A Look at UC Trends and Recent News

16 Sep 2013

How do recent acquisitions relate to the overall trends happening in unified communications? The UCStrategies Experts take a look in this Industry Buzz podcast moderated by Phil Edholm. He is joined by Jon Arnold, Marty Parker, Michael Finneran, Dr. Joseph Williams, Clark Richter, Art Rosenberg, Tsahi Levent-Levi, Steve Leaden, and Roberta J. Fox.

Topics covered include recent acquisitions by Cisco, the Microsoft-Nokia deal, UC investments, company leadership, video, and Roberta J. Fox concludes with a "Top Four" list of unified communications trends coming from customers.

Phil Edholm: Welcome to the UCStrategies podcast. We have an exciting agenda today. We are going to talk about not a specific topic but a number of things that are happening in the industry, that really represent a lot of the underlying changes that the Unified Communication, and Communication and Collaboration industries are going through.

We are going to start by talking a bit about the acquisition strategy of Cisco. Some comments made by Avaya, and how they reflect to people seeing their investment strategy in unified communications. We will then go and talk a bit about the Microsoft-Nokia merger and acquisition, what it means for the industry, and what changes we would see there. We will talk further a little bit about some of the leadership changes in companies that are going to impact who is representing those companies, who is driving them. Then we will close with a discussion of video. There are a number of new video companies coming out. I think one of the big questions we are going to ask is, is the barrier to becoming a cloud video company gotten so low that virtually anyone can do it?

With that, let's start and talk a bit about the recent Cisco acquisitions. Over the past six to eight months, Cisco has done a number of acquisitions. In the data center space, they have purchased WHIPTAIL, Composite Software, Big Data Analytics, JouleX, Energy Management, SolveDirect, which is a outsourcing system management for managing deployment. They made some major focus in smaller cells, with Ubiquisys Femtocell technology company, and Intucell, which is self-optimized networks for wireless.

Finally, in security with both Cognitive Security and Sourcefire, they have been beefing up their security investments. What's really interesting is that there were no major UC investments made in this. First, Jon Arnold would like to comment a bit on what he sees as Cisco's direction and kind of as representative of investments in UC overall.

Jon Arnold: Thanks, Phil. Yeah, I think a lot of what Cisco is doing, to me, is taking more of an inside-out approach, where they really are trying to fortify the network from the ground up even further, when you talked about security investments, and virtualization, and data center, and energy management - all the things that really speak to the need for solidifying the infrastructure; getting that base really solid to build out from. Because that is clearly what the carriers are going to need to monetize these new services.

It also ties in quite a bit, I think, to their bigger focus now, which is this whole Internet of Everything (IoE) and Internet of Things (IoT). That seems to be the big buzz word that has taken over, certainly for telepresence and even collaboration as being their kind of big go-to themes. But that IoE/IoT trend is really getting big for them now. I think they are trying to use all of this to strengthen the case for the network being the core of everything. And as you say, the UC stuff is getting lost in the shuffle a little bit here. Because it speaks more to the what goes on inside the enterprise than with the end users. That really is after the fact. You can't have that working right without all of these core pieces.

I want to specifically just comment on the security guys, a couple of the acquisitions that you mentioned there, because what's starting to happen, the proliferation of the IP endpoints is creating a lot of vulnerabilities for security that a lot of enterprises just aren't aware of. I think Cisco is starting to see a little bit after the fact that these security breaches are potentially going to cause big problems.

This is one of these scenarios where these changes are happening faster than anyone can react to. I think we all know that. To patch these leaks, they've got to buy these companies who have that expertise. I think that explains a lot of these acquisitions, small companies in very specific focused areas that really address these pieces that just aren't all there. I think we are going to see more and more of it. I think the other big vendors are going to have to follow suit as well.

I think that's fertile ground for the startups. I think this speaks to the idea that there are developer communities that focus on a specific vendor. I think you are going to see more and more of that. Guys developing solutions that are specific to a Cisco ecosystem, specific to a Siemens or an Avaya, etc. I think this is probably a good time to be focusing on these types of problems. Because we are going to see more and more of them as the cloud becomes bigger, a bigger slice of the overall pie for where the investment dollars are going.

Phil Edholm: Thanks, Jon. Let me throw it over to Marty Parker. Marty, you had a couple of comments on this, and how you see this investment going in UC.

Marty Parker: Phil, I think you introduced it very well and Jon's comments were really apropos. There is a lot going on in the network layer. What we are seeing, however, is an interesting little puzzle that the IP PBX vendors are starting to realize that they are living with the consequences of their own definition of unified communications. When they defined unified communications as "IP PBXs plus a bunch of new features," over the last four or five years, they mentally put themselves in the mode where they thought that UC was measured by the number of IP telephony endpoints that were being shipped, and not by the amount of new solution capacity that was being delivered, the amount of business costs, not technology costs that were being converted into UC dollars.

The highlight of that was when Kevin Kennedy, the CEO of Avaya, on their last earnings call in the Q&A portion in response to analysts challenging him about the revenue declines in the Avaya financials, said, "well, everyone knows that for four of the last five years the UC market has been down."

The point, of course, is, and I am not going to do a lot of analytics on this call, but if you do the math, it's the IP telephony market that's been the decline. Maybe unit shipments are going up slightly, but price per unit is going down enough that the overall is declining. Whereas those companies that are investing more in what I call UC solutions, that is, finding new ways to do business; as we say, "communications integrated to optimize business processes..." - new ways to do business where companies will say great, if you can save me $10 million in my labor costs, I will give you $2 million to do it. That's where we are seeing the growth occur.

When these companies are faced with the consequence of their poor definitions, they start saying well, where am I going to get the growth? On that same call Kevin Kennedy said, "well, we expect to be getting our growth by penetrating deeper into the infrastructure."

So just as Cisco started started down that road when they started building computers; their UCS product is basically an Intel server to support virtual machines images, they started down that road. They're continuing down that road, trying to build more and more into the infrastructure layer, to be consumed by anyone who is at the application layer, including themselves. As we see Avaya there, we see Cisco there, we see Alcatel-Lucent there. I think we are going to see a real conflict in the leadership mentality of the IP PBX companies as they try to decide where they are going to invest.

I think the pattern we see at Cisco, which is the investments are going towards infrastructure, may be a pattern we are going to see with many of the IP PBX companies. Only perhaps a few of them plus the new innovators who invested purely in a software version of UC are going to be really chasing the UC Solution model trying to convert business costs into technology revenue. It's going to be an interesting time. I think we are going to see some interesting strategic shifts here, Phil.

Phil Edholm: Absolutely, Marty. One of the things that are always interesting is watching the small acquisitions of technologies. It is always an interesting bellwether of what the interesting technologies will be in the future. That's great insight.

One of the other topics we really wanted to talk about this week was obviously the elephant in the room, or I should maybe say the two elephants in the room - the Microsoft and Nokia acquisition. Microsoft agreed to acquire essentially the phone handset business from Nokia, which moves Nokia to being essentially a back end infrastructure provider in the telecom business with the handset business moving over to Microsoft as being Microsoft products.

I think obviously is an interesting and fertile question as some people have remarked that it is kind of two dinosaurs mating. Another comment is that really it was the only option that Microsoft had. Going the other path and trying to compete with Android, it's tough to compete with free. When you make your money off of selling software and you're not the driving cloud influence that Google is. But I wanted just to get the sense from the community. We will start with Michael Finneran as the expert in all things mobile. What do you think the impact of this is? How do you see it changing the industry?

Michael Finneran: Thank you, Phil. Frankly not a lot. The first thing that blew my mind about this was that Ballmer announced this acquisition right after he announced he was going to retire. It's kind of like he pulled the pin in the hand grenade and left the room. But I think desperation had a lot to do with it. Certainly there are a number of handset manufacturers that do support Windows Phone, but market reports now tell us about 87 percent of Windows Phone sales are through Nokia. And basically without some cash infusion like Microsoft is providing, there was a good chance Nokia was going to go under before they had a chance to gain any traction in the Windows Phone market. But it's importantly to note that in 2012, 60 percent of Nokia's revenues the device and services business was in the Asha line. Those are the dumb phones that they sell in developing countries. About the only positive I can see from it is that everybody is predicting now that the next big growth market for smartphones is going to be in emerging markets, and Nokia does have good brand recognition there. But overall, it just does not move the needle.

There is no way that two weak players equal one strong player. If anything, I am afraid it's going to slow things down just when Windows phone and Nokia need to speed things up. The extra overhead, and baggage, and bureaucracy you were going to get by slamming these two big companies together, it's just going to throw them further back. Of course, they do get Elop back as a potential successor for Mr. Ballmer. But I think Microsoft has bigger fish to fry. The biggest issue being is, is this combined hardware-software strategy really going to be a winner for them? I have even seen some articles now that seem to say that maybe this amalgam that Microsoft has put together despite the fact that it has loads of great products rolling around in there, maybe this thing really is just unmanageable. But I don't really see the Nokia-Microsoft combination really moving the needle on the Windows Phone's spot in the market at all. Phil?

Phil Edholm: Thanks, Michael. It's an interesting set of comments. Joseph Williams, you have some insight here as well.

Joseph Williams: Yes, on the positive side, Microsoft is familiar with the Nokia phones. There was a lot of engineering collaboration between the two. It is not as though they are picking up a technology they don't know and are not comfortable with. Having said that, Microsoft's experience with actually building, managing, and distributing phones is poor at best. I mean, they are pretty nascent at this point.

There have already been a lot of articles in the Finnish newspapers about how long anybody from Nokia will stay who had been acquired. There could be a brain drain out of Nokia that significantly impacts Microsoft's ability to digest this as well as turn it into a powerhouse. Not different from what Google had to do with Motorola, so let's be fair. This is not a Microsoft problem. It is just a problem of a software company acquiring a traditional ODM.

Let's talk about impacts on UC, though. Nokia as a product will not belong to where the UC products are housed - we're talking about Skype and Lync here. The Skype and Lync teams will have to spend a lot of engineering time trying to figure out. So Steve or Steve's successor will want to get some quick hits here. Some of those quick hits can be to go to these teams and say hey, what can you do for the Nokia handset? What can we do to differentiate ourselves here? Energy that we might have seen going toward improving the Skype and Lync products will very likely be diverted as they try to anticipate what they are going to do on the Nokia handset. That's going to be a problem.

Integration of the Nokia engineers into the Microsoft engineering culture is going to be complicated and difficult for them. They don't live in a stack ranking environment, for example. They are going to through some hardship on that.

The other interesting part of this is Lync and Skype have spent a great deal of time trying to build a relationship with the operators. It is a complicated relationship. Now that Microsoft has to deliver handsets as well, is going to further complicate that relationship. And at this point, it's very difficult to predict, whether a Telefonica or a Vodaphone, or an AT&T, won't be cutting deals with Microsoft to enhance the positioning of the handset, and the price they ask to get paid as special concessions around Lync, and Skype, and things like that. This not only complicates the way Microsoft is going to have to digest and accommodate the engineering, it is going to complicate their relationship with their key channel partners, the mobile operators. Honestly I think this is going to result in momentum loss. It is a really good opportunity for competitors to step up at this point.

Phil Edholm: Interesting. Obviously, that's one of the challenges of not only bringing together two organizations that are culturally different, language different; and are located, what, about 4,000 miles apart from each other. It will be an interesting challenge to bring those together. Marty, you also had some thoughts on Nokia and Microsoft, and what it means to us in the UC community.

Marty Parker: I'm finding myself sitting back and saying, wait a minute. What could be behind the curtain? I agree with Michael...from one view, the two elephants or two dinosaurs...I agree with what Joseph said, this is a complex integration. But the thing I'm wondering is, what else could happen here? The one that comes to mind when I ask that question is XBox. Microsoft sells a heck of a lot of consumer product as XBox in the gaming market. And they chose to be in the gaming market, including hardware provider, rather than saying "I'm just going to make software for a Sony device." And it worked for them.

What we've realized is that mobile phones are not connected to Enterprise UC. Mobile phones are connected to the user. The user is first a consumer, first a human, first a family man or woman, first a child. Then, they are part of an enterprise. The enterprise isn't the lead-in here. It's not the dog; it's the tail. Maybe there is a play for Microsoft if they can find alternate channels or alternate delivery methods.

So I start asking myself well, Skype managed to build themselves into one of the world's largest carriers without any contracts with Verizon and AT&T. What could happen if they were to follow kind of the Skype model: "Here's your Skype appliance."

I don't know the answer to these questions, by the way. I'm just hypothesizing. Something different could happen. As was just suggested, it may lead to some renegotiations of things with the likes of Vodaphone, or Verizon, or whomever - whoever is willing to break the model. Because personally as a consumer, I do not like getting locked into two-year contacts with my current carrier where I call them up and say hey, "I like the newer phone you're selling." They say, "sure, that will be $400 before you can change, or else you are going to have to change phone numbers." That's kind of black mail to me, green mail, I guess I will call it. I don't like that, and I would be willing to buy a device that works on Wi-Fi and maybe get a cellular subscription if I need it.

Who knows what a new model might look like. Certainly Microsoft had to do something. Because Apple and Google, the two monsters in the mobile device world were not - they are definitely not friendly to Microsoft, let's just start there. Even if Microsoft said, "well, I can put the software I am creating on those devices as apps." Apple and Google can both say "yeah, but you're not qualified to be in the play store." Or, "you're not qualified as an iTunes vendor" or something like that. Who knows how nasty that could get.

So I am in the mode, Phil, of leaving my mental door open on this one. Because I just don't know whether creativity will overwhelm the first impression of negatives, and risks, and limits.

Phil Edholm: Absolutely, that's excellent insight.

Next, one of the interesting thoughts of this is that Microsoft does have one huge advantage that neither nor Samsung and Google really have, which is Microsoft is literally tied into virtually every CIO in America around the world. They have a strong enterprise sales organization. They have strong enterprise channels. They have strong enterprise capabilities. That is one significant advantage in the handset market. Clark Richter, I guess I would ask you the question. Does this mean interesting things for the channel that are very different, because Microsoft is now going to be in this business and is unique in having an enterprise channel to integrate these products with?

Clark Richter: Thanks, Phil. Yeah, I think it certainly has some implications. I think first I just want to make an observation on how much of a different direction Cisco and Microsoft are going. All of Cisco's acquisitions being in the enterprise space, right? They have dabbled in the consumer market and even the small business market in kind of a slash and burn, and are running from that. Meanwhile Microsoft has made fewer acquisitions this year, but they are moving off more and more into the consumer space. I mean, if you think the biggest implication for the channel, for the existing channel that Microsoft has, it is obviously there is a lot of talk about margin and going more to sort of similar to an Apple model. There is not a lot of product margin per se. Obviously has implications for traditional VARs. But the reality is, I mean, this has kind of been undergoing - underway for a while. Not a lot of companies make their living off of marking up Microsoft licensing other than maybe the large DMRs. I do not think it is necessarily that huge of an issue. That joined with the whole motion with the cloud has been forcing a lot of the solution providers out there in the market to focus more on building their own services and their own intellectual property, rather than relying on the Microsoft and Ciscos of the world to mark up their products.

I think from the channel perspective, this is well underway. Most of the Microsoft partners out there are already primarily service organizations. The margin thing, and then becoming more of a consumer and cloud-focused company doesn't really have huge implications for them. You look at the healthy channel that companies like Salesforce have that those companies don't make any margin off of selling a product, per se.

Then back to your original question though, Phil, in terms of how the implications for these other handset providers who have been relying on basically the service provider and carrier markets to deliver their devices. Now Microsoft, who already has a seat at the table of the CIO and the lions business underneath them. I think it becomes kind of almost a battle of the service providers and carriers with Microsoft, and how they can play in their channels, because essentially they are a channel for the handset market. That would be kind of where this plays out in terms of the enterprise IT space in my opinion.

Phil Edholm: Excellent.

Joseph Williams: Do you think though in the channel that Microsoft could approach the Outsourceries and Intermedias and West IPCs, and ask them to bundle the phone and manage the enterprise phone footprint as part of the services?

Clark Richter: I think it would be a very attractive business. Microsoft has such a great history of building channel; enabling people to build businesses around their software. If they can return to their roots in doing that, I think that is a great model.

Phil Edholm: If you kind of combine some of the comments that as a group we made, not wanting two-year contracts, Microsoft's strength in the enterprise channel and devices; a strategy where Microsoft looked at devices being purchased by enterprises, and the carriers providing more open, not subsidized communication packages, it could be very interesting.

In other words, where Microsoft would go to a company and say, "buy the new Nokia-Microsoft phones for your employees, and let them choose their carrier." But then you have the common device to manage Wi-Fi integration internally and common application integration. That may be a very interesting strategy that I have not heard talked about a lot in the market that comes out of these kind of discussions.

Michael Finneran: One word of caution in regards to that. In dealing in the mobile market, enterprise customers do not even enter the equation. The only mobility company that ever really focused primarily on the enterprise was BlackBerry. But they didn't hit their stride until they pierced the consumer market. Any hope that something growing up around enterprise mobility, I'd look at that one with a note caution.

Art Rosenberg: I agree with that, Michael. I would suggest also that consumer BYOD is going to be a big play. It will affect all of us.

Phil Edholm: Absolutely. The last specific topic I wanted to talk a little bit about was video. We actually had over the last couple of weeks two new video companies come out, Acano and Pexip. Acano is OJ Winge, and actually both of these companies are predominately from Norway and are founded by ex-Tandberg/Cisco executives and technology folks. One of the things that's very interesting is that if you have been watching the video market, last year we saw the companies like Blue Jeans and Vidtel really come into the market.

This year we have seen a number of new companies like Zoom. A very large number of companies using WebRTC for video. I think the question that this begs is really two-fold: what's happening in the video market, and what does it mean to you if you are at enterprise trying to define your video strategies? Tsahi and I have worked very closely on the whole area of WebRTC and what does it mean. With that, Tsahi Levent-Levi, I would ask you to kind of comment on what does this mean for video? Are we going to see two companies a week from here forward?

Tsahi Levent-Levi: The answer is most probably yes. You mentioned two, Acano and Pexip. But there are a lot more. There is Squiggle that sent a press release this week, and vLine and Barc and a lot of others. I think what we see now is not only additional companies doing the same in-fighting for the same market share with the same use cases, but companies and vendors that are looking at videoconferencing and collaboration, and coming up with new paradigms of what does it mean, and how do we need to communicate with video? Pexip, if I remember is the one that showed the ability to build rooms that are static over time.

You can join a room, and all of the text and collaboration that went in that room is always there. The participants are the same. Some of them can be in the room while others are out of it. It changes that paradigm. Squiggle went to a position where you are working in the distributed team. Then when someone wants to talk to someone else, he just presses the icon or the photo with the image of that person, and he has got a one-on-one call with that person. The call that they see are one or two minutes at length, because it is only to synchronize specific topics. You see all of these different use cases and scenarios.

Now what it means to the enterprise? It means that you now have a lot more choice especially when some of these are quite cheap and quite open. I would envision that you will have within the same enterprise more than a single solution at the same time. Each one used for a totally different use case and for a totally different project.

Phil Edholm: That's absolutely great insight and I think kind of brings us to some of the questions around what does this mean? How are users going to deal with this new world where you do not have a single client? Any comments from the experts about do you have you have a single video platform? Can you have multiple? Are they application-specific? How is this going to change the industry going forward?

Marty Parker: In our UniComm consulting practice, there is a real struggle going on in the enterprise right now over what to put on...what to support is a better way to say it. What to support on the BYO mobile devices: laptops, tablets, smartphones, in order that, that video endpoint on those devices is going to work with the video room systems that the customer already owns. Because that's the model for video in many enterprises. They spent megabucks, literally, on these video rooms that are interoperating across the wide area network, the MPLS network and wide area network in the enterprise. And through SIP and H.323 addressing, they are able to interoperate with their clients, their customers, clients, and business partners. But now, I am going to put video capability on the mobile devices so that people can join without coming to a physical room. And that means that either the choices that they make will be limited by what the gateways will support. Like the new Cisco VCS or the Polycom devices that handle gateways for this purpose. They are going to say okay, this is the gateway I have invested in to let these desktops interoperate with my room systems. And that's going to define from whom they will buy. I get open. I get standard. The question is, who's been through the interoperability tests, and who is going to be supported by the vendors when the two things don't work? We are going to find a battle over support and so forth that is going to effect this. It's going to be about integration, security, and support, and maybe cost. Although the user can say well, I am bringing my own so you have to work with it. I don't think that is true when it is part of a business process. As Tsahi has said, maybe these new companies will find their way in through business processes like a persistent collaborative room model, in which case that's right, but they will not be competing then in the UC space, they will be competing in the enterprise content management space.

Maybe we will see a lot of these guys start up and then get bought by the likes of EMC2 and folks that are in the enterprise content management space and that will be a new market growth for them. It will be interesting to watch. But I am going to argue that as a CIO, and as an IT manager, I will want to minimize the number of clients I support that have video capability for the reasons I said.

Phil Edholm: Anyone else have an alternative view? I think if I look at the whole WebRTC world, the intent with WebRTC is to have a standard browser-supported endpoint that has video capability that literally could be any device, regardless of whether it is my mobile handheld device, my tablet, my PC, or my television. Does that actually kind of change that dynamic in terms of device support? Or, do we still have the limit - attempting to limit devices? Tsahi, you've paid a lot of attention to WebRTC. What are your reactions to that?

Tsahi Levent-Levi: I'm sorry, but I think it's not true. You can't say that if now I use videoconferencing or video in a new use case, that's for Marty, by the way. If I'm using video now for a different use that I haven't made before, then this does not compete directly with my UC Solution.

Marty Parker: You can find new users, and you don't need the interoperability. I agree with you.

Tsahi Levent-Levi: It's not only new users. Within an enterprise, how many of the employees today use the Polycom videoconferencing system and how many use Skype? Both for business use cases by the way... I would say that more of them use it for Skype at the day-to-day, and they do it for more hours of the day as well. Why? Because it's easier to use. They don't need an endpoint. It doesn't cost them anything. It works. They can use it with people outside of the company, so it's easy to collaborate elsewhere. Saying that there is a new technology, but it doesn't affect UC just because you cannot incorporate with what exists today...I don't know, it does not work that way.

Marty Parker: There is a barrier to entry. You're right, the users may choose to use Skype. But there are enterprises that block the Skype address at their firewall, so go figure.

Tsahi Levent-Levi: Yes, and then there are other solutions you can use as well.

Phil Edholm: I think this is a very interesting question, which is, if you remember back to the days when Salesforce came out. Salesforce didn't sell to companies. It sold to individuals. Individuals bought Salesforce because with Salesforce they were able to be more effective as a sales manager. I bought it for my team, and it made me more effective as a sales manager. Are we seeing the same thing? Basically intruding on the UC revenues the same way Salesforce did in the CRM space back 10, 12 years ago when it came out. We actually see different models. You see certain people that have enterprise models that are selling servers, and software, and then a lot of cloud players. It will be very interesting to watch as we move forward.

With that, I wanted to actually ask for a couple of our UC experts to make comments just generally about what they have heard.

First, I'd like Steve Leaden to talk a bit about what you have heard today, and what's the feedback to the channel and the enterprise on how to respond to these changes taking place? How do you plan for this? How do all these things, all these motion parts impact your business? Steve, some comments on that.

Steve Leaden: It's very interesting to see a lot of these acquisitions over the last few months and I think it definitely provides indications and trends as to where the market's going. I've taken a look at all of these from WHIPTAIL to Sourcefire to JouleX and SolveDirect and many of the others, including Microsoft. And really, I can capsulate these areas into four major trends that are going on, which I think many of us follow as both the user community that follows UCStrategies as well as the UCStrategies team.

Those four areas include video, mobility, security and cloud. Just as a quick observation here on some of these areas, we're very involved as a consulting practice in the cloud area, we're in a large deployment with over 7,000 users. And we're really seeing the trending for cloud being in the small-to-medium business and then the mid-to-large business still establishing itself. From a security point of view, obviously, security is becoming more and more of a talking point. I will give you just one example being with SIP trunking. We are doing a number of SIP trunking evaluations for clients and security is definitely at the top of the talking points area in terms of evaluation. And simply because you need some kind of session border controller around a data driven technology that is subject to viruses, DoS, DDoS attacks, etc. And then as SIP trunking will mature, I really believe that it will go way beyond just voice; it is going to include WebRTC, video, IM/chat, mobility, remote workers and other kinds of tools.

And then interestingly with the leadership changes that are going on, that's really another talking point. In my opinion specific to ShoreTel there were a number of key executives that left within a short 30-to-60 day period. I think they still have a very strong, loyal customer base, prospect base, as well as channel partner base, based upon the simplicity and ease-of-use factor. They continue to introduce new products so we will see how the new leadership comes in and makes some changes going on.

And then from the Microsoft point of view it's very interesting to see that they're really getting into the mobility market through this Nokia acquisition. I think it's something they had to do in order to stay current with the other trending that is going on with some of the other big players, one being Google of course.

With that, I'd like to give some counsel here or some opinion here. To the channel partners, you have to really watch these trends and evaluate closely how these macro trends may affect your core business going forward. And to the enterprise user, as with the channel partners, I would take a close look and evaluate how these macro trends are occurring and its possible impact on the enterprise UCC strategy. It's not just about deploying UCC as a technology today, but it's also about planning for your UCC strategy for your entire enterprise for the next three to five years. I think these four trends that we have capsulized here as a group on this podcast, including video mobility, security and cloud I think plays to those trends.

Phil Edholm: Next, I would like to introduce Roberta Fox, who also has some comments from her practice, obviously dealing with very large customers about how these changes impact enterprises and their decisions?


Roberta Fox: In our perspective at Fox Group, we primarily work with government and corporate clients, helping them select and implement these next types of next generation solutions. We're seeing a very, very different view of what a customer side of UC trends are. I always found David Letterman's top four or five points an interesting way how to highlight what is going on. So I thought I would share with my fellow listeners, what the customer views are telling us about unified communication and their trends.

Number Four: they keep asking us, so why do I need to change? "My phone system, my e-mails are working fine, I do not see any reason why I have to move to these things and spend the money." They are only looking at changing their telephony solutions or moving to unifying various types of communications when they change buildings or something major. But most of them don't really feel the need to change, even in spite of the vender FUD and a lot of sales pressure.

Number Three: the projects are definitely having different sponsors. The projects are no longer being driven by telecom professionals, if in fact they have any left in their organizations, and most don't, except for the very largest. Most of our clients at Fox Group are sales or marketing professionals and these people are really driving things, because they want to add more communication capabilities with how they service and work with their customers, and not so much about how things are done internally. And then, the IT folks, poor folks, are getting pulled into these projects, sometimes begrudgingly at having to be involved because they are busy doing other computer systems applications types projects. So it is an interesting client-sponsor and who we are working with shift.

Number Two: the acquisitions are definitely more complex and more time consuming. And this is primarily because of the fact that there are so many different types of options. When you really try to unify communications and you are looking at the telephony, you are looking at the messaging integration, the video, the desktop, there are many more elements, even if you are only changing one piece of the puzzle, you have to look at all the other pieces. And so then you overlay that with okay, is the customer going to own it, are they going to go to cloud; service base - is it going to be hosted, is it going to be managed or is it going to be a combination? And to give you an example, the last large PBX replacement we did for a company that was 9,000 people and about 60 locations, it ended up having us to look at, for the total solution, for everything, there ended up being 16 different design alternatives because the client wanted to see all the variations, and to really be able to say to the board that they have looked at all the factors. And it really ended up, no surprise to folks on this call and listening, that it added up acquisition costs from a procurement perspective. They really had to do this, and they wanted us to do this. But fortunately, we were able to modify our automated RFP Analysis tools, but it really did add a significant amount. In fact, it tripled the time and effort to have us and the client team looking at all of the various approaches. And they certainly had not expected that in the original telephony replacement.

And the Number One big shift we are seeing is the major one, and it's good and bad: the world of telephony is really now the same as the world of computing. And by this we mean you used to put in your PBX and you could have it for 10, 15, 20 years and yeah, you kept the boxes there and you upgraded your software occasionally (if you did that; a lot of clients don't). Whereas in the world of computing, you're upgrading your machines, you're swapping in and out servers, you're changing operating systems. And it is constant change of the infrastructure of both the hardware and software. What this means is that many clients are not used to that kind of mindset for their telephony for their phones. And they are also not used to the cost differences. Telephony used to be about three-to-four percent of capital to manage, and computing is 15-20 percent, depending on your environments. Now telephony, with the unified communications and server-based solutions, are all taking that same kind of cost models and management. So it's a big shift and it's causing some concerns with clients.

So these are the top four trends we see in unified communications from a customer perspective. And we hope that the industry adapts to this and respects the client's viewpoints, and I will turn it back over to you for now Phil.

Phil Edholm: Thanks, Roberta. With that, we'll close this podcast. My thanks to all of the experts for their comments. For the listeners, I will hope to have you come back again next week. Thanks very much.



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