ShoreTel CEO Don Joos talks cloud UC, channel opportunity and competitive threats

Alex Scroxton sat down with ShoreTel’s CEO Don Joos to discuss the growth of cloud-based unified communications in the channel, and why the new boss is keeping a close eye on Microsoft Lync

Last summer ShoreTel promoted from within to fill the vacant role of CEO following the departure of previous incumbent Peter Blackmore.

Its choice, of senior vice president of business operations, and former Avaya and Nortel staffer Don Joos, sent a clear message as to where ShoreTel’s trajectory was taking it. As a key figure in the development of the unified communications outfit’s cloud strategy expectations were, and remain, high.

Over the years ShoreTel has built up a substantial channel that it believes is chomping at the bit to apply cloud and virtualisation to the unified comms world.

It has been investing substantially of late, adding people across EMEA in both sales and partner support, focusing its resources on a smaller number of key partners while backing off some of the lower end transactional business through distribution, all the while attempting to drive greater awareness of exactly what it does.

So far, this has been a success, with recent customer wins such as Cheshire Police – which replaced a Siemens [Unify] infrastructure with over 2,000 ShoreTel UC endpoints – and Yorks-based ISP Plusnet, backing up its investment, and signifying a move towards larger customers, albeit not in a fashion that would leave behind – or worse alienate – the small businesses that have long been its bread and butter.

Its customer wins have been reflected in the increased status accorded to fast-growing partners such as Devon-based Southwest Communications, which has gone a standing start to over half a million pounds of ShoreTel sales in the space of a year, or Solar, which recently became the first European partner to be handed platinum status on its programme.

It has also introduced more and more traditional system integrators and managed services providers to its ecosystem, an ecosystem which it insists remains 100% channel now, and always will do, particularly as UC moves from on-premise solutions to hosted, cloud-based ones, a transition close to Joos’ heart.

“As we start to expand out the hosted business and we start to compete against different players in the marketplace, a lot of them have a direct sales force, but as the adoption of cloud continues to grow in larger companies, our view is that larger companies are used to working with a VAR and those with a direct sales force, if they want to scale cost-effectively, need to develop a channel,” he says.

“Now, I’m hearing a lot of them say that but the reality is I’ve never seen a company go from a direct model to a channel model successfully first try; if they try to do both there’s always a conflict and, even if you get a lot of it right, it still takes three or four years to build up a true channel programme. Having a channel programme already existing to me is an asset that others can’t replicate quickly.”

Joos reckons that right now, about 90% of the UC market is on-premise and about 10% hosted, give or take a few percentage points. But over the next three years, he predicts, this will flip and the majority of the on-premise installations will float off into the cloud.

“If I go back in time to the TDM to IP conversion in the early 2000s, once the inflection point occurred there was about a three year process of just a lot of growth in IP, and then there was the long tail, and today roughly worldwide we’re at about 50% on TDM, it varies by region,” says Joos.

“My point being that there is a long tail and now that the shift from on-premise to cloud is happening, I think we are on the cusp of or at this inflection point and I think we are going to see significant movement, and that’s why we’ve positioned the company for this opportunity.

“I also believe that hybrid will play into the equation, because systems get replaced about every seven years, that’s kind of how they sit on people’s books right now. Would a CFO logically say he’s going to go throw something out if it’s working, but is not fully depreciated? I doubt it. And even if it is depreciated is he going to throw it out because it’s working? Or is he going to say that with net new, site wise and application wise, yeah, okay, he’s going to go cloud.

“And so that’s where the channel becomes important, because this is going to come back into the installed base for opportunities, to start selling applications on a subscription basis. Mobility especially creates an opportunity for easy adoption and quick entry into an existing installed base.”

Currently, Joos thinks the cloud unified comms market is ripe for whoever fancies a slice of it – which also means it is highly fragmented, and he makes clear that he has clear designs on global market leadership. Those designs may even be attainable ones.

To take ShoreTel and its partners there Joos has already overseen a major transformation of its datacentre assets, making them more efficient, reliable and scalable, and the firm began to provision its first new customers in its souped up facilities in December and January.

Who is he up against? Joos cites a number of specialists such as 8x8, Ring Central, Thinking Phones, Vocalocity and Fonality, but, he adds, the bigger concern is not the active players but those who haven’t appeared yet, or those who one would not necessarily consider UC players, but who may make a move.

“For instance, where does Google go with Hangouts and Google Voice? Do they get serious in the space? Do they integrate with Gmail? Is this a space that someone like Amazon could enter? Where will players on the comms platform-as-a-service side – players like Twilio or Tropo, choose to go?”

However, Joos is for now not too concerned about developments there, and believes ShoreTel’s mature channel and advanced R&D capabilities will give it an advantage.

“The other players, when and if they enter, are probably going to have more of the basic features that lend themselves to the low end, where people are really just looking for basic core telephony. The differentiator is in regard to the apps that wrap around the core, that’ll be incredibly important. Voice is a commodity, apps are the unique part.

“It’s also about user experience, which starts on how the product is architected, and goes through into the sales and go-to-market and into the support model, that is where we draw in customers. Right now in the market we are not the low cost provider and nor is that our strategy, and I’m completely fine with that because we deliver a different experience that shows up in the fact we have the lowest churn rate in the industry.”

However, he adds, “I also see Microsoft Lync, and I think they are a threat.”

Three to four years ago few would have predicted that Microsoft Lync would necessarily have made the kind of inroads in the market that it has, but over the past year ShoreTel has watched its growth with interest.

 “If the customer really likes IM and presence on the desktop – and Microsoft has really good market share from that perspective – then great, we’ll just integrate handle the voice and handle the call control, and that works for many.

“However,” Joos continues, “the Microsoft approach is to say just turn it on – a lot of it [Lync] is free, and I think once people start to dig into the details they find out that there is more to it than that, and so when you start to have TCO conversations the math starts to come out in our favour.”

In EMEA, ShoreTel plans to lean hard on the channel to get its competitive message out there when it comes to going up against Redmond, and believes that its established channel of voice specialists will come into play against Microsoft partners.

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If those partners can help their prospect do a proper analysis of what it means to deploy ShoreTel’s solution in terms of infrastructure, staff training and TCO, it will win against Lync most of the time, at least if ShoreTel’s theory is correct.

Since taking the hotseat at ShoreTel last year, Joos has spent a good amount of time on the road with both investors and partners, and is currently working on a longer-term channel strategy accounting for both cloud and network virtualisation.

Currently this strategy is centred on its domestic market in the US but it will hit EMEA during the next 12 months, and Joos is keen to reassure partners on this side of the Atlantic that they are not being neglected. Indeed, he says, it may even be beneficial for markets such as the UK.

“The cloud track is what’s being rolled out right now in the US market, and we’re working through the programmatic aspects of that,” he explains. “In a way that’s an advantage to the international markets because we’ll have worked through a lot of that already.”

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