ShoreTel’s two-year effort to create a common platform for its premises- and cloud-based unified communications offerings has been done over three phases, according to CEO Don Joos.
The first two—the foundation and migration phases—entailed the bulk of the heavy lifting, from the software coding to the work with employees and channel partners to get them ready to build and sell the platform. In August, ShoreTel launched the Connect platform and entered the acceleration phase, where the vendor and partners can now push the offering into the market, drive sales of the technology and grow the company, Joos told eWEEK in a recent interview.
That acceleration phase will kick up more later this year when ShoreTel releases the last part of the platform. At the August launch, ShoreTel rolled out Connect OnSITE, an on-premises UC solution owned and maintained by the customer, and a fully hosted and managed UC-as-a-service (UCaaS) offering.
Later this quarter, the company will release Connect Hybrid, enabling customers to run their communications applications either on-premises or in the cloud, using the solution as a single platform for both. Offering such a hybrid UC solution is important in a business communications world that is rapidly changing, Joos said. Companies are looking at their infrastructures—including their collaboration environments—from the point of view of how well workloads run on them, the CEO said. It’s those workloads that drive productivity and business decisions.
“It’s not about PBX anymore,” Joos said. “It’s about the applications.”
CIOs also are changing the timeframe they’re looking at regarding returns on investments (ROI). Where once they viewed ROI through a three- to five-year prism, that has now shrunk to 18 to 24 months because they know technology is changing so rapidly. At the same time, businesses don’t want to run all of their applications in the cloud or on-premises. They want the flexibility and the control that comes with having the option of either. That is driving the demand for hybrid communications, Joos said.
The launch of Connect Hybrid will put ShoreTel in a leadership position for hybrid communications and give it a key differentiator in a crowded and competitive UC space in which most vendors—including Cisco Systems, Microsoft, Avaya, Mitel and others—are pushing toward hybrid solutions, he said.
Industry observers like Zeus Kerravala, principal analyst with ZK Research, have said businesses increasingly are embracing UCaaS because they believe some services are best delivered via the cloud, while others should stay within the firewall. Kerravala earlier this year said that while other vendors are offering both on-premises and cloud-based solutions, none yet has such an integrated offering like ShoreTel’s common platform.
“I would say we have a common platform, while others have platforms that are common,” he said.
Still, the competition will be fierce, according to analysts. IDC expects the cloud communications market to grow from $123 million in 2013 to $7.5 billion in 2018, while analysts with IHS Infonetics in March said that more than half of the respondents in a survey said that by 2016 they will be running at least some of their UC services over private or public clouds.
“Businesses continue to migrate their unified communications applications to the cloud, citing flexibility as the key reason,” Diane Myers, principal analyst for voice-over-IP (VoIP), UC and IP multimedia subsystems at Infonetics, said in a statement at the time. “Cloud solutions are inherently more flexible than premises-based solutions, offering businesses the ability to scale users up and down, centralize management and deploy new features and applications quickly.”
It’s also a market in which several vendors are going through transitions and that some analysts believe is ripe for consolidation. For example, Nokia is in the process of buying Alcatel-Lucent for $16.6 billion and Unify a year ago released Circuit, its new UC platform. Mitel over the past two years has made strategic acquisitions to expand its cloud and mobile capabilities, and even made a $574 million bid for ShoreTel last year. Joos and the board rejected the offer, saying it undervalued the company and that they were confident in the Connect platform.
ShoreTel Looks to Accelerate Adoption of Connect UC Platform
The potential is significant, Joos said. Hosted communications has only about a 10 percent penetration in the total addressable communications market, and the top four players have less than 50 percent of the hosted market.
“In hosted [communications], several people can be successful over the next couple of years because there’s not a lot of penetration,” he said.
Joos said the Connect platform will make it easier for the company to serve enterprise customers, but that its primary target is still the small to midsize businesses (SMBs)—those organizations with 5,000 or fewer seats. Channel partners were introduced to the platform earlier this year and will be key in driving growth, the CEO said.
ShoreTel got into cloud communications when it bought M5 Networks for $146 million in early 2012 to complement its on-premises products. In 2013, Joos replaced retiring CEO Peter Blackmore and began driving the development of the Connect common platform. Two years later, the company is continuing to see the results of its cloud efforts. In its latest quarterly earnings, released Oct. 22, hosted revenues grew 19 percent over the same period last year, and cloud bookings grew 24 percent. Recurring revenue accounted for 51 percent of the $90.2 million in total revenue, and hit an annual run rate of $184 million. The company signed up 390 new cloud customers since rolling out the Connect platform, Joos said in a conference call with analysts and journalists.
“As Connect is now available to partners, we do expect it to make up a greater percent of our booking going forward,” he said during the call, according to a transcript on Seeking Alpha. “The rollout of ShoreTel Connect was not an ending milestone, but rather a beginning milestone. As we progress throughout fiscal 2016 and beyond, the single common platform will enable faster release iterations and quicker introductions of new features providing us greater flexibility to address market demands.”
The CEO said ShoreTel engineers next year will focus on such efforts as integrating more applications into the platform and developing APIs to enable developers to create third-party apps. In addition, the company will push to expand the platform not only in the United States, but also in Canada and Australia, where cloud computing is most popular. According to Synergy Research, 95 percent of all cloud revenue generated worldwide come from the United States, UK, Canada and Australia.