ICA to celebrate its first anniversary

Next Monday (July 16th), ICA will complete one year of existence. The alliance has made great strides in joint-development although they still lag the advances made by Siemens, Alcatel amongst others in their depth of integration with Microsoft's UC portfolio.

Their recent PR noted that they have sold over 430,000 licenses worldwide. This is definitely impressive when we compare it to the LCS 2005 installed base of just of 2 million licenses worldwide.

It is interesting to see how quickly telephony, collaboration and messaging vendors moved past UC once Microsoft announced their ICA with Nortel. Today, most of these businesses emphasise on business process integration, web services amongst other things. I believe that Microsoft will enjoy strong adoption of OCS in 2008-09. It will interesting to see the attach rate of Nortel to those deployments.

Siemens Enterprise Communication as a service provider

I received a PR from Siemens Enterprise Communications (SEN) which I think is interesting. It says that SEN will operate as a service provider to run internet services for Accor Hotel group in Germany.


In this 5 year pilot project, SEN will act as a project developer, investor and operator. This project envisages a change in the way guests are billed for the services they use. Instead of buying quotas of time, guests will be able to pay for the time they use. SEN will bear the project costs, maintenance charges, operation and customer service. All usage fees collected by the hotel will go to SEN.

This is an interesting proposition. I am surprised that Accor hotel group didn't include telephony in this business model. we all know how much of phone calls we make from our hotel rooms.

Beside that this is an interesting development from a few angles. First, it helps Accor group to focus on its core competence. Second, it allows SEN to develop propositions that lead to increase in the usage of its services. These two together offer better services in both hospitality and communication.

There are certain issues that need consideration. On one side, Guests might take notice of the difference in customer service wrt communications. Furthermore, there is the larger question of the trade-off between profitability and customer experience for SEN.

The imperfection of P&G (Postini & Google)

I am sure most of the readers know that Google acquired Postini for $625 million. The blogosphere is full of comments on how aggressive and passionate Scott's team has been and what Dave Giroud mentioned in the press.

It is encouraging to see Google invest a PE multiple of 10 to invest in complimentary security product. This bolsters the security SaaS movement. However, we need to understand some crucial mismatches. Google Apps customer base is largely the 1-2 user segment while Postini's market is in the 100+ user segment.

Google Enterprise team have experienced the benefits of partnering with Postini. However, Postini continues with its channel recruitment and enablement strategy which is very different from Google Apps partnership strategy. Currently, Postini has a healthy team of 1600 resellers serving 35000 businesses and over 10 million customers. It will be interesting to read Google Enterprise communique to Postini's channel once the acquisition is completed (which is expected to happen by Sept, 2007).

I would also like to highlight the difference in business model. Google's enjoys a leadership position in the ads market which is something they would like to take into the corporate space. Its a difficult sale however Google being a innovator, I am sure the clever techies will come up with an non-intrusive way. However, thats not the point. The difference in the business model is what I want to highlight. Google-Postini and Postini-reseller network have different business models which are not sustainable in the long run. And in fact, Google's track record in this space isn't encouraging. Yes, I am thinking of Feedrunner, GreenBorder etc.

Finally, lets look at the big opportunity ahead. Postini has an interesting portfolio of products around security compliance. Though its not the biggest selling app yet for Postini, Google can scale it to provide an attractive and valuable portfolio of complaint communication services using Positini's policy enforced TLS amongst others. I think that there is a great possibility for Google to embed some of Postini's intellectual property into its product suite. This can justify the PE multiple that Google agreed to pay.

Shoretel's IPO and Mitel's lawsuit

On the sidelines of its analyst conference in Las Vegas, Mitel announced that it sued ShoreTel over four patent infringements. ShoreTel on the other hand was busy preparing for its IPO. Shares were expected to have started trading on wednesday. This is a sad news as it couldn't have happened at a more inopportune time for ShoreTel.

Ironically, Mitel has been having a rough ride for a couple of years. Last year, it was forced to shelve its plans for an IPO when Vonage's public offering failed to hit the right notes following a patent infringement lawsuit issued by a carrier. Moreover, Mitel's attempts to acquire InterTel has been facing rough waters following Mihalyo's private equity backed counter offer. For a company that have been in corners, the executives must well know how much pain it causes.

Cisco to change 'right to use' license model

It has been a nightmare for businesses to understand how much a Cisco solution costs, what with its complicated pricing structures. For instance- to buy a basic 7906G phone, one needs to not only buy the phone for $175 list price but also pay another $100 for something Cisco terms as 'right to use' license. It is with this license that things get complicated.

While each 'right to use' license cost $50, different devices require different numbers to run them. While 7906G requires just 2 such licenses, the high end 7985 G requires 7 of them. Think of the confusion it creates when a user buys a desktop, mobile communicator and a soft client that run on the same Cisco Call Manager.

I understand that Cisco is moving away from the device user license regime to a user license regime. This I believe will significantly reduce the complexity of costing and promote Cisco's high-end portfolio.

Mobile challenge

I read an interesting observation is Vihaan's brochure that went-

Why does mobile have only 20% market share of phone calls, even though penetration is above 90% ?

I think this question emphasises the market opportunity and the challenge for a mobile operator. Of course, there are solutions in the market that can be used to tap the opportunity. Lets look at them-

1. Mobile operator deploys micro/nano/pico cells within enterprise premises. Enterprises get a private numbering plan, pricing scheme.
2. Mobile operator deploys mobile PBX that runs on the operators network and offers enterprise grade telephony features.
3. Mobile operators enter into a definitive agreement to handoff traffic to private wireless in-building networks

Each of these solutions have opportunities and threats associated with them. At this point in time, I am hearing of the use of option 1 at most.

Going green with communication

Climate change is everybody's concern these days. The weather systems are changing and the effect on our ecological balance is becoming starkly visible.

Environmental sustainability and its pressures are generally concentrated around the industries that generate the green house gases, toxic wastes and the like. More often than not, we forget the role played by industries such as the IT and communications, and the financial services.

Recently, I listened to a podcast by Andrew Winston, author of 'Green to Gold'. He outlined the effect of the decisions of the finance industry on environment which I thought was interesting. He went on to cite that evangelists will have to look for business case to drive environment friendly initiatives and those aren't difficult to find.

British Petroleum for instance saved in excess of $1 billion by closely watching its carbon emissions from oil exploration. Walmart of all companies initiated a close watch on their energy emissions and ended saving up to 20% in electricity by moving to more environment friendly initiatives. I think similar value propositions can be found in the communication industry to contribute to the environment. Conferencing and collaboration is a great example. Shift from hardware to software is another contribution.

The Wi-Fi challenge

The wire read - "Boingo today announced a new flat-rate Wi-Fi service that eliminates roaming fees common in Europe and Asia. For €29 per month, global business travelers can access all of Boingo’s 100,000 hot spots worldwide. "


Boingo Wireless is partnering with France’s Hub Télécom and Norway’s Oslo Lufthavn Tele & Data AS (OLTD) - two of Europe’s leading Wi-Fi providers - to bring Boingo Global to market in Europe. Later this year, customers will be able to sign up for the service at more European locations including hot spots in Germany, Italy and the UK.




The strange thing is - How can a hot spot provider charge roaming fees? In a typical hub and spoke network, the hot spots are rarely interconnected directly. Anyways, for now the question is not applicable.



Customers must have the right expectations set for this kind of Wi-Fi service. Having over 100000 hot spot does not guarantee coverage wherever you need it. However when you need it and have it, Boingo is a definite bliss. I cannot begin to explain the horrors of Wi-Fi charging in Western Europe.

Thanks to WiMaX

Siemens Enterprise Communications were demonstrating the capabilities of its new range of products at the Mariott Marble Arch Hotel near Oxford Street in London. I was curious to watch them demonstrate their new Open size video infrastructure and their Openscape unified communication capabilities amongst others. Needless to say, Siemens had put in a lot of effort to make sure it works. For the Opensize product, they had a guy use the system at his office in Munich. In another case, they had placed a softswitch some where in US to do multi-modal communication.

I didn't have too much time at my disposal as I had to take a call from my colleagues in San Antonio, Texas. As I enterted the demo area, I looked at my mobile and to my horror I found that my cell didn't have coverage. But to my dismay I saw an awed audience look at the demos run by expert staff of Siemens brought from various parts of Europe. I thought that maybe Siemens is using some high speed wired connection. I was informed that all last mile connectivity in that area was handled by WiMAX. I knew that Urban WiMAX had established a network in London last year. The exhibitors told me that the WiMAX service provider didn't take more than 24 hours to set up a tower and offer the connectivity to Siemens. And the engineers on the floor seemed happy. The Opensize video instrument was constantly using 1Mbps link to transmit and receive. There were only 2 packets lost in the 10 minutes I spent at the booth - my eyes glued to the scan report.

Bell Labs Laptop Guardian turned into a product by Alcatel-Lucent

Omniaccess 3500 Laptop Guardian is a external card that interfaces laptops. These devices offer plug-n-play corporate VPN client service. In addition, the device can be used for remote laptop management for performance and against theft.

I think that this product offers critical value to enterprises. It gives its IT staff control over staff laptops outside the offices. Remote control and management are the USPs of this card.

From the usage point of view, support for different wireless access technologies in addition to wireline will enhance the power of the offering.

Most current offerings address one challenge or the other. For instance, the external 3G card offered by a mobile service provider offers 3G transport links to its network and levies charge accordingly. Secure ID offers access management only. Omniaccess 3500 will offer both and more; in addition it will hopefully give IT staff the control of the resource.

Mobile service providers stand to gain the most out of this product, although the benefit for fixed-wireless/wireline is significant too. The laptop guardian has the potential to add multimedia traffic to mobile data channels.

I think this product is a useful piece of innovation. Saying so, I would rather like to see this card technology embedded in the motherboard of the laptop instead of being a add-on card.

Chart Focus: Siemens Open Communication Vision

LG-Nortel

LG-Nortel offers a range of IP phones that work with Nortel's BCM and CS1000 series. Sold by Nortel's sales force, the JV has seen some strong traction for LIP6800 series phones over the past few quarters. Recently, LG-Nortel developed specific sets to work with Microsoft's SIP specifications. At their WinHEC conference earlier this week, Microsoft announced the availability of LG-Nortel phones for testing on OCS2007. LG-Nortel is relying on Microsoft's recommendation and sales success from Nortel's channel.

LG-Nortel is a dominant player in the small business market. It offers iPECS, ipLDK and NEXER product lines to the sub 150 segment. These products support LDP 7000 and LKD series digital handsets. In addition, the JV offers LIP 7000 series IP phones and two ranges of wireless sets.

Watch out Nortel!

I was reviewing Nortel Enterprise group's performance in Q1, 2007. The vendor registered a sequential growth of 18% on system deployments (47% y-o-y) in EMEA. Nortel enjoys continued success in emerging markets especially in Russia and the Middle East. Its growth in Q1, 2007 has been concentrated in the sub 200 segment. Its BCM series and KTS portfolio have been the most successful products.

One of the key challenges for Nortel is to grow its MLE installed base. While Meridian M1 continues to be successful, CS1000 series struggles to grow in comparison. Overall, Nortel's growth in this segment has been modest.

Overall, Nortel is in a great shape. Its Innovative Communication Alliance (ICA) with Microsoft is on track. The alliance has already launched a few solutions and announced several others to be launched later this year. Microsoft and Nortel are conducting joint roadshows in Dubai, Manchester, Johanesburg and Copanhagen in the next three weeks. Already, both companies have started working on listing tier 1 accounts to be targeted.

Recently Nortel enhanced their ethernet switching portfolio ERS 2500/4500 to support multimedia communication. This will help ICA provide unified communication over converged infrastructure in the SME - a very large and untapped market segment. In addition to premise based solutions, ICA has come up with a roadmap of hosted solutions involving CS2100, Microsoft HMS and Active Directory.

In addition to ICA, Nortel stands to leverage its JV with LG. At WinHEC earlier this week, Microsoft announced that LG-Nortel phones could successfully work with OCS 2007. Currently, LG-Nortel offers an extended portfolio of IP phones and IP based KTS systems (iPECS and ipLDK series).

My outlook for the vendor is positive. I expect Nortel to grow at 5-10% sequentially this year.

Cisco IP telephony grows in Q1, 2007

Cisco Unified Communication Group reported growth in Q1, 2007. Phone shipments that form their primary barometer grew sequentially by 3.2% and 66.9% y-o-y in EMEA. In the enterprise market, Cisco had a small growth sequentially and approximately 32% y-o-y. The large chunk of growth is in the SMB (25% decline sequentially and over 100% growth y-o-y).

Cisco launched Unified Communication 500 series for the sub-16 segment to cater to the new market demand. This product overlaps with the target segment of Linksys LVP 9000. In addition to the 500 series, Cisco launched Unified Communication Manager Business Edition for the 150-500 users. This software runs on a single rack unit server.

Over the past few quarters, Cisco is reaping the benefits of early wins. A large number of customers that have had deployed Cisco Call Manager are growing their footprint of Cisco IP telephony. Some of the large wins such as the Abbey National, Bank of America and State Bank of India require branch office connectivity; fuelling traction for Cisco Unified Communication Manager Express.

Cisco has seen a rise in the average selling price (ASP) of IP phones this quarter. I believe that this to be a one-off variation. Overall, Cisco faces a downward price pressure for hardphones. Also, there is a strong traction for SIP phones. R5.0 and R6.0 supports third party SIP phones that users can connect after buying a 'right to use license'. Growth in softphones have been comparitively lower than IP phone growth- softphone adoption is concentrated in larger deployments often complementing hard phones.

Cisco has invested in developing markets in Eastern Europe and Africa (both sub-saharan and North). Cisco continues to beat the average market growth rate. In the coming quarters, Cisco is expected to see increased competition from Nortel and Mitel in the enterprise segment. In the SMB market Avaya has been very active. They have launched a number of new products like Cisco.

Chart Focus: Microsoft names handset vendors for its UC suite

Interactive Intelligence embraces mobility

The value of extending enterprise apps on to mobile devices has been well articulated. It reduces decision time, improves efficiency and therefore contributes to overall productivity. This is well known, however its value in the contact centre industry goes far beyond that.

Although the contact centre industry has introduced new communication channels such as e-mail, self service, web chat etc, customer service is predominantly desk-based. Interactive Intelligence Interaction Client® Mobile Edition has the potential to change that.

The Interaction Client®, Mobile Edition is a graphical client interface that supports the Windows Mobile 5.0 and Smart Phone operating systems to make Interactive Intelligence IP telephony functionality accessible via mobile devices such as the Microsoft Windows-Powered Pocket PC and the Windows Mobile Smartphone.

In the enterprise space, the inclusion of the mobility dimension makes Interactive Intelligence' EIC more compelling. However, the major limitation of the mobile client is its reliance on HSDPA for synchronous multi-media communication- a vital element in contact centres. As an alternative the mobile client allow data transmission over WLAN and voice over cellular network.

Mitel acquires Inter-Tel: Its all about IPO

Last friday, there was news that Mitel announced definitive agreement to acquire Inter-Tel. I couldn't join the conference call that day. My curiosity was addressed yesterday when I went on a call with the senior management of Mitel Networks.

I wanted to know why Mitel bought Inter-Tel. Mitel is far bigger than Inter-tel. Both play in the SMB. Both are dominant players in the U.S. And Mitel has been dabbling with the prospect of an IPO for over a year now.

I asked Don Smith, CEO of Mitel as to why his company agreed to pay 57% more than Inter-Tel's net sales ($428 million) in 2006. The price-earning ratio of the deal is 27.8 which seem quite high when Inter-Tel has been growing by 3.6% y-o-y by sales and the U.S CPE market growing at 6.2% y-o-y.

Don said that Inter-tel was on Mitel's radar for some time now. He thought the timing to be right. Mitel had to face a proxy battle from Mihalyo for sometime-in the end Mitel walked off paying 10% over the last offer made and 8% premium to the last traded price of Inter-tel stock.

In addition to the acquisition of Inter-tel, Mitel announced its intent to withdraw from the IPO registration process. The timing of the withdrawl is interesting. InfoTech's research places Mitel+InterTel as the leader in the sub 100 segment market in the U.S and ranked two in the sub-500 market in U.S. I reckon this acquisition is all about the IPO. We shouldn't be surprised to see Mitel re-register for an IPO sometime next year. Whenever it does, it can value itself at Inter-Tel's price-earning ratio; that wouldn't be all too bad.

But then what does the acquisition mean to Mitel? During the call with Mitel, I learnt that there is low channel overlap. This allows to leverage existing relationships to promote products from both companies. It is believed that both brands will continue to co-exist. One of the significant advantages of Inter-tel is its real-estate (57 offices) in the U.S- something that will give enhanced direct touch capability to Mitel as it attempts to break into the MLE with its ICP 3300.

Is this the beginning of a trend?

There are several players in this market that are looking for partnership. Nortel managed an ICA with Microsoft. ShoreTel is taking the IPO route. Siemens Enterprise search for a partner continues. However, there is no reason to believe that Mitel's acquisition of Inter-tel will begin a trend. I think this to be a tactical move towards a successful IPO.

Chart Focus-Key entities of UC

ShoreTel-The world is Orange

One of the leading IP PBX players in the United States, ShoreTel, has been slowly developing a footprint in Europe. Armed with a strong team, interesting product, and granular pricing-the vendor has already established footprints in UK, Spain, Benelux, Sweden, Denmark, and Ireland.
I saw a demo done by Jerome Joanny, their International Product Manager. Honestly, from what I saw- their solution is very easy to use, simple and user friendly. Although, I didnot test the whole range of features it became obvious that the solution was designed keeping the user in mind. Jeremy showed us their new feature- ring back tone. He said their product development team is working very hard to bring in mobile phone type features and functionalities into the PBX.

ShoreTel solution fits the 100-200 user segment very nicely. Steve Timmerman, VP of Marketing believes that his product is a good fit for a wide segment of the market. Their a-la-carte pricing model allows customers to buy as they grow. With close to 56 partners in EMEA, ShoreTel is aiming to build a momentum. The vendor has successfully leveraged the reach of service providers such as British Telecom in Spain.

One of the USPs of ShoreTel is around customer satisfaction. Although, I haven't delved into the details of how they get it measured, the passion in their team to uphold the levels of customer satisfaction and beat it is quite incredible. In my numerous discussion over the last couple of years, I have consistently seen this message come across. I must say that overtime it has become powerful.

Although they are a strong player in the US, ShoreTel faces the same challenges as most small players in Europe. They are trying to consolidate their resources and gain traction, with customer satisfaction in mind. Ken Bailey their EMEA Marketing Manager pointed out the criticality of channel development. They are predominantly two-tiered except for Germany and their growth rate is dependent on the selection of the best-fit channel. In the last few months, ShoreTel has been active in the Nordics-led by Justine Cross. They have not only recruited two VADs but also have gained some customers.

I think that ShoreTel faces competition from BCM 50/200, Cisco ISR & Call Manager Express, Hipath 4000, Avaya IP office, Ericsson MD Evolution, Alcatel OmniPCX office, Inter-Tel 5000/7000 amongst others. Between them, shipments account for in excess of 2 million lines in the 100-200 user segment in Europe. From top of my head, the market size of 50-250 user segment in Europe is approximately 28 million lines. IP penetration in this segment is in low teens. If we buy ShoreTel's message that their TCO is lower than Cisco, Avaya and Nortel and that their customer satisfaction is the highest, their solution is a good bet. I recommend ShoreTel to greenfield sites and organisations that have a clear IP adoption strategy.

Roaming 'rip-off'-Game over

Telecoms.com reported-"A committee of the European Parliament has backed proposals to cap roaming charges for mobile calls made abroad, voting in favour of a Eur40 cents (£0.27) per minute ceiling for an outgoing call and Eur15 cents (£0.10) per minute for an incoming call.

The proposal will be put in front of the full 785-seat EU assembly in May which will decide whether a cap on roaming charges should be automatic, or require customers to request it from their operators."

This news is good for some while bad for others. I am sure GSMA and the operator will agrue that this is a bad move and will affect the profitability of mobile carriers. However, bad mood is expected to reign with innovative players such as LGC Wireless and others, since the proposal diminishes the value of their offerings. It is to be noted that extortionate roaming bills and relatively higher access rates have help form an alternative industry- one that aimed to help consumers and enterprises beat these toll gates. I call the offer 'mobile toll-bypass' untility.

The good news is for the consumers. In advanced countries in Western Europe, the average mobile usage per person is just 4 minutes a day. Using the same infrastructure and services deployed in emerging countries, users talk for much longer- and pay far less-in charges adjusted to purchasing power parity. Good news is for non-mobile carriers, if this proposal becomes legislation they would be able to predict their costs with greater accuracy and price their products more appropriately.

Overall, I think this move will help the industry in predicting costs, and determining value in roaming. The purse of the consumers won't shrink-I believe, they will instead take more for the same money. Licensed mobile operators will remain in business for longer- as this move takes away some cream out of the value propositions of alternate solutions.