Transcript for Catching Up With Mitel
Jim Burton: Welcome to UCStrategies Executive Insights. This is Jim Burton, and I am joined today by Jon Brinton, Executive Vice President and General Manager of the Cloud Division for Mitel. Jon, welcome.
Jon Brinton: Thanks, Jim, it’s great to be here.
Jim Burton: I recently read a report from Synergy Research Group on “Cloud Business Communications Market Share Report.” They published it at the end of May of this year. What I found interesting about it is where Mitel fit in all of this. I knew Mitel was a cloud player, I knew that they were doing a really good job, but I had no idea of their market share. They are double the size of their closest competitor. I was surprised because there are some names that we know are associated with cloud, but at the same time, while we know Mitel is part of it, I really didn’t realize not only did they have this large market base, but they are growing just about faster than anyone as well. So that’s how I want to get this started. Can we talk about that a little bit about how you see the marketing develop and that market share that you have and how it applies worldwide?
Jon Brinton: That’s a great question, Jim, because a lot of people, knowing Mitel and our long time position in the premise market, are not as aware of the great strides we have made in our cloud growth, in our strategy that we are deploying against for cloud services. According to Synergy, we do have the largest base of any cloud unified communications providers. It is also the fastest growing, which I think is important. It is by a large margin over many of our competitors. That is part of what we talk to customers and channel analysts and people that know Mitel about. The fact that we have been a solid, established company for over 40 years, has the number one market share in the premise business in EMEA, and number one market share in five countries, they are surprised. They’re not aware of the rapid growth we have had with the cloud. I think that’s because, specifically within our company strategy, we have developed an approach where we have a very large base of customers. We are going to service that base of customers and take great care of them, and help them in their technology needs to migrate and move forward.
And then as some of those customers migrate to the cloud over time, which many of them are now considering, we want to have the technical and commercial models available for them to be able to do that. Quite frankly, in the cloud, we are adding a lot of new logos to Mitel on a daily basis from customers that are now acquiring our solutions for the first time who have never been Mitel customers before. We are really experiencing a lot of positive growth in this area, and it’s a real testament to how well the Mitel team is moving forward and transforming our business.
Jim Burton: Jon, with your success and the presence you have in the world market, how do you see this market evolving and developing over the next few years? What are some of the things that are happening both regionally and some of the characteristics you see changing in this market as it evolves?
Jon Brinton: That’s a great question. It is not a unified answer because in the cloud market in general, Jim, the technology is moving at different pace and different geography. Clearly, the United States, with our marketplace, the way capital is invested here, the way businesses will adapt to new technologies, this market is moving the farthest along as far as cloud unified communications is concerned. What we are seeing here is the market really beginning to move up and be embraced more. Where companies in the past were considering whether they should migrate some of their communications to the cloud, now they are past the “whether” and thinking of the “when,” or actually planning to do that. In the U.S., we are seeing the medium- to large-size enterprise embrace cloud unified communications even more than they have in the past.
In the European markets specifically, and some of the other parts of the world, Europe is probably two to four years behind the U.S. overall in cloud adoption rates. There are some very high adoption rates in the Nordic countries and the U.K. that are not as far behind, but in some of the more continental European countries, they are a bit slower in deployment, but those markets are picking up. Mitel is making specific investments there in order to be able to leverage the growth in that market.
In many parts of the world, whether it is Asia-Pacific, North America, CALA, you do see companies and especially multinationals looking to deploy cloud solutions with providers that can support their locations in multiple geographies. What really started out as a small business utilitarian trend, we are really seeing the solution begin to move up-market to much larger customers and in more geographies than we have really seen in the past few years.
Jim Burton: Moving on with how the market is evolving, one of the things that I know some of your competitors are talking about how they are moving up-market. These are companies that have been addressing that market of under 15 and quite frankly often under 30. They are going to move up into that enterprise market where Mitel has been serving customers for years. What do you think of the characteristics of that? What is the difference in what’s important to these medium and large customers versus some B type of customers that some of your competitors have been addressing for some time now?
Jon Brinton: That’s a good insight, because that’s probably an area where we would have a different point of view than many of those competitors. We have cloud customers today, many of them that are in the 25,000 to almost 40,000-user range within an enterprise organization or branches of an organization. I really think that while the market in general is moving up-market, the considerations when you get into those larger enterprises are much different than they are down in the SMB.
What I mean by that is that you are not talking about company’s organizations. I mean we have large government organizations in North America and in Europe that have cloud deployments with Mitel that are in 5, 10, 15, 20, 25 thousand users. Those are not private enterprise ones that are just thousands of users. Those are not organizations that just started up yesterday. It is not a clean sweep or slate that you are starting with those customers. They are focused on things like protecting their investment. Where our hybrid cloud capabilities, where we can leverage the transition from premise to cloud with a hyper cloud deployment and regain the value in a lot of the investment that they have made, that’s a key consideration for them.
They’re high available type of customers. We have a large police agency in one country in Europe that has alarm centers. Those alarm centers will always stay a high availability premise-type deployment. They have over 10,000 other users that they are moving to the cloud with us. So the ability to support that failover to the traditional public switch to telephone network and local survivability is very important.
The ability to work in larger IP frameworks is important. When you get into a larger organization, they will have an application framework that they already have deployed in their company. How closely and well can you smoothly integrate your unified communication solution into that, that’s a key consideration. The ability to support multiple geographies, is one area that we are seeing in a lot of successes. A multinational company that does not have IT organizations on the ground in all of their countries or large IT organization, they want to benefit from the cloud with centralized management of users and the ability for users to self-administer a lot of their needs. Multiple geographic deployments are important.
Then I would say that another very key consideration is contact center. When you get into these medium to large-sized enterprises, they will have very robust contact center needs. Mitel is very strong, and contact center is also one of core growth businesses we are very focused on, along with mobile and cloud, and being able to deploy that onmi-channel customer interaction for those enterprises.
Lastly, I would say the commercial model that you offer to your customers. A lot of the cloud move is to a software-as-a-service recurring payment type of model operating expense. When you get into larger organizations, many of them have defined commercial models. Some of the, prefer capital expenditure and things like that. Mitel accommodates the commercial model as well. That is about a half a dozen things that when we really get into talking about living every day with medium to large-sized enterprise customers or large government agencies or communities of interest, these are very important considerations, understanding that some of the guys that really cut their teeth on the small business customer, their sizing will move up-market. Mitel’s really focused on being enterprise cloud experts. That is what we deploy for our customers.
Jim Burton: Well, the numbers speak for themselves with the size of market share you have already garnered. One of the other questions, though, you mentioned contact center is one of the applications that the larger customers have. Are there other application requirements for the larger customers that many not necessarily apply to the lower end of the market?
Jon Brinton: Yes, the contact center really fits closer to the adjacency of your unified communications, that is, being able to support a robust contact center. By that, today, we mean omni-channel contact center. As you know, if I am an organization, a retailer, or whatever, I have a customer base. People today, if they are not satisfied with their customer service experience, they will complain on Twitter or on Facebook or on other media. Part of the contact center focus is being able to interact with customers even if they are in a store and needing assistance and have actionable data tied around that. It is being able to, whatever medium that they are communicating in, to establish communications and migrate them through whatever medium you need to in order to solve the problem for the customer. Maybe it is taking something from a web chat or something into a conversation and a share or collaboration where you are actually showing them merchandise or something online. The contact center needs get more complex as you move up with the ability to support that omni-channel deployment.
The other is outside of our traditional unified communications base, being able to integrate into larger IT frameworks. Mitel was the first unified communications provider to fully deploy their software in a software-only deployment, so an application, within a VMware environment. As you know, VMware is the market leader in virtualization. So being able to have our communication software function within another greater IT framework, virtualization that an enterprise has deployed. In the same way, it’s integrating into other applications that these enterprise customers might be using in their business like Microsoft Lync or Salesforce.com or SugarCRM, or Google for Work, or other applications that they have deployed that have the ability to have that kind of telephony unified communications interface occur as part of how you interact with those.
That’s the outside of our core adjacencies and the mobile integration, obviously, which is people today have a device of choice that they carry. For employees, many times, that device of choice for their business communications isn’t the desktop phone anymore. It is their iPhone or their Samsung Android device or Windows mobile device. Being able to have them use that as a primary device of choice, those are the areas that really become much more important as you move up to larger organizations. It’s that integrating into what I call being a part of their larger IT framework where it is not UC focused or centered and everything else go around that. We are a participant in the larger IT framework that that organization is deploying and supporting for their end users. That’s when you are really successful in the medium- to large-sized operations.
Jim Burton: We’ve talked about the world market in a couple of ways, the different geographies, and all of that. The big question, I guess, is how is Mitel addressing those changes in those cloud markets around the world?
Jon Brinton: That’s a great question. We are blessed to have some great channels around the world that are what we call powered by Mitel solutions. They are deploying cloud solutions that are based on Mitel technology for the larger service providers, globally in different markets that have a cloud unified communication solution that is powered by Mitel. We are also delivering in many of our countries, as we talked about, we have the number one market share in EMEA. In five different countries, we have the number one share. In some of those markets where we have a very strong presence, we are actually enabling our channel with our Mitel-enabled offers to be able to more rapidly pivot their business to begin deploying cloud solutions. As you know, one of our strengths as a company is globally we have over 2,500 channel partners. That’s a lot of additional expertise where they may be involved in our vertical and then also serving verticals like the hospitality or healthcare or other vertical industries, or having specialties in other parts of the customer’s IT deployments to where they bring much more to the table for specific customers, to assist them when they are selecting a unified communications vendor. In order to more rapidly enable that channel to pivot their business then to a cloud or recurring revenue model, we are actually directly enabling our cloud offers to those channels in many of our markets globally.
Over the last year or so, we have established Mitel-enabled cloud offers for channel in the U.S., Canada, in the U.K., and then Australia. Then this year, we have added continental Europe to that as well. We are rapidly expanding the markets where we directly enable our channel to deploy cloud solutions, and giving them tools, certifications, and helping with some of the heavy lifting to get them into the cloud sooner. That’s one of the areas that is influencing the growth rate that we have. It is helping us to extend our abilities to support customers on a more global basis.
Jim Burton: You bring up the whole transition to cloud for the channel. It is a big challenge for them because if you think historically, the channel has been working on a CapEx model and now they are working on an OpEx model. That changes their financial model as well. Are there other things that you are doing to help the channel make this transition to cloud?
Jon Brinton: Yes, that’s a great point. Last year, we also started an initiative, which we have launched into market where we have really revived focusing on the channel value model. We understand that the channel partner is a very important conduit for us to that end customer. We are making sure they are enabled and providing a high quality solution when they are deploying for customers and on behalf of Mitel, because they are a brand extension of us to our customers. What we have done is we have tied a part of our customer’s channel’s value model with what the partner gets out of the program with Mitel to their technical accreditation and cloud solutions. So, having the right technical certifications, the right level of participation in our programs, in addition, we have released some new stand-alone cloud channel program to really focus on those. Some channel partners are all in and just want to drive that recurring cloud business. Others want to add a cloud dimension to an existing business. That’s where we have added the additional technical accreditation.
One of the things that we do today is in order to influence our customer’s buying power or our channel buying power with Mitel is we have also introduced the partner performance index where we are scoring the channel on their technical capabilities. We are really focusing on how good a representative they are of Mitel to the end customers they are supporting. We give them additional benefits in the program if they are providing a very high level of customer experience and demonstrating a high level of technical capabilities. We are providing mandatory customer satisfaction surveys for our highest tier partners. We are really focusing on the channel value of quality or implementation capabilities, the SLAs that they are provided to end customers, their systems performance. Also, from Mitel’s perspective, we are giving them some additional technical expertise and sales expertise to assist and enable them out in the field. Those are the areas where we have taken our channel program. We are moving it forward in a way for those channels that are truly focused on driving the cloud business. If somebody is going to continue to be a value channel or a premise program and they are not interested in cloud, that’s fine. That track is available for them. Many, many of our channels today are really focused on how do I migrate to supporting customers in that recurring revenue model? We built a whole set of capabilities for them in order to be able to do that.
Jim Burton: That’s really important. The channel is critical to your success. It’s critical to a good quality implementation. It sounds like you put together a really good program to help the channel move along.
I would like to change topics here a little bit and get into a recent acquisition that Mitel made of Mavenir. How is that going to apply to your cloud strategy?
Jon Brinton: Yes, I am extremely excited about the transaction that we completed recently with Mavenir. One of the things that a lot of people on the surface in our industry maybe didn’t understand or get is that is really an opportunity for Mitel to expand the scope of our business and our capability to serve our customer’s needs. As we have been through transitions in the traditional premise business and we clearly went from TDM solutions to IP PBX to now the cloud, what Mavenir has done is they are the experts in delivering voice over LTE solutions, rich communications services, and voice over Wi-Fi through 4G-enabled networks and selling primarily to and having in their customer base about 130 of the largest mobile providers globally. They actually have 15 of the top 20 mobile operators that are in their customer base deploying solutions today with Mavenir. What a lot of people don’t understand is that as you move through the technology transition, 1G, 2G, 2.5G, 3G, prior to 4G and voice over LTE, that was more of a stair step technology change for the wireless industry. With 4G LTE and VOLTE, what you have now is the voice traffic in that wireless network moving to a pure IP type of solution where it’s IP networking and transport and that type of trunking. That’s the same change that we have experienced in our premise business, in the enterprise business five to ten years ago. What a lot of people lose sight of is once it is an all IP network or once the voice traffic is all IP, it really does not matter if it is the TDM fixed line network, a broadband network, or over the mobile network. It is all IP traffic. What Mavenir does is it brings to us the capability to really lead in the mobilization of unified communications.
I will tell you in the Nordic and some of the markets that we do business in, we are already seeing many small business and customers now acquiring their unified communications from their mobile provider. Within the last couple of weeks, we had a new program and campaign announced where T Mobile in Holland has selected Mitel to power what they are calling their Cloud and Clear business unified communications offer that they are delivering over their mobile network. The ability to have our cloud unified communications capability basically in that IMS or the application layer of the 4G network provider is really one of the key benefits that we get from Mavenir. They have done a great job of attracting customers, expanding their footprint. They announced footprint wins so you will see a recent announcement with Vodafone and some of their other providers with whom they do business where they are in their footprint deploying technology with them.
It really makes Mitel today, whether it is the fixed, enterprise market, or the global market, the provider of next generation enterprise, mobile, and cloud communications. It positions us very well for the coming next few years as that market really goes to develop. If we look at it, it’s an exciting way for us to expand, to have a whole new set of channels that we can take our solutions to, and to really be with the mobile communications phase. As you know, for many especially as you get down into the digital natives and the generations that are beginning to become a large part of the work force, they are very mobile centric with those wireless devices. Being able to take our cloud unified communications and deliver it over mobile providers’ network in the same way that we do with traditional PDM or fixed line network type of channel that is extremely exciting to us.
Jim Burton: It’s interesting. When you talk about it that way, it reminds me that people like me who follow the industry are always looking at what’s the next step. It seems that what you have done is jump over the next step and really looked ahead and said, this is really where the market is headed. These are really some important parts that we need to be addressing in the future. You have jumped ahead and made an acquisition that sounds like is going to serve you very, very well.
Jon Brinton: I would liken it to the fact that five years ago we were the first in deploying hyper cloud. We were the first to natively deploy our software in a VMware virtualization environment and take what people saw as a traditional PBX in a closet and put it all into applications and make it run on somebody else’s IP framework.
Mavenir also has a fully virtualized solution for 4G carriers. It’s not proprietary hardware. It’s not a bunch of proprietary servers that they rack and stack. They can deploy it fully virtualized in their environment. Originally, when we got to market with the VMware-based solutions and our virtualization solutions in general a lot of people were thinking, what’s the real application? Today, when we talk about having those customers that are 25,000 or 20,000 users or 5,000 users wanting to blend their premise in their cloud infrastructure, it’s that capability of having a pure software-based solution that allows us to do it. I believe with Mavenir, you are going to see the same thing. The cross over will be in the capability to support that natively in the mobile network as well, which is really exciting.
Jim Burton: It is very exciting. One of the things that my observation is over the years, and we have done quite a number of podcasts over the years with Mitel, it just always seems that you are visionary, looking at next-generation stuff, and often way ahead of the competition when it comes to these things. At the time, it looks like what is that all about? A few years later, it is like, oh, now I get it. Congratulations on that acquisition.
This brings me to my final question for you, and it’s about your overall strategy. What is Mitel’s overall business strategy? You have a lot of components going on. You have a lot of competition. Where does that stack up and what’s your strategy going forward?
Jon Brinton: Yes, that’s a great question because from what a lot of people know of the company, we have had a really transformational year, year and a half. Part of that is Rich McBee, our CEO, came to us over four years ago from Tektronix and Danaher, and understanding how they had really grown very successful businesses. If you look at the year or so, we have had a transformational year. We were recognized twice as a leader in Gartner Magic Quadrants. We doubled our size and our profitability. We have the fastest growing cloud business. We made this early move into mobile growth. We have established the number one market share in five of our core countries and in EMEA. Part of the strategy behind this is we are about a billion two hundred thousand or so annual revenue now. In having a very large chunk of that, which is the core business of the traditional telephony premise-based business with a very large installed base of over 60 million users globally, so that’s the foundation so to speak in the house. If you think about it, we are really focused on maximizing the value in the core. We are working with our channel to provide excellent customer service and high customer satisfaction. We have a very high net promoter score with our channel and customers. We have a high level of customer satisfaction in that base. We continue, where possible, to expand the scale of that geographically or near adjacencies. We have excellent performance as that business transitions from hardware to software. A very large installed base, very stable business. It is a flat or growth market overall, but it is an extremely stable business. Some of those customers may never move to the cloud. To be able to support them, provide them the level of service they want, and retain that customer relationship is really important to us.
Then on top of that firm foundation, we have really built three growth pillars that are just very important. I think they are right at the inflexion points of where this industry is going. The three growth pillars are the ones that we largely talked about in this podcast, which is our cloud business – being able to take those base of customers and as they look to migrate to the cloud to move in that way. That is about 15 percent of the total company’s quarterly revenue now. It is continuing to add to that base as it matures and be able to offer extremely competitive and highly compelling public, private, and hybrid cloud solution to those customers. Then we are creating a lot of new logos and new customers to Mitel. Maybe it’s the first time that they are purchasing from us. That’s one of the growth pillars.
The second is expanding in the contact center. We talked about how that is such a critical component for that kind of real time customer care solution. We have a seen great growth in contact center. Contact center is a very important part of what drives the customer’s choice in the vendor with whom they do business in many cases. We see the ability to deploy contact center solutions in the cloud as well as very important. That is a real growing area. It is a place where we can really provide a lot of business value to customers as well. It is not just helping them manage costs and managing supporting users, but increase their revenue and grow their business and interact with their customers on a more successful basis. The second of the three growth pillars is expanding in the contact center.
In the third now, with the acquisition of Mavenir, is really that expansion into mobile and that fast growth market. The voice over LTE, voice over Wi-Fi, the 4G business that they are in, is an end market that is growing at over 50 percent on an annualized basis. It really delivers to us the convergence of the fixed and mobile technologies, or the enterprise and mobile technologies where it all comes together in one unified communications atmosphere.
Finally, it really gets us in the swim of the trend of the bring your own device, digital natives, people that are highly mobile focused. If you think of how long many of us and how much time many people spend with their mobile device each day and using it. Some of the statistics, if you are a statistics nut and you see some of them that come out about how little of the time each day a lot of digital natives are actually away from their mobile device, it’s just shocking. It really shows where communications will shift to over time. On top of that firm foundation, having those three growth pillars that all intersect and provide a highly pleasurable, unified communications experience to our end customers, that’s the strategy that we are focused on. That is what we are executing against. You may have seen two weeks ago that we announced the acquisition of Tiger TMS. They provide solutions to property management to the hospitality vertical. We will be focusing on some vertical expansion within that growth, the three growth pillars, and our core business that help us to really get deeper with customers and some of these important verticals. Executing against that strategy is what you should expect from Mitel. The existing thing about it that I see having been associated with the company for a very long time, is just how customer focused it is in delivering solutions through our channel that provide a really robust unified communications experience for our customers.
Jim Burton: Well, it is definitely very exciting. The three pillars I think are important. I think most people would say, well yeah, obviously cloud and obviously mobility. The area that I think is often overlooked is the contact center. If you look at a company of any size and you can pick a minimum of 50 to 100, they all have contact centers. Quite frankly, even when get down into the smaller sizes, they have all something that they may not call a contact center, but you and I would knowing the technology and knowing the market the way we do. It sounds like you have three good solid pillars to build on, and going after those vertical markets is something that we at UCStrategies would always applaud.
I want to thank you for your time today. I was great catching up. I know I learned a lot from this podcast. That is one of the reasons I like to do these. It helps me keep up to date on the market. It is exciting stuff you have got going on. I appreciate your time, Jon.
Jon Brinton: Thank you, Jim. I appreciate you and your listeners taking the time to find out more about Mitel and where we are at and asking some great questions. I appreciate your time and thanks very much.