UCStrategies Experts Discuss ShoreTel Analyst Conference

In this Industry Buzz podcast, several UCStrategies Experts who attended the recent ShoreTel analyst conference provide their thoughts on the conference and the company's strategy.

The Expert team includes Jim Burton, Blair Pleasant, Dave Michels, and Jon Arnold. UCStrategies Expert Marty Parker did not attend the conference, but was invited to the podcast to provide a "counterpoint" to some of the opinions expressed.

Jim Burton: Welcome to UCStrategies Industry Buzz. This Jim Burton and I am joined today by a group that attended the ShoreTel Conference last week in Chicago. That group includes Blair Pleasant, Dave Michels, and Jon Arnold. We had a call yesterday to discuss the state of the industry as part of our weekly call and as we were talking about some concerns we had about ShoreTel, Marty Parker stepped in and said that he saw some positive light that some of us didn't see. So we have actually asked Marty to join us as part of this conversation.

We are going to take it in a couple of phases. We want to talk about the things that we really saw that went well last week, the good job that the folks at ShoreTel did, but then we have several areas of concern. And so we will call that the constructive criticism area where we will share some of the concerns we have about their strategy and their positioning. But to get started, I think that there are a lot of positive things that came out of it. We all met their new CEO, Peter Blackmore; we thought he did a fine job. We see him as showing good positive leadership, which is important to the company, and quite frankly, I think they did a very good job, the board did, in selecting Peter as their leader for the stage of the industry or stage of ShoreTel in this industry. It was a well-managed event, certainly well attended. But why I turn it over to others -- I will turn it over to Blair first to talk about her observations about some of the things that really went well at the event last week.

Blair Pleasant: Okay, thanks Jim. I got a lot out of the event, mainly from talking to some of the resellers and customers. There weren't too many customers there, but there were a few who presented to the analysts, and I spent a little bit of time talking to them. I tried to talk to the channel partners as much as possible; I have always felt good about ShoreTel but it really reinforced my feelings about the company after talking to the resellers. They are really happy with the product and with the company and it really suits their needs. So what we are going to be talking about a little later is that the ShoreTel solution isn't for everybody but I think that for the customers where it is a good fit, they really do offer the capabilities and the solutions that a certain part of the market needs. And I think their customers really are looking for something that is simple and easy and not necessarily too complex; it doesn't have too many moving pieces and it provides the capabilities that they need at this point in time.

In talking to the resellers, they really did emphasize how easy, you know, the whole tag line of ShoreTel-the Brilliantly Simple. The resellers kept talking about this and they really appreciated that it was a simple solution to sell, to implement, to support, and that's what they and their customers were looking for. So I think on that regard, ShoreTel did a really good job and I appreciated the opportunity to spend some time and speak with the resellers because they did shed a lot of light on what they were doing.

Dave Michels: I thought the conference was really very informative and a great time. I was impressed; it's been a summer of conferences, and I was just overwhelmed or impressed with the energy at this conference. There was just a lot of excitement. ShoreTel just finished out a blow-out year, I think they said 30% growth; just a lot of positive energy, a lot of excitement. The resellers were happy, the customers were happy that were there and there was a lot of people there. I think in the Analyst room I think I counted something like 29 people at one point. I mean, just a high energy event, very impressed. They did it in Chicago and I really enjoyed that. I stayed for a few days after the conference and I think I gained 30 pounds. It was just great place. The heat wave broke right after the conference which was very fortunate.

A couple things that I got out of the conference: one is I have always heard ShoreTel harp about their simple message, Brilliantly Simple is there tagline. I have always just more or less dismissed it as a tagline; every vendor has got one, but I really got a better appreciation for what they are trying to communicate with that and why it's resonating with individual users. And I never really sat down and thought about how complicated the industry has really become and how many vendors are actually positioning themselves as slightly less complicated than others where ShoreTel is kind of coming to the extreme and really positioning themselves as not less complicated, but simple. And we heard it over and over from the keynotes in the management team, we heard it over and over from customers that presented. The dealers were harping on it and they've really expanded their channel with large service provides, dial tone providers, that have been more or less unsuccessful selling complex solutions. And so I got a better appreciation for that whole brilliantly simplified line and I really feel I better understand why resonates so well.

This was Peter's first time, I met him at InterOp, but this was his first time to really present to all the partners. And a lot of people were very anxious to hear and judge him as if a CEO gets judged solely on presentation skills but if they did get judged on presentation skills solely, he would be doing fantastic. He seemed to capture the hearts of a lot of the attendees, his messaging was very humble and respectful of the accomplishments ShoreTel has done prior to his arrival. I was a little confused by his strategy, he outlined a four point strategy and the first three points made perfect sense.

The first point was the U.S. Market, which was basically "continue doing what we are doing;" how can you argue with that? They are experiencing growth and that seems to be working. The international market he wants to change up, but again, how can you argue that? ShoreTel has been slowed through their international expansion. He has a credentialed resume with his international experience, being a European himself, and living in the Far East and what not. So I think that was welcome to hear, a change coming to the international plan; he is going to be more focused and target specific markets instead of trying to help one guy serving Europe or whatever it was they had which was not sufficient, instead of trying to build a critical mass in certain countries. The third point was mobility, again a very similar strategy to what we hear from a lot of other vendors that they are doubling down on strategy with a number of points both in the current line and in the roadmap. And so that made sense.

Then he got to this fourth point, which I don't even know why he brought it up. It was the cloud, and he basically threw out there that "I don't have a strategy," at least not one that he was willing to present. If you going to list things that we are not going to talk about, you could have listed six more points. But for some reason he threw that out there; last year at this event they announced ShoreTel as a Service, which never went anywhere. It didn't come up this time. So I am not really sure what he was doing with that fourth point and why it was on the agenda and why he brought it up, maybe I missed something, I would love to hear what you guys think. But all in all very, very educational, very successful, great event, it was very impressive.

Jim Burton: Jon Arnold, can we hear from you?

Jon Arnold: Yeah, thanks Jim. I just want to continue some of Dave's themes and Blair's too and I think, Dave, your comments there are as kind of spontaneous and heartfelt as what ShoreTel could possibly hope for in the market. Because you are a fairly technical guy and I think you if anybody knows how complicated this stuff can be and I am sure that Blair would nod her head. Anytime I talked to resellers, that is always one of the biggest challenges they find that making all of these pieces fit together and work in a way that they can use and that their customers can use is never as easy as it looks. And so I think ShoreTel has the right value proposition, and we saw that last year and just for the earlier comments about the energy that we saw, for those of us who were at their event last year in California, that was my first exposure to their analyst community event and that is the first thing that struck me as it was almost like being at an Amway meeting or something. I mean these people were just...you know, you normally pay people to sound this excited but they really, genuinely seemed very, very pro ShoreTel. They are certainly doing something right here with developing that community and we saw it ShoreTel in Chicago, and it was the same thing. So if they are continuing with that strong connection that they have built with the resellers, I think that is a reflection on something that Blair mentioned earlier, that they know their business, they know their market. And I think as long as they stay within that comfort level, to your point, Dave, when they start talking about cloud and later on we will talk about UC, if they start going beyond what their core resonance is with the market, that's where I think they are going to be taking some risks, and they may find it a harder time, but there is clearly a spot in the marketplace for resellers and end users who really just need simple, basic, communications.

And that is going to I think, lead us, Jim, to our discussion of what UC really means and what UC means for ShoreTel and their customers. But when you look at what is out there, complexity is not just a technology, but it is dealing with the vendors. I think there is a ton of companies out there who would rather not deal with Cisco, they feel confused about Avaya and Nortel, and after that, who else is there? And that is what Peter Blackmore tried to get across. Or maybe it was Kevin Gavin with the market-share stuff that after them, they are probably the biggest of the second-tier vendors. So they become a very important alternative for the marketplace that does not want to get caught up in the complexities of big companies with expensive systems.

One last think I want to mention is at last year's event, one of their really strong messages was TCO. They really went overboard, I think, trying to claim that as their leadership position-no one else has better TCO. Didn't hear a peep about it this year and so I am actually glad that they are moving away from that because I think that is a losing game to try to stick to that as a way to win business. Because it is just going to be a race to zero if you just keep going on being the lowest cost provider. So I think they are smart to move away from that and just focus on that simplicity message.

Jim Burton: Thanks Jon-and everyone. One thing that I would like to emphasize a little bit more on the positive side is their mobility initiative. They made the decision that they were going to offer their mobility solution to other platform providers-and Cisco and Avaya in particular. And I think that will serve them well, they have got a good solution with their Agito acquisition and I think that again, that will serve them well going forward and branching out. And providing a solution that is beyond just what their core capabilities are, that this is an extension that takes them into new markets and new opportunities.

Dave Michels: Jim, let me raise an issue about that. They acquired Agito, I don't remember when, about I think about a year ago, I don't recall. And I wasn't positive on it back then, I had written a post about that, and I still honestly do not understand it and you just mentioned how they are continuing to support other brands, well that makes a lot of sense. Because the SIP FMC integration solution doesn't, I don't think, resonate very strongly with the ShoreTel core of space. It's more of an enterprise and they said that. It is probably the Fortune 100 or 500 or something, and so they have to support other systems because they are not in that space, and so...I don't really give them credit for supporting other systems, they acquired a company that that's what it does and that's what they have to do with it. I am really more confused still, why they acquired the company. As they pointed out, it's a separate channel, it is a separate customer base, they have separate dealers that are doing just that. It is not necessarily much overlap with the ShoreTel customer base. I do not understand the tie-in and I question, I understand that FMC SIP integration on smart phones is an interesting market now, but I don't think it is going to be a strong market in the future, I just do not understand it. It seems like 4G is going to end up using the cellular path instead of a WIFI path. I could be wrong, I could be completely wrong but I was kind of more confused about this whole Agito, now with ShoreTel mobility strategy than before.

Jim Burton: One of the things that they did mention is that they see this as a Trojan horse exercise as well where they become a vendor to some of these companies that they are not vendors to today and that that could open up a new opportunity for them in the future. We will get into a discussion about Trojan horse opportunities that Microsoft is deploying and how that may end up turning around and hurting the ShoreTel initiatives.

So let me get into the constructive criticism portion of this discussion. And I wanted to start off with the fact that this is what we are really trying to do here. We are not trying to poke holes at them and say they are bad, what we are trying to do is to help educate the market as well as part of this process that we are going through. So let me go back to some things that Kevin Gavin said in his presentation which, quite frankly, was extremely well delivered and really narrow things down to some very basic points.

But one of the areas that I got a little bit sidetracked on, and a little bit confused about, is he was showing an example of crossing the chasm and trying to tie that together with how you go from into one technology area to the next technology area, to the next technology area of a particular industry or market space. And he started off, the ones that we're particular interested in here and he gave other really good examples, but is the telecom space. And we have the old TDM telecom industry that has been around forever; we transferred into the IP-PBX marketplace which is where we are today, and he mentioned that the next phase is unified communications. But he really never talked about how they were getting into that space, it was all focused on their positioning in the current space and how well they were doing and why they thought they would continue to grow. When he did in another part of his discussion, talk about unified communications, he talked about the three things that they offer in unified communications is "multi participant," which we would think about point to click to communicate, "multi modal," and that is of course that we have different devices that we can use to communicate with, and different modes for those communications, and "mobility," which of course, we've talked about a little bit. And to me, the unified communications does have a lot more to offer and I made a comment about how I did not see them as a unified communications company. And that was what came up in our discussions earlier in the week, and Marty said well, he would disagree with that, and so I thought I would turn it over to Marty to discuss that. Marty?

Marty Parker: Well Jim, thank you by the way first. My response was mostly to the sense that people came home with that they were really focused on their PBX mission. ShoreTel is focused on their PBX mission. Maybe it was different people speaking, I am sure it was, at the conference which I didn't attend, than those I dealt with in the first half of this year as I was preparing a white paper in support of their ShoreTel Release 12. And so yes, I was doing it on contract to the company, so I will put that disclosure out there on the table, but I did go and read all 145 of their case studies. And they have got some good case studies, some in video format, some in text format. I found about 25% of them were in a zone that I could consider unified communication. Some were more on mobility and other things. I was looking specifically at those that would support ShoreTel's new theme with their ShoreTel 12 with integrated collaboration. Besides my bias against telephony companies using the term collaboration, I was trying to support that, see what would support that idea. And I found a couple dozen case studies that supported that theme. Now many of them were the traditional, "I can save money by not traveling." Lots of that going around and it is true, so everybody can say it.

But they also had some very good examples of people using their instant messaging and presence, sometimes behind their call center, a couple of credit union case studies... You can imagine the ShoreTel product would be attractive to credit unions, but a couple credit unions were using instant messaging in presence in their call center to basically support the expert agent type of idea that they could resolve customer situations more quickly.

There were a couple of firms, some in the distribution and transportation industry who talked about the presence and click to communicate as a more rapid way to move their business along. And then there were a few starting to show up, obviously the ShoreTel 12 release wasn't out yet, so case studies based on that weren't invisible, but some were starting to talk about actually working in a more collaborative way. Now the ShoreTel 12 release actually does put a very nice desktop suite there for the users. Internal to the company it's instant messaging with the ability to click and do a voice call, to click to add video, click to add desktop web-sharing, what most companies view as a qualified, unified communication client experience. For audio and web conferencing, which is kind of a different experience, it is not the peer-to-peer, but the group audio and web conferencing, it is not audio and video, it's just audio web, they had again a very easy to schedule their brilliantly simple idea comes out there-but easy to schedule conferences and some nice features there with the ability to desktop share inside that audio conference which is what most people do anyway. So it surprised me a bit when all of you came back kind of with a wow, they are a PBX company, because their building product, which means they are investing in things that are not just PBX. So that's kind of my view of it but obviously people could read more about ShoreTel 12 on the ShoreTel site if they were interested.

Jim Burton: Thank you Marty, I appreciate that and our objective at UCStrategies is to be very well rounded and to present all sides of an issue so that it is not biased by one of us individually or as a group, but to really get the facts out. So I appreciate that input.

One of the things that I found most disturbing at the conference was the issue that they brought in three customers to talk to us. One of them is just getting started with ShoreTel, the other two had got some pretty interesting and exciting implementations but in those cases, both of them are using Lync and Blair, I know you have some comments on that, why don't you share your thoughts and we will just pass it around to Dave and to Jon as well.

Blair Pleasant: Yes, it was nice to hear from the customers as always and I liked most of what they had to say. Again, they focused on the ease of use, the simplicity, and that was what really got them excited and I wrote a blog about it last week, that they mentioned the word easy at least five times in each of their presentations. And that is really the value prop that they are getting from ShoreTel. The thing that concerned me is that two of the three are using Microsoft OCS or Lync and one of them is already starting to use Lync Voice to get a feel for it. They are not quite sure where they are going with it and how they are going to be using it, but they are certainly using Lync for pretty much everything except for the major part of their voice communications. And the other user is not quite ready for Lync Voice but again they are using Lync for everything else-for conferencing, IM, and presence. So it concerns me a little bit as far as what ShoreTel is going to do to differentiate themselves and how they are going to co-exist with Microsoft, especially in a couple of years as Microsoft does get more proficient with their voice capabilities and customers start feeling more comfortable. That yes, Microsoft indeed can be the voice provider so it just gives me concern as far as how ShoreTel and other vendors, for that matter, not just limited to ShoreTel, how some of the other switch and call control vendors are going to co-exist and compete with Microsoft. The users were very upbeat and very positive about ShoreTel. Reading between the lines, it does make me wonder what is going to happen in three to five years.

Jon Arnold: Yeah, I'd concur with that Blair, too. There is a real vulnerability there for anyone, you know, you pick your partners but it is hard to not be needing to be tied to Microsoft and that cuts both ways. And it will also be interesting to see where Skype fits into Microsoft's plans, if that somehow could bring the online based voice component into their systems and then as you say, they can marginalize the vendors like ShoreTel and that is not a good place to be. But I think for the moment, they really have to ride that market and make the best of the installed base that they have. I think the challenge is going to be, of course, growing the businesses and getting new companies on board who will use their system. And I think the issue we are all seeing there too is that because they are behind the roadmap in some of these spaces, particularly in video and certainly in virtualization and cloud, that by the time they catch up it will be too late. That I think Lync has a shorter window I think to get what they need than ShoreTel does to get all those other pieces in place, short of making some acquisitions, which you cannot rule out at this point. But I know Dave and I spent some time on the floor with some of the briefings about the video and we were both kind of a little surprised that it was not as far along as we thought. You know the Polycom end points are great for talking to each other but there isn't that desktop integration yet and it's still early days for them. So coming back to Jim's discussion about where UC fits in the definition space, well there's is this clearly still a voice centric product and again if they stay in that comfort zone with their customers I think they are okay but eventually those customers are going to move on, especially as mobility solutions mature. And if ShoreTel is not giving them everything they need, in equally simplistic fashion as the voice piece, then that value proposition of theirs I think is going to get weakened and they will be more vulnerable to competition both higher and below who are going to go after that business. So there is a lot of things that have to keep going right for them to keep where they are going and similarly to get past some of these limitations. And we have not seen that yet and it is not clear how or when that will happen.

Dave Michels: To Jim's point, I was surprised at two of three customers that presented had implemented OCS and when we asked them about that, what are they using it for, voice was always included in that story. And so I was trying to get a better understanding about that and I talked to different people at ShoreTel about that. And I got a good demo of their new SA 100 conferencing collaboration appliance. And it is impressive, I mean they have done a decent job and it's a new product and so some of these customers that deployed OCS didn't have access to it, and it was a nice, you know, it had presence, it had IM, it had video. And I asked different people, well why would you implement OCS or why would you implement this product and the answer I got grew consistently back, it was kind of funny because it was different answers but the reasoning that was consistent was price. And I would expected from ShoreTel simplicity or integration with the phone system, tighter integration, or something along that line, but the answers always came back, "this is cheaper than OCS," and then when talking to somebody else, they say well no, Microsoft gives away OCS and so OCS is cheaper. But there wasn't the clear value proposition other than price about why you would use one or the other. And the other thing that I think ShoreTel is going to be... if they go down this path, and the roadmap had a lot of aggressive UC type of applications in it, that it is going to be hard to maintain that value prop of simplicity as they go down these complex solutions. And so looking again at this SA 100, they had mobile clients, but the mobile clients support presence but not IM, and the collaboration solution does not work with Apple products because it is based on Flash and so these are the hurdles that other companies that are doing this have experienced. And all of a sudden you cannot answer questions with a single answer, does it do this, well yes on this platform, this direction, if you don't do that. It gets complicated real quick. It will be interesting to see how they maintain their positioning as they go down this path.

Jim Burton: Thanks Dave. I just want to reiterate, it was a great conference, we think they have got a lot of great things going on in the future. We pointed out some areas of concern we have that as constructive criticism so again, thank you all for participating today, and look forward to talking to all again next week. Take care.