VoiceCon Enews | September 1, 2009
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This issue of VoiceCon Enews is sponsored by NoJitter Hot Zone
Want to know what’s hot in enterprise communications? Go to the No Jitter Hot Zone, a new section of the industry’s leading news, analysis and blogging site. Each Hot Zone page is devoted to a particular topic of high interest [...]

Allan Sulkin is out with his mid-year numbers for enterprise communications shipments, and as he previewed in a No Jitter blog a week or so back, the second quarter was a pleasant surprise, as revenues rose from 1Q09. However, the full report shows that we’re a long way from done with these bad times.

Here are a few highlights from Allan’s article, and what I think they might mean:

* Cisco stays on top; Avaya claws up: Allan reports that Cisco kept its market leadership position, but that Avaya actually “slightly narrowed the gap.” He attributes this to aggressive pricing strategies by Avaya.

This seems like a very healthy dynamic for the industry, and if Avaya gets its hands on Nortel Enterprise, it should nominally take the lead in market share. But the key for Avaya will be not resting on its laurels, but continuing to keep an eye on pricing, because you can bet that Cisco will continue its march forward. But with two very strong market leaders jockeying for top position, the customer should be the winner. The wild card here is, if Avaya acquires Nortel Enterprise, how will they handle pricing and end-of-life strategies for the Nortel product set?

Free is generally considered to be an attractive price point for the customer, and Allan argues that giving away UC software may be an acceptable thing for the vendor as well, if it’s the best way to make the telephony system sale. The opportunity cost to the vendor is high, because it’s foregoing a potentially fat margin on the software sale; but at least this is better than giving away or drastically discounting hardware or other items with a higher cost of goods sold.

Or is it? One commenter to Allan’s blog asks the critical questions: “Doesn’t ‘free’ software devalue the very thing vendors have been trying to instill value in for the past decade as hardware became a commodity? Aren’t the vendors teaching customers that licenses are of less value than the hardware that runs it?”

The answer would appear to be yes they are, and this commenter clearly disapproves of such an attitude, calling it “last-century thinking.”
I’m not so sure I agree with that condemnation. There’s hardware and then there’s hardware. An Intel CPU is hardware. An IP phone is hardware. You’ve seen one, you’ve seen ‘em all.

As Mike Zafirovski departs from Nortel, and the company prepares for the September 11 auction of the Enterprise Solutions business, I think a blog post from Allan Sulkin sums it up best: “From the time Zafirovski came to Nortel, its enterprise business slowed down in terms of significant product innovation and design compared to the competition and lost sizable market share, especially in the large enterprise systems segment. By virtually no competitive measure is its large enterprise business better today than it was four years ago, although it has retained its position as a leading small system supplier. That’s not to lay all the blame at Zafirovski’s feet, but events have shown he was unable to turn Nortel around.

I understand the Canadian Pride issues and the seeming unfairness of the Canadian government helping to bail out automakers but not Nortel. On one level, you can’t excuse the disparity, but I think high tech gets treated—fairly or not—as a different kind of case. Every business is supposed to be innovative, certainly including car companies, and yet high tech almost has no other reason for existing.–technology sometimes seems to practice innovation for innovation’s sake. In contrast, the job of making cars that always get better was outsourced to Japan years ago, about the time of the granddaddy of all the bailouts, Chrysler Bailout 1.0.

The truth is that UC is in the eye of the beholder,” Brent writes. “For some companies, unifying voice messaging with email constitutes a UC solution. For others, automating emergency notification and response mechanisms is a unified communications solution. Still others want to unify their presence and IM engine with the calendar, PBX, directory, and other communications infrastructure via a common interface, and they call this a UC solution. There are companies that want to streamline a business process by adding some communications capabilities; for them, a communications-enabled business process is UC.”

Later, Brent adds: “Companies don’t buy ‘UC systems,’ they buy UC components that first provide them value individually, and then if it makes sense, they unify them in some meaningful fashion.” Citing an enterprise communications professional with whom he spoke, Brent concludes, “the value of the UC components must come first, followed by consideration of the value of integrating them.”

If you contrast the UC experience with the IP telephony experience, you can see why there continues to be confusion in the UC market. Chances are that if a migration from TDM to VOIP was a good idea for one office, or one business unit, the value proposition was pretty close to the same for all others. The main variable was not the value brought by the new technology, but the cost of keeping the old technology—or, conversely, the cost savings from keeping these paid-for systems and deferring the VOIP upgrade.