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Usually, when a vendor acquires another company, it causes headaches for their channel partners, who don’t like having to learn something new. Such is apparently not the case with ShoreTel and its M5 acquisition.
At the ShoreTel Investor Day in San Francisco (great location at AT&T Park, home of the San Francisco Giants), after listening to M5’s CEO Dan Hoffman, it became clear that this acquisition should be a very smooth transition for the companies, their customers, and their partners. Hoffman noted that M5 partners now get access to the ShoreTel product line, and ShoreTel has more opportunity to innovate regarding the hosted product, since M5 owns the code.
ShoreTel is confident that its channel partners will benefit and grow in several ways. The company is beefing up its lead generation activities, and these leads go directly to channel partners. ShoreTel channel partners will now have more offerings for these leads, since many of these companies are looking for a hosted solution, which ShoreTel was not able to provide until now. Based on the M5 acquisition, those leads can now go straight to the M5 sales organization. ShoreTel has a large presence in the state and local government market, and some of these organizations are starting to ask about cloud services. Rather than losing these customers to hosted providers, ShoreTel can offer them a choice of cloud or premise-based solutions.
During Q&A with the ShoreTel executives, I asked how ShoreTel’s partners feel about selling cloud-based services that don’t provide as much revenue to partners upfront, and how ShoreTel will incentivize these partners. CEO Peter Blackmore stated that ShoreTel partners have been asking for a hosted solution and are excited about M5, since they now have appropriate offerings for their customers. He noted that channel partners like the recurring revenue model, and knowing that they get revenue every month. While ShoreTel hasn't formally announced how its new partner program will work and how partners will be compensated for selling the M5 solution, they will do so once the deal closes.
Other changes are expected to impact channel partners positively as well. According to Blackmore, in order to increase profitability, ShoreTel is doing two things: focusing its efforts on increasing sales, and reducing its R&D budget in FY13. Blackmore claims that while the company will continue to invest in R&D, it does not need to invest as much of its budget. Its previous investments, as well as economies of scale based on its acquisitions of Agito for mobility and M5 for cloud services, has helped them get to the place where they don't need to invest as much.
ShoreTel will mostly invest in sales, lead generation, and adding “quota carrying” workers in order to increase revenues and profitability. The company built a model for lead generation, and will be taking qualified leads and giving them to channel partners.
The company expects the hosted market to grow 20-28% in 2012, and over 30% beyond 2012. With its M5 acquisition, it believes that it can meet the growth expectations. One advantage ShoreTel believes it has in the hosted space is that there is no one clear market leader that the company has to compete with, compared with the premise market where Cisco and Avaya dominate, and that ShoreTel can take a leadership position.
Other channel-related changes include the fact that ShoreTel has to replace Don Girskis, senior VP, worldwide sales, who is leaving the company in order to pursue philanthropic activities. The company stated that Girskis will be replaced by two internal hires, one focused on North American and one focused on international sales. There weren’t any channel partners at this event, so I couldn’t ask them directly how they felt about these changes, as well as the M5 acquisition and selling hosted services, and ShoreTel’s move to a two-tier model, using distribution partners such as Ingram Micro and ScanSource.
One thing that impressed me about M5 is its focus on reliability (Hoffman said that the company’s three priorities are “reliability, reliability, and reliability”) and the customer experience. Hoffman acknowledges that M5 is not a low-cost offering, and compared the company to Starbucks – they can charge more per seat because of the experience they're providing to customers. M5 built a secure private network optimized for voice to enhance quality of calls, which Hoffman considers a key differentiator.
All in all, I believe that ShoreTel partners should be pleased with the changes that the company is making, and the fact that they now have the option of selling premise, hosted, and hybrid offerings. The details of the new partner program have yet to be announced, so we’ll have to stay tuned and see how this plays out.
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Communications Integrated to Optimize Business Processes.
UC integrates real-time and non-real time communications with business processes and requirements.
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