New Mitel CEO McBee Makes Push for Midmarket, Channel

Mitel CEO Rich McBee is revamping the UC vendor to target the midmarket, and is relying on the channel to help.

Mitel CEO Rich McBee has spent the last few days mingling with the people he's most anxious to court: business users and channel partners.

McBee, who in January assumed the CEO post of the UC (unified communications) vendor in hopes of injecting some life back into a company that had become financially stagnant, has over the past six months reorganized Mitel's business units, revamped its sales approach and cleared out some of the executives who were in place when he took over.

For much of this week, McBee has been in Hollywood, Fla., at Mitel's annual Business Partner Conference, extolling the company's new direction to the 1,100 or so attendees at the event. The reaction so far has been positive, McBee said in a telephone interview with eWEEK.

"They're going to [ask], -Did [Mitel] rearrange the chairs, or is there a fundamental change going on at the company level,'" he said. "It's a fundamental change at the company level. This is a fundamental shift at Mitel, no doubt about it."

When McBee came to Mitel, he replaced Don Smith as CEO and inherited a company that was less than a year past its initial public offering. Mitel last year had pared about 20 percent of its workforce, and in its fiscal third-quarter earnings announcement in March, it posted a net loss of $4 million on revenue of $162 million.

McBee said it also had good technology, including its Freedom UC architecture, a cloud-based initiative for its software that the company announced in November 2010. Mitel just collected another Freedom architecture customer: The Chicago Bears will use the technology for communications and collaboration in the organization, the team announced June 2.

It was during those first three months of the year that McBee talked with as many customers, channel partners and employees as possible. From those meetings, he crafted his plan to revamp the company's business and sales strategies, a plan he called "3+1," which he announced May 2. The three were plans to simplify the business, focus Mitel's product portfolio and change how the company dealt with the channel. The one was leveraging what McBee said is Mitel's advantage in virtualization, particularly its partnership with VMware.

The reorganization led to several executives leaving the company, including President and COO Paul Butcher. The changes were necessary to get the company moving forward again, McBee said.

"We needed to focus our portfolio," he said. "Mitel has a huge amount of technology, and we were doing a lot of little things [rather than] a lot of big things we needed to be doing and have done right away."

McBee pared down the organization into three business lines: Mitel Communications Solutions, a $500 million business telephony business; Mitel NetSolutions, a networking business of about $80 million; and Mitel DataNet, its $80 million hardware and software business. Creating these business lines leads to greater transparency and accountability, he said, noting that each has a general manager responsible for its performance.

McBee also wanted to zero in on the midmarket, a space with businesses that fit better with what Mitel is selling. Those businesses-with 100 to 2,500 employees-are looking for good technology, but are not tied to a single vendor, like a Cisco Systems or Avaya. They're looking for the right technology regardless of the name on the products, they want an open architecture and they want choice.

"This is a group of customers that select best-of-breed," he said.

Mitel will still work with larger enterprises and smaller companies, but most of its efforts will be behind the midmarket push.

Regarding the channel, McBee said the majoritiy of Mitel's sales will be through partners rather than direct sales. He said that Mitel, with its full-sized direct-sales staff, had essentially been competing with its partners. Making the change not only will help Mitel create better relationships with its channel partners, but will also enable it to reach its target midmarket customers.

"They buy from trusted advisers," McBee said. "They don't really buy from the vendor."

Mitel will continue to hold on to some customers, but primarily because of licensing reasons, he said. Most of Mitel's efforts will now be in fostering the relationships with the partners.

Those partners will be important for Mitel going forward, as it looks to grow its presence in the highly competitive UC field that includes such heavyweights as Cisco and Avaya as well as smaller vendors like Shoretel. But it's a market that is expected to continue growing. Market research firm Gartner expects the space for UC hardware and software to hit almost $19 billion by 2015.

And McBee said Mitel is in a good position to grab its share of that. He said that vendors like Cisco and Avaya are hindered by what he sees as closed architectures, while companies like Shoretel offer simpler solutions that won't always meet the demand of midmarket businesses. Mitel has the open architecture and the high level of technology that these businesses are looking for, he said.

McBee expects to continue to compete with vendors like Cisco and Avaya in the midmarket, but they're hampered by their reliance on standardization and their high growth expectations.

"In this [midmarket] segment, it's best-of-breed, and best-of-breed does not lend itself to standardization," he said. "I'm pretty comfortable with what we're doing."