On-time delivery of virtualization platform for its comms and contact center software will boost customer confidence in Mitel’s R&D organization and help the company face off against competitors with similar offerings.

Mitel has a competitive corporate strategy in the business communications and contact center markets. This has focused on consolidating its position in the North American SMB PBX market, as evidenced by its acquisition of Inter-Tel, as well as bettering its penetration in enterprise accounts. The company’s recent IPO, though it raised less money than the anticipated $200 million, should help put the firm on a steadier financial footing, allowing it ease its debt load, raise money for acquisitions and provide a level of fiscal transparency that customers and partners should find reassuring. However, the acquisition of Inter-Tel and subsequent integration efforts have kept the company focused very much on the North American and United Kingdom SMB markets, as opposed to growing business operations in other areas where Mitel did not already have a notable position.

Mitel has a competitive set of products and solutions in the business communications and contact center markets. This includes PBX systems for SMBs and enterprises, messaging and conferencing software, contact center solutions, UC software and a services organization that provides a range of managed, hosted professional, and even wireless and transport services. Differentiators include Mitel’s CLEC services (resold data transport, cellular wireless, Internet and similar services from a third-party telco), integration work with VMware for virtualized communications software, integration work with Sun’s thin client technology, fully hosted conferencing and email services, and a “managed services” program that provides a unique long-term equipment leasing option. Weaknesses include a lot of overlap within the PBX portfolio (due mainly to acquisition), no data networking systems beyond those that partners provide, a sometimes inelegant migration path for some communications platforms, and products designed specifically for SME but now being positioned for enterprise needs as well.

Mitel’s marketing initiatives have created a competitive brand in the business communications and contact center markets. This is particularly the case in North America and the UK, especially in the SMB space. The company’s brand and that of its products are generally less recognizable to larger enterprises, which are seen as a key growth area for the company. And outside the UK, brand equity is generally low in Europe. Mitel’s product branding strategy has centered on linking its company name to those of its products – Mitel 5000, Mitel 3300, Mitel Communications Director, etc. Such a straightforward branding strategy helps streamline marketing efforts, promoting both company brand and product brand simultaneously. And the Series X marketing initiative has helped Mitel draw attention to its various mobility, virtualization, and presence solutions. Meanwhile, Mitel’s “Simply Communicating” marketing slogan highlights the ease-of-deployment, ease-of-management and ease-of-use aspects of the Mitel solution. It’s a message that resonates among SMBs, as simplicity is a valued asset in the communications systems for smaller sized businesses. However, it is a message that may resonate less with enterprises whose IT departments recognize the complex communications environments they support and could be dismissive of such claims.

Mitel’s sales and support programs are competitive in the UC and contact center markets. The company employs a hybrid sales model that results in a 65/35 direct/indirect ratio in North America, and a 40/60 split in the UK. Elsewhere in Europe sales are 100% indirect. The Inter-Tel acquisition complicated Mitel’s sales strategy, which was primarily through channel partners with the help direct touch sales reps. Inter-Tel, on the other hand, relied much more heavily on a direct sales force which been retained by Mitel post-acquisition. Heavier reliance on direct sales could create channel conflict problems that were not an issue with Mitel’s previous channel-centric strategy. Mitel’s 1,500 resellers – a figure that’s increased 20% since 2006 – tend to be smaller, regional firms and companies that often sell voice solutions from Mitel’s larger competitors as well. Having to compete for attention within major channel partners’ portfolios could make it difficult for Mitel to maintain resellers’ loyalty and ensure they regularly lead with Mitel products.

Mitel’s technology partnerships are competitive in the business communications and contact center markets. Mitel was a founding member of HP’s ProCurve Alliance launched in 2007 and partnered with Brocade (Foundry) a year later. Both relationships involve product interoperability and access to data networking gear lacking from Mitel’s portfolio. However, HP has many other alliance partners, many of which are Mitel competitors. A longstanding relationship with Microsoft also resulted in product integration and access to new technology sooner than some Mitel competitors. But this does not appear to have strongly differentiated Mitel solutions or significantly expanded go-to-market opportunities. Mitel’s alliances with Sun and VMware have delivered interesting new product offerings based on both companies’ technology, though these remain quite new and it remains to be seen how well the companies will be able to generate demand. And Mitel maintains an interesting relationship with IBM that involves some rather mysterious patent cross licensing activity on the one hand, and product integration work with the IBM Foundations Reach server on the other.

We are taking a positive stance on Mitel in the unified communications and contact center markets. The company has a proven record of innovation, demonstrated most recently with porting its communications software to industry-standard servers, developing a hosted key system, and introducing a virtualization solution for its communications and contact center software. Mitel’s acquisition of Inter-Tel helped it pick up considerable momentum in the SMB market, at least within North America where the majority of the two companies’ revenues were derived. And Mitel demonstrated an ability to broaden its line of deliverables through partnerships with small but technically sophisticated third-party developers.

However, the Inter-Tel acquisition did little to further Mitel’s ambitions in Europe, where it is well-established in the UK but otherwise lacks penetration. Ongoing product and channel integration initiatives between Mitel and Inter-Tel are potentially a distraction for the combined company. Brand awareness remains an ongoing issue, particularly outside Mitel’s core SMB market. Though the company has adequate unified communications and contact center solutions for its own telephony platforms, Mitel does not stand out in the contact center market.

• Though it’s not a publicly traded company, Mitel provides annual reports on its financial health. This degree of transparency could help increase confidence of customers and business partners. The company tends not to use figures from these reports for marketing purposes, but they reveal a modest, yet rather impressive (6%) increase in revenues despite the difficult economic clime.

• Mitel has a fairly strong position in the United States where an estimated 8.4% of enterprise telephony ports shipped in 2009, according to Synergy Research Group. Mitel also points to research that indicates it commands top positions in the SMB IP PBX market in both the United States and the United Kingdom, as well as advances made penetrating Western Europe. This helps the company’s marketing efforts against much larger rivals it is competing with head-to-head in the SMB space.

• Mitel’s acquisition of Inter-Tel expanded the company’s role in the SME market segment. The move was particularly beneficial in the U.S. where Inter-Tel maintained a sizable base of enterprise customers, as well as a channel that is now a conduit for Mitel products and services.

• Mitel moved aggressively to integrating Inter-Tel’s business operations with its own. The company has rationalized some Inter-Tel products and made others (contact center, audio conferencing and Web conferencing) fully interoperable with Mitel telephony systems. There is a combined reseller program; the former Inter-Tel’s direct sales organization has been converted to support the combined portfolio, and the company’s Managed Services program now covers both Mitel and Inter-Tel products.

• Mitel has done a respectable job building out its global channel network with well-known top tier players. With these partners Mitel possesses a respectable international sales footprint which provides an advantage over smaller rivals and enables it to better compete with larger, more resource rich competitors.

• Although Mitel’s forte is in the SMB market, the company has begun chalking up customer wins of large enterprises as well. Though they remain a distinct minority, such sales activity could help interest a greater number of larger-sized businesses to turn to Mitel as well.

• For the past several quarters Mitel’s annual financial report has recorded net losses. This increased dramatically at the end of its fiscal 2009 (ended April 2009), due in part to operational expenses associated with folding Inter-Tel operations into its own. While this may normalize in the future, the fact Mitel only reports its finances annually could delay any reassuring news the company might otherwise share with customers and business partners.

• Mitel has an estimated 3.6% of enterprise telephony ports shipped in 2009 in Europe and 0.8% of the worldwide contact center systems revenue, according to Synergy Research Group. Additionally, Synergy notes that Mitel contact center market share has decreased in recent years. On the bright side, these areas hold considerable promise for the company, however Mitel may find increasing share in these highly competitive markets extremely slow going.

• The process of combining Mitel and Inter-Tel has moved rapidly from an organizational standpoint. However, integrating what are today two separate portfolios into a single cohesive catalog remains a work in process that requires considerable R&D and financial resources.

• The legacy Axxess PBX acquired from Inter-Tel brought with Mitel a notable customer base. However, the proposed migration path for legacy Axxess systems to the IP-based Mitel 5000 platform is not an elegant one and it makes customer retention less than a given. Installed Axxess customers looking for VoIP migrations may very well invite rivals to bid against incumbent Mitel.

• Mitel contact center solutions are built primarily to support Mitel PBX systems. This is a distinct disadvantage compared with more PBX-neutral solutions. As Mitel guns for enterprise and large contact center opportunities, support for a multivendor environment will become increasingly important and Mitel could find it difficult making the short list.

• Mitel should prepare special incentive packages for Nortel resellers in an attempt to draw them away from Avaya. The company should also be actively targeting Nortel contact center and communications customers with alternatives to an Avaya-centric product migration.

• Mitel should ensure that its top-tier channel partners aggressively market its telephony systems. With many of these partners also promoting a number of alternative products as well, Mitel should ensure it is not lost in the crowd. Identifying and recruiting a wide range of Mitel resellers of all stripes is tantamount to improving awareness for and sales of Mitel products globally.

• Mitel should bring jointly developed voice-data solutions to market by leveraging its partnerships with HP and Brocade/Foundry, and with its MiSolutions program. Being a single source provider of more complete end-to-end solutions would help Mitel shorten its sales cycles and enable it to compete more evenly with the likes of Alcatel-Lucent, Avaya, 3Com, Siemens Enterprise and Cisco.

• Mitel needs to build on recent customer wins among large enterprises to demonstrate its ongoing momentum in breaking out of its SMB mold.

• Mitel competitors should point out that the company’s acquisition of Inter-Tel created some significant disruptions for the latter’s customers. Existing products will be supported for years to come, but before long systems and software will need to be migrated. Competitors should help their resellers make the most of this with targeted sales initiatives aimed at the Inter-Tel installed base.

• As Mitel makes inroads into the enterprise market, competitors and resellers representing them should not get drawn into arguments over price points. They should instead keep conversations focused around portfolio breadth, their experience serving the needs of large enterprise, and their delivery of mature telephony systems specifically built to meet the communications needs of large enterprise.

• SME PBX vendors should protect and continue expanding their carrier sales channels to counteract any moves that Mitel has been making to develop its own carrier sales channels. All Mitel rivals should also continue to establish new or leverage existing relationships with service providers and softswitch vendors as a means to expand sales of their IP end points and create additional revenue streams.

• Competitors that can offer a full set of telephony, contact center, data networking and security products (3Com, Alcatel-Lucent, Avaya, Cisco and Siemens Enterprise) should actively bundle end-to-end solutions to create advantages the areas of pricing, sourcing, configuration, release management and service support.

• Competitors in Europe should expect Mitel to continue its concentration in the UK market, with the addition of Inter-Tel’s customer base and channel. The company plans to utilize its UK standing and as a launching pad for deeper penetration into other European regions, such as Spain and Portugal.

• With the weakened economy impacting sales, communications solution suppliers more willing than ever to negotiate for new business. Enterprises and SMBs should leverage this to their best advantage when preparing to purchase new telephony and contact center solutions.

• Mitel is eager to build out a larger base of customers in Western Europe, as well as large enterprise customers in all regions. Prospective customers should use this to their advantage when negotiating with Mitel.

• Customers with Inter-Tel technology installed should consider leveraging Mitel’s TotalSolution Managed Services as a cost-effective way of transitioning from legacy technology to the latest Mitel has to offer.

• Mitel customers should not confuse the company’s TotalSolution Managed Services with what other vendors and service providers call managed services. The Mitel offering certainly has a component that monitors Mitel systems and applications deployed at the customer premise, but it is as much an alternative to outright purchases of communications technology. SMBs should investigate it as a means of cost-effectively deploying Mitel-based communications solutions.

• SMBs seeking a UC solution to supplement their traditional telephony systems should look into the Lotus Foundations Reach appliance that Mitel and IBM are co-marketing. Customers should likewise investigate Lotus Foundations Reach solutions that IBM has co-developed NEC and ShoreTel.

Recent News/PR [May 19, 2010] Mitel Becomes Official Partner of TV Festival de Cannes [May 19, 2010] Mitel Becomes Official Partner of TV Festival de Cannes (NASDAQ: MITL), a trusted provider of unified communications software solutions, today announced it is an official partner of TV Festival de Cannes taking place May 12 - 23, 2010. Stations will be installed on location to provide communications access during the festival period. The flexibility of the Mitel IP phones equipped with the Mitel Wireless LAN Stands allow them to be connected through a wireless interface minimizing the requirement for fixed network wiring which significantly reduces the logistical burden of installation and makes it an ideal solution for such short-term events. (MARKETWIRE) More News/PR from YellowBrix...

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