicity, however, if it is to grow its share of the highly competitive UC industry as a whole. One giant of the space may have fallen, but with such billion-dollar businesses as Cisco, Microsoft and Avaya jostling for customer attention, ShoreTel has its work cut out finding its audience.
As the Synergy Research Group puts it, the company “has challenges with brand name recognition, international presence, and a limited service provider reseller channel”.
Already those challenges may be working against it. In its most recent financial quarter – the three months to December 31 2009 – revenues were effectively flat, and in fact product sales (rather than services revenue) had fallen 4% year-on-year to $27.9 million.
However, the company has a number of attributes that may yet help it survive. The first is its "zero long-term debt" policy, which it presents to potential customers to counterbalance their concerns over picking a lesser-known supplier. Avaya, by way of comparison, is $6 billion in debt.
Secondly, ShoreTel announced in late 2009 that it had become the first UC vendor to achieve integration with the popular online VoIP service Skype, which allows for further telephony cost savings by using the public Internet for long distance calls. The functionality will also allow businesses to add click-to-call icons to their websites, allowing consumers who use Skype to contact call and support centres both quickly and cost-efficiently.
And thirdly, it has partnered with one of the biggest giants of all. At IBM’s Lotusphere conference in Florida, ShoreTel confirmed that its UC technology is to be bundled with some versions of Big Blue's Lotus Foundations Start, a suite of office applications aimed at small to medium-sized businesses.
Together, IBM and ShoreTel will offer an ‘out of the box’ UC solution that includes IP telephony, instant messaging and live presence information for enterprises. And it is arguably when combined with desktop and enterprise applications that UC will trigger the revolution in communications that its proponents have long predicted.
These factors suggest ShoreTel has a future in the UC space, but also that its future may well involve an acquisition.
