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ShoreTel squares up to market silverbacks

IP telephony specialist aims to cash in on others' misfortune in bid to become one of the big boys

Howard: our key objective is driving additional channels and the Nortel implosion is going to help us

Ambitious IP telephony vendor ShoreTel is looking to make 2010 the year it steals a march on the market’s bigger players as it strives towards becoming a $1bn (£620m) company.

The aftershocks of Nortel’s demise, and Avaya’s acquisition of its enterprise operations, will be felt in the voice channel for some time to come. ShoreTel’s chief executive, John Combs, claimed Nortel’s drawn-out disintegration offered a golden opportunity for his company to impose itself.

“A lot of end users that bought a Nortel system are not very pleased with the partner who sold it to them,” he said. “These partners are now looking for something else and we are able to bring ShoreTel in because we integrate gracefully.”

Eye on North America

ShoreTel claims its share of the pure IP telephony market in the US currently stands at about eight per cent. Combs admitted that the North American market has long been dominated by Cisco, Avaya and Nortel, with the latter’s collapse leaving a vacancy at the top table.

“Now there is an opportunity for us to move into that seat,” he said.

From a UK standpoint, the vendor’s EMEA managing director, John Howard, said his priority was strengthening the channel line-up and adding new routes to market.

He added that new partners would only have to invest in skilling up on one, all-encompassing platform and would benefit from being part of a select group.

“We are not over-distributed,” he said. “Our key objective is driving additional channels and the Nortel implosion is going to help us – it is making channels review their voice vendor.”

Senior vice president of worldwide sales Don Girskis added that ShoreTel only signed up VARs with top-notch customer-satisfaction credentials.

“We turn down far more partners than we accept,” he said. “It is far easier to increase your margins as a partner through customer satisfaction than through volume.”

ShoreTel was founded in 1996, with its first installation taking place two years later. It finished 1998 with more than 100 users, rising to 1,000 in 2000 and 5,000 the following year. The vendor breached the 10,000 mark in 2004 – the same year Combs joined.

The former Mitel and Nextel man has overseen a period of steady growth. Turnover for ShoreTel’s 2006 fiscal year stood at $61.6m (£38.2m), rising to $97.8m the following year and $128.7m in 2008. In 2009, the vendor grew sales by five per cent to $134.8m.

Combs stressed that his firm was not bogged down by the debt levels of the bigger vendors and had $100m cash in the bank to invest. “The company’s financial foundation continues to be rock solid,” he added.

He asserted that the company would not have its head turned by acquisitive suitors.

“Our whole focus is to build our business to $1bn – we are fully committed to that,” he said. “Our team is strong and we have a clear path to get there.”

Combs revealed that the $100m pot would be ploughed into research and development, brand awareness activities and bolstering sales headcount by up to 50 per cent.

He added that his biggest obstacle to growth was “not getting to the table”, claiming ShoreTel still had limited penetration of its target market of companies, with between 20 and 5,000 staff.

He claimed the vendor was considered in “10-20 per cent of opportunities” in North America, and somewhat less in other parts of the world.

Big ideas
Avnet Technology Solutions has been working with ShoreTel for three years. Joel Chimoindes, director of Avnet’s Unified Communications (UC) Business Unit, claimed the distributor had recently signed up two sizeable partners for the vendor.

“It is not just suited to a smaller telephony or UC-type partner, we are seeing bigger SIs and VARs look at ShoreTel,” he said. “If they are an Avaya or Siemens partner, then the ShoreTel solution can co-exist inside their product range.”

Chimoindes claimed that building ShoreTel’s name in the UK would require greater publicity, strong channel engagement and continued product investment. He claimed the vendor’s strong integration credentials with technologies including Microsoft’s OCS platform and Polycom’s video kit were a key differentiator. He also agreed that the time was ripe for going after the market’s alpha males.

“The consolidation that is happening elsewhere will force partners to look at other vendors,” he said. “We are into something big with ShoreTel and it is an exciting time.”

Keith Humphreys, managing consultant for analyst euroLAN, claimed ShoreTel would be wise to home in on its most successful horizontals, rather than trying to square up to the market’s silverbacks.

“I think it has a very good space in the mid-market and the top of the SME market,” he said. “I would think aiming to recruit the big boys would not be the ideal strategy.

“Cisco and Avaya are going to stay sitting at the top, and companies such as ShoreTel and Mitel are going to duke it out.”