Software PBX maker Sphere Communication to become a part of NEC Corporation

Software based PBX maker Sphere Communication has agreed to become a part of NEC Corporation. The Japanese manufacturer of electronics goods NEC Corporation is to acquire all shares, intellectual property and patents of Sphere for an estimated $ 42.1 million.

Sphere Communication is a tier-2 supplier of software based communication services available primarily in North America. One of the key assets of Sphere is its development platform (Sphere Communication Services Engine) that remains an object of envy for many. Its user-based pricing approach is its competitive advantage. This underlies its best-of-breed approach. Based on open technology, its PBX can work with a multitude of third party phones including Aastra, Grandstream and Polycom. They inter-work with third party voice media gateway from the likes of Allied Telesys and AudioCodes.

NEC on the other hand has a wide breadth of portfolio that ranges from TDM to IP. Frost & Sullivan analysis by Kriti Rao suggests NEC is ranked fourth in terms of market share in N.A. One of the main challenges facing the company is related to transformation and this is exactly where Sphere comes in. Sphere has a small team of talented people who have a forward-looking vision.

NEC Corporation has been focussing on growing their office equipment business for over two years now. They have a JV with Philips in Europe. In addition, they have something called NEC Infrontia. In the U.S the operating business is NEC United Solutions. With the acquisition, Sphere will be absorbed as a operating unit in NEC United solutions. We are yet uncertain of the autonomy of Sphere in the future. Todd Landry, Senior Vice President, Sphere Communication said "this announcement will help Sphere scale and expand its reach".

I am told that channel partners have nothing to fear. Most of them will be happy to include NEC's portfolio. I am not sure. The utility of Sphere's business with their distribution networks is very different from NEC's. Moreover, it will be interesting to see how Sphere's technology partners take this announcement. Overall, I think this is a good deal.

Inter-Tel shareholders accept Mitel's offer

So, the marriage is complete. The merger of Mitel and Inter-Tel will lead to the joint entity to become the market leader in SMB VoIP in the U.S. It will be interesting to see how this announcement affects their international strategies, a market that is three times the size of NA and where Mitel and Inter-tel have very limited and localised presence.

Follow-up on Mitel's patent infringement lawsuit

ShoreTel has come back strong behind a successful IPO. Not only has it launched a counter claim alleging that Mitel has infringed its patents, but also has filed claims of damages up to $10 million and injunction on Mitel for making false or misleading statement during ShoreTel's run up to an IPO.

ShoreTel claims that Mitel's ICP 3300 infringes on its patent on VoIP traffic through a firewall. I have noted in the past that Mitel's actions were in poor taste.

Update on OCS 2007

The press from yesterday read that Gurdeep Singh Pall is happy with the progress made by his technical team. OCS 2007 is now code complete and will release to manufacturing. This means that the product will be GA before the end of September, 2007.

The PR offered some pricing information. I have been betting on $100 list price for CAL. I was close. Gurdeep announced that OCS client access license (CAL) would come in two flavours: Standard and Enterprise.

Standard CAL: The standard CAL would have IM and presence capabilities. List price- $21.
Enterprise CAL: This would offer all of the conferencing and VoIP call management features and will be list priced at $97.

It has to be noted that in addition to the CALs, organisations need to buy the server(s). Customers using LCS need not worry. Microsoft has released documentation to help migrate from LCS to OCS. Its service assurance agreement takes care of the CALs. However, the enterprise needs to purchase the additional server.

The market opportunity is quite large. There has been in excess of 50,000 downloads of Microsoft OCS beta release software from the web in addition to the distribution of over 50,000 beta kits. If we look at the installed base of exchange systems & LCS globally, OCS in its first year can rake business of around $1 billion.

Finally, to be benefits. This is where I was a bit dissapointed. Well for two reasons. One that I wasn't commissioned to write the white paper that Art Rosenberg wrote. Nothing against Art. He is a veteran in this space with a lot of experience and I respect his views. However, the paper failed to come up with compelling reasons to deploy UC. It talks of

a) reducing internal technology TCO costs, including procurement, support and administration
b) reducing costs for user communication services particularly for mobile devices
c) increasing individual end user time productivity associated with communication activity
d) increased business processs performance by providing greater flexibility in making contact with different people more quickly and in different ways.

which to me looks like the solution to be cheaper and offer time-cost-productivity benefits. What about value destruction. How many of you turn-off your corporate IM clients to save yourself from distraction?

In the end, I believe that Microsoft's UC is a neat concept. Art very accurately talks of contexual communication. To me, thats the value-add of Microsoft's UC, whose ROI is subjective to user's business. To be clear, I am not a skeptic. I endorse the product. I fact, I think OCS and office communicator 2007 launch will drive away competition from telephony vendors in the presence and user interface market. One of the secret treasures in Microsoft's arsenal is its voice management capability. I reckon that the story of their real time audio codecs have not been well covered.

Web services model gain traction

I spoke with Fabien Maisl, Head of Marketing in Cirpack last week. I am told that he is the best person in Cirpack to discuss IP centrex. He outlined the success stories of IP centrex in residential and business environments. Recent reports suggest a 50 percent rise in their installed base that has swelled to more than 6 million active users.

In a related story, Jeff Pulver's VON magazine attracted my attention to a news item from CommuniGate. Aurora, a Ontario based ASP has selected CommuniGate pro to offer messaging and groupware solutions to SMB customers (20-200 users).

It is interesting to see news items talking of the success stories of IP centrex, web services model amongst others. Telcos have undertaken massive restructuring of their infrastructures to facilitate these kinds of service delivery. At this point in time, user base is concentrated in the small business segment (sub 50 users). It will be interesting to see if operators can come up with value propositions to entice a mainstream.

Aastra Technologies grows 6.9% in Europe

Aastra Technologies released its second quarter results recently. Sales grew at 6.9% y-o-y in Q2 thanks to increased momentum in Germany. The completion of restructuring DeTeWe has helped it focus on the German market that I estimate to be growing at over 5.5%.

One of the fascinating items in the report has been the increase in its gross margins in Europe. Defying the market trend (well almost if you exclude Cisco), Aastra Technologies saw an improvement in its gross margin that grew to 43.1% of sales from 40.7% in the same period last year. This has been despite an increase in SG&A as the report suggests. My opinion is that currency fluctuation has a role to play in this. This is because the fixed costs overall including salaries has remained more or less stable and variable costs (read marketing) saw a modest increase in the past year. Honestly, this is a good result as I don't see price decline eroding gross margins.

In the previous quarter, Aastra Technologies completed the acquisition of Elocom, a Portugese distributor that promotes NeXspan family of products.

Mobile IP Centrex?

Yes indeed. Mobile IP Centrex arms the mobile operators to offer primary business telephony functions to very small businesses. Several mobile operators including Vodafone have been trialing such solutions for some time now.

I spoke with Thomson's Cirpack today who said that their platforms support in excess of 6 million active IP centrex subscribers. The number includes residential as well as business users. I believe that at a connection fee of around €15/user/month, the market size for business customers in sub 20 segment in Europe would be approximately €429 million in OPEX.

Mobile IP centrex is a platform that mobile operators can explore and target the small business segment of the market. The best advantage for a mobile operator is in the future proofing of their investment. As IMS mature, some of these softswitches can be turned into CSCF in the IMS core network.

Aastra joins the FMC bandwagon

In its next major release, Aastra's NeXspan IP PBX can support Nokia E60 and Aastra i2052 softphone. The interesting bit is that customers don't have to install any additional software on Nokia devices - a marked difference from the path Avaya and Cisco has taken.

For the customer, the lack of need for additional software reduces the barriers of entry into the FMC world. This also allows Aastra to form partnerships to be formed with the likes of private network providers as well as low power GSM license winners. As this trend hits mainstream, I reckon that mobile operators will find it hard to stop their subsidised handsets from being used against them.

Court injuction in Truphone vs T-Mobile (UK) to set a precedent

First the regulator, then the European Commission and now the judiciary. It seems like mobile operators are out of luck these days. Their comparative higher tariff for basic services is not helping them win any new friends. The days of their unique value proposition is over. Today, alternate technologies such as IEEE 802.x and other Internet based services are challenging the dominant position of GSM/GPRS/EDGE/UMTS etc.

Recently, in a case between Truphone and T-Mobile (UK), a judge granted mandatory injunction forcing T-Mobile (UK) to interconnect with Truphone. Truphone uses the Internet to route mobile calls thus reducing the mobile operator to a last mile mobile network provider.

This and others are creating a momentum. Mobile operators are facing similar situation as that the incumbent telcos faced with local loop unbundling and other aspects of deregulation. At the end of the day, increased competition is always better for a whole lot of people than not. Businesses and consumers are likely to benefit in the long run. It is an encouraging sign for the enterprise mobility industry especially for players such as Private Mobile Networks and BT Mobile.

Another feather in the cap of Internet service providers came from across the atlantic. FCC is planning to aution 30MHz in the upper and 30MHz in the lower 700MHz bands early next year. These frequencies became available as analog broadcasters using TV's UHF channels 52-69 are switching from analog to digital in 2009. The commission Chairman Kevin Martin appears to have circulated a draft order to have open access rules for two 11 MHz blocks of the total 60 MHz in the 700 MHz band that is to be autioned. This is a good news for players such as Truephone and others including Google who seem to have shown interest in bidding.

Clever Microsoft technology for voice quality

Microsoft is not always associated with quality. However, the forthcoming OCS 2007 which is expected to be in the market by September 2007 has managed to pull a punch. Microsoft has been boldly professing the future of telephony for sometime now. First at VoiceCon SanFrancisco 2007, it was Jeff Raikes who sent the PBX manufacturers into panic mode by predicting that there will be 100 million softphone users by 2009 and that the cost of per line telephony would decline by 50% then from its present price levels.

Later, Gurdeep Singh Pall mentioned at CeBIT in March 2007 that Psytechnics has credited Microsoft OCS to provide better quality of service for voice call when compared to Cisco Call Manager.

Until today like Matt McGillen, I believed it to be a marketing gimmick to move away the communication conversation from the home turf of Cisco. I had read what Matt had found out, but could understand the ramifications when Mike Hollier, the CTO and founder of Psytechnics explained to me how it works.

Microsoft has built interesting technology that rapidly changes the buffer size resulting in improved performance. Their real time audio codec makes use of variable bit rate transmission that along with varying buffer size improves the performance. Moreover, the technology uses the silence mode more effectively than competition. Also, Microsoft is making use of Forward Error Correction (FEC). Overall, Microsoft has been clever in their usage of software technology to score points over competitors hardware technology. I wonder if the industry will conspire to prove Jeff Raikes right!

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.