UCStrategies Experts Discuss Announcement of Mitel Freedom

14 Nov 2010

In this Industry Buzz podcast, the UCStrategies experts review the announcement of Mitel's new "Freedom" architecture, and new service and extended capabilities in the cloud, desktop virtualization, and UC mobile.

The UC expert panel includes Jim Burton, Marty Parker, Michael Finneran, Blair Pleasant, David Yedwab, Dave Michels, Art Rosenberg, and Jon Arnold.

UCStrategies encourages your comments on this podcast. Please see the "Comments" section at the bottom of this page to contribute.

Jim Burton: Welcome to UCStrategies Industry Buzz. This is Jim Burton and I am joined as usual by the UCStrategies team. Today we are talking about Mitel's announcement. A number of us, having seen the pre-release information, observed that a lot of this that they are announcing today is in fact not new, but one important thing to note is that it is a repackaging and a rebranding. There are a couple of new items and there is some good direction that they provided us. So without further adieu, let's jump right into it and Marty, let me turn it over to you.

Marty Parker: Jim, thank you for that. The thing that I noticed here within the various themes-there's a theme of openness, a theme of virtualization. But the one that struck me is that Mitel has actually put a stake in the ground for cloud-based enterprise communications. There's a lot that has been said about it and there are some companies, 8x8 and CallTower and others who are already out hosting solutions. But in this case, Mitel has brought their software, their feature set, which is already well known and highly respected as a small-, mid-, and large-business software set and they've put it in the cloud. And they are offering it with a specific price...many companies who do hosting aren't that specific on the price, but their price is $34.99 per user per month, including the telephone instrument itself, by the way. So you're basically getting the hardware as part of that license. And that includes their managed services and we have known that for some time Mitel has been offering managed services to their customers-that they will run your help desk on your communication system for you and they will provide the avenues and changes and basically manage your communication system. That is all buried in this price. So for a company that wants a really well-featured product, with a desk phone, with integration to mobile smartphones and tablets, which they also emphasize as part of their solution set, with a soft phone capability and presumably with their communications enabled business process integration options, in a cloud-based per user per month basis, this looks like a pretty interesting item.

As to the other aspects, why don't I toss the ball up in the air for others who would like to comment on the openness or the virtualization or other items.

Michael Finneran: This is Michael. I was noticing of course, they are series about the mobility business. They touch on all the bases. They hit RIM, they've got iPhone, they've got Android, and of course like most of the mobile solutions you have different capabilities with the different platforms. The fullest seems to be with RIM. Mitel is the only PBX company I am seeing that is actually offering the RIM MVS, the Mobile Voice Solution, which provides nice integration with the Blackberry device and also now with the MVS version 5, allows them to support WiFi. They also have iPhone and Android - in that case you don't get the WiFi, at least not yet, but they do have the dynamic extension and the unified communications applications. So they do seem to be touching all the bases in the mobile space.

Blair Pleasant: What I like is that they are not dictating to customers how you are going to get the capabilities. They've got a premise solution, they've got the hosted - they will be white labeling the hosted solution through different providers. They have the managed services Marty mentioned. But I think what's really nice is the flexibility - they are trying to make it easier for their customers, whatever size, but especially for SMBs to be able to get the services or capabilities in the way that they want that makes the most sense for them.

David Yedwab: They also appear to be becoming much more sophisticated in their view of routes to market or channels, and how they are going to be partnering with the channels from their strategic partners, like a VMware for the virtualization solution, as well as the certifications that they are going to be providing for their cloud offers and some of their other offers. So this is a real step up in the direction. The one thing that I really have a question for the rest of the team is, they didn't mention whether an enterprise can have a hybrid solution-some on-prem and some in the cloud. Did anybody get an answer for that?

Jim Burton: We had heard about that before, David, and that's something that they have been working on as they have been working in all their virtualization, is to be able to distribute wherever an enterprise customer may want. You know, all in the prem, all in the cloud, or a blend of things. And Dave Michels, I know that you have spent a lot of time looking at this as well, so maybe you could comment.

Dave Michels: Their biggest challenge has always been being invited to the table. They are doing an interesting twist on FUD (fear, uncertainty, and doubt) where they're kind of reversing the FUD and putting it back-normally the FUD is from the vendor saying, " if you do this, you can lose out if this company goes out of business or whatever." But I think what Mitel is doing - they are basically saying customers may want to change their architecture. They might want to go from, as Michael was saying, iPhone to Blackberry or to Android...or they might want all of them. Customers might want a system that is in the house or hosted or virtualized and/or maybe an appliance. They might want Exchange for email. They might want Notes for email. They might want a third party for email... And Mitel is definitely saying, if you don't know what you want, or if you think what you want might change, that they're positioned to accommodate all of that and I think that's an interesting strategy. I haven't really seen anyone else do that yet.

I am not sure I agree with David, though, about the channel. Because I think that they are creating a bit of a challenge for themselves with the channel, because they have their existing channel, which is primarily moving boxes. Now they are selling a hosted service, they are also selling a hosted offering to service providers so they could sell hosted service. They've also got direct offices that are selling all these combinations. So I think there is going to be a little bit of channel contention in the marketplace as these different paths start meeting each other.

David Yedwab: Let me jump in on that because it's really interesting, because you just said Mitel's issue is getting to the table and getting to the table means having channels to go to market. So I think I'd rather see a little bit of channel conflict to get better coverage.

Dave Michels: That could certainly work in their favor, but it also may steer away strong channel players that are worried about the conflict.

Art Rosenberg: They talked about certifying in various areas of expertise that customers will need, and when I asked them about what level they are going to go to, because you could go from the architectural level and the technology level and network level and so on, but when you get to the applications and now you have to think about the vertical market needs there, they indicated they haven't really done that yet, but they're thinking about it or planning on it.

Jon Arnold: I've got a few thoughts as well, built on some of these things. I agree with a lot of stuff going on and coming back to Dave's point, both Daves...about the channel issue...I agree with Dave Michels that this whole idea of being available to almost any route to market can cause some confusion in the marketplace. Just a couple of things I want to add to this: first off, I didn't hear any mention today about video in the conversation, and they have Magor, so they have their own in-house video solution and I didn't think to ask about it on the briefing, but I would think that this could fit into the value proposition to add something beyond just voice. Because this is a very voice-centric telecom-based type of roadmap that they are showing here, and yes, it's a lot of branding and stuff, but the message that came through loudest to me on the call was how they're positioning voice as just another data application in the IT infrastructure. And the concern that I have is that when you come out with this flat price hosted offering, it's competing really first of all too much on price and less on the brand and I think it's going to put them in the middle of a whole bunch of competitors and I am worried that they may get caught up in a price war here and that's not what the channels want to see, because it's going to be hard to incent them if there is not enough money in the pot for everybody to do this.

I worry that what they are doing with this route, and I think they kind of have to go down this road, is that by positioning voice as just another application, I think that they are taking themselves down a few steps in the value chain with the customer. And it's a different conversation than what you are hearing about CEBP and integrating into other applications and business processes and stuff like that, which so many other vendors are talking about, and I am a little concerned that they are going to kind of take themselves a bit back from where they have been and where they have been successful.

The other comment I just want to make on this is, as we know Don Smith has announced his retirement now, and they are in mode to replace the CEO. I am thinking that this move is also to partly set themselves up for their future direction however that is going to come when they do find a new CEO. So I think this is setting the stage for how they want to play on a larger scale and stay in the game and keep up with Avaya and Cisco. Lots to think about here, but I agree there is not a lot new, but I have probably more questions than answers, based on what I am hearing so far.

Art Rosenberg: I raised the question about CEBP and they said they haven't done it yet, but they are thinking about it, so there is a lot to be done.

Jon Arnold: Back to that point, you can be almost too flexible by giving the customers so many choices. I think that kind of takes the value of what you bring away from what you've done so well, to saying, "oh well, you can have it any way you like," but then you can become a very - almost like a plain vanilla solution that works well for everybody but isn't particularly distinct in any one area and that's the thing I worry a little bit about here. I think everyone is trying to figure out how to sell to this market, how to use the channels the best and they are struggling with this, I'm sure, just like every other vendor is out there.

Art Rosenberg: Right-they're not really any different. The problem really is the UC migration path, it's not just one kind of step. It's like, have you thought out where you are really going to be going even if you don't know the answers, but you have to at least know where to start and what you need to be prepared for. And I didn't see enough of that.

Jim Burton: One of the things, getting back to the channel for a minute...I think it's going to be difficult and a challenge for every vendor who is looking at changing their business model and moving things to cloud services, because most of the distribution channel is used to selling big boxes and getting a big payday when they have made a sale. If you look at what most of these new offerings are going to be, there is going to be a dribble of revenue coming in over a long period of time, while the total revenue may add up to be the same amount. If it's over a five-year period it's very difficult to incentivize the sales organization and if your current business model is based on the old model of getting big chunks of money every time you make a sale, it's really going to be tough on everyone.

The other comment that I would like to make and we had a little bit of discussion in our pre-podcast announcement was the fact that they did push "open"...they continue to talk about how open was so important to them. Dave Michels, you had an interesting comment and I will pass it over to you to comment on their openness and where they are and where they may not be.

Dave Michels: The comment that you are referring to is that they are using the proprietary MiNet protocol on the phones for the SIP protocol, which allows you to use third party phones, but that, as well as the channel issue...I don't know if I fault Mitel for these decisions. I think that the space is in a fairly...the industry is transitioning and they have to play these different angles. And right now, SIP phones are very popular with a lot of platforms, but they do not offer the functionality that the proprietary phones offer and so they can go to SIP, but they would lose some of the functionality, which is probably a better differentiator they have on the hosted offering. So I support that, but it seems strange to be calling it "open" at the same time. With the channel, the applications are moving into the cloud and so they have to play that angle and they are going to create some channel conflict. I am not sure there is a way to avoid that, but the industry is in transition, it's a reality.

Art Rosenberg: And the channels are in a state of flux because their responsibilities are shifting and the expertise needs are shifting and how are they going to get from here to there and with whose help?

Dave Michels: That's a really good point because the typical Mitel dealer today is not Blackberry certified, is not VMware certified, certainly there are some out there that meet all those requirements, but the customer requirements that the customer needs are changing the skill set of what it takes to put the stuff in.

Pam Avila: I just wanted to add my thoughts to what both Dave and Jon have said, because I absolutely agree that the channel is an important part of Mitel's efforts going forward, and I really think that even the comments thus far haven't given it enough weight.

The reason why the channel is so important is because technical certifications are all well and good, but if the products don't get into the hands of the end users, it's all meaningless. And right now, with Mitel positioning voice as really just another application in the data world, it really creates a huge, huge, barrier for their traditional telecom dealers. They're not used to the data world; they're not familiar with it, and Mitel is going to really have to do some fancy dancing, I believe, to bring their dealers up to that whole data world, and also to get them solution selling instead of box selling. Partnerships and relationships are great; I understand the VMware relationship. However, the VMware salespeople have the same issues. They're not solution salespeople; they're not familiar with selling with the voice at all. They're more familiar with the data side. So they have some of the same challenges.

Overall, I think Mitel's biggest challenge is really going to be how they bring their channel along, and how they attract new channel partners.

David Yedwab: There is one other piece that I don't think we've covered real well and this idea of a single code stream, no matter how the services are delivered, I believe is extremely important because most of the other traditional vendors have got different code streams for different size systems and this is a potential differentiator, especially if my earlier question about how they are going to do hybrids for larger enterprises is answered successfully.

Jim Burton: That's a very good point David, I agree 100%.

Jon Arnold: I have another angle to thrown in here. Someone mentioned earlier about the tablet thing and they made it clear on the call to me that they are not going to be getting into the tablet market and I know all the vendors have to have two paths they can go. They can do what Cisco and Avaya or Samsung are doing and come out with their own tablets, or play the game and be compatible with everybody else's. So this again reinforces that open theme that "okay, well we'll support Android, alright we will support Blackberry's tablet, we will support the Apple tablet"... So again, they are setting themselves up to be as flexible as possible in the marketplace, and that could eventually be good for the channel guys, I guess, because I am sure some of them are picking up on this as a new product category for them to be selling. So if they are not going to be selling much in the way of big box systems, at least this is another end point they can push into their customers and say "hey, this will support the Mitel platform and away you go with this level of capability."

Dave Michels: Along those lines, we've seen three big tablet announcements - Cisco, Avaya, and Polycom this week - were all really around video and we just said that the video isn't the core part of this solution they've announced. Now the Polycom announcement was to go with the standard Android tablet from Samsung and I am sure there will be others on the market soon. And I think that makes a lot of sense for a company like Mitel, who is already embracing the different iPhone and Android platforms.

Jon Arnold: Why then aren't they talking up Magor?

Blair Pleasant: Well they just didn't for this announcement. It doesn't mean they are not talking about it.

Jon Arnold: Yeah, but I don't know-I am just thinking , they are one of the few vendors that has their own and I -

Marty Parker: I don't know, Jon, if that is actually a Mitel solution, isn't that a separate company?

Jon Arnold: It is, but it's in their fold, right?

Blair Pleasant: And they've done a lot of good integration work with them.

Jon Arnold: But again, to me it comes to the point of well, are you going to be a voice vendor or are you going to be a UC vendor, and I guess that's why we're having this call in a way, because everything I am hearing about their briefing, it's all about voice.

Art Rosenberg: That's where they're coming from.

Jon Arnold: Well, of course, but like we all say, it's a market in transition and everyone is moving to collaboration and where do you fit in the market? And that, to me, drives the value proposition. Where is the money? Because voice is not going to be where the money is.

Art Rosenberg: They were very explicit when we asked about device independence. They came right out and said "device independent" - what that means to me is multimodal devices, not voice devices. I mean that's not a good answer. So they have opened the door to everything, but obviously they don't have everything yet and they are going to be partnering and who knows what else, but if they are going to be open and device independent and network independent, which is what the customers are going to need, they are going to have to go there whether they like it or not.

Jon Arnold: And they are ahead of the pack, right? That's what I like about what they are doing. I think they are one of the leading companies who have embraced this and are building a business around this.

Art Rosenberg: Right.

Jon Arnold: But can they leverage it? I don't know; I hope they can.

Jim Burton: It's always been a big challenge for companies like Mitel - they have done well over the years, they have always been extremely innovative and the question is, are they going to be able to make this next big turn. I almost view this...there was a big shift to UC and now there's a big shift to cloud, and it's been tough on a lot of these companies to make the first shift and the question is, will they do the second shift? And they certainly seem to be out in front of trying to resolve those issues. Of course, I think we all wish them well and we are just going to have to stay tuned to see how well they can execute on their plan.

Jon Arnold: And a lot of this will have to do with who they hire for a CEO.

Jim Burton: Absolutely.

Art Rosenberg: Somebody with experience, right?

Jim Burton: Experience in what, though? Any other comments before we close out today's podcast? Not hearing anybody jumping in, I will thank you all and look forward to our next podcast. Thanks, everybody.


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