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ShoreTel is a strong-willed David in an industry full of Goliaths. Founded in 1996 in Sunnyvale, Calif., the company has staked a modest claim in the IP and unified communications spaces, working hard to differentiate its platforms from incumbent players like Avaya.
It hasn't been shy about recruiting channel partners to the cause, either, even if, as ShoreTel CEO John Combs told Channelweb.com in a recent interview, ShoreTel still isn't being brought to the table with new customers often enough.
The company grew about 5 percent in 2009, and its most recent earnings call, for the second quarter of its 2010 fiscal year, found Combs upbeat and ready to get more aggressive this year. If there's something different about ShoreTel now than in years past, it's a sense of swagger. Competitors take them seriously -- Avaya global channel chief last fall referred to the company as "a minnow punching above its weight class" and "historically been easier than us to do business with" -- and so does the channel.
Channelweb.com caught up with Combs recently to hear about ShoreTel's hope for solution providers, and why the combined Avaya-Nortel is a good thing for its growth.
ShoreTel posted some significant gains in 2009. I remember reading that ShoreTel had a stated goal of growing at least 5 percent in 2009, and you got there. What helped you do it?
In our business, there are basically two fundamental things you can control: product development -- and our mantra is "best product" -- and distribution. We have the best product. My investments are being made in three key areas: growing our sales team, growing our distribution partners and investing in our engineering team to enhance the product. In 2009, yes, we grew 5 percent, and candidly our objectives were much higher than that, but the economy was a challenge, and relative to other folks we did extremely well. We've grown distribution, and did a lot of lead generation activities to give our dealers prospects that they may not have found. We also added AT&T, and during the period picked up Qwest and Verizon, and Telstra in Australia. They have all been big partners.
Internally, we've built a team that has enabled us to leverage the areas we do well in. We also have a government group, too. Historically, we've struggled in the public sector, but our team has grown us from two state contracts to 18 major public contracts, and we also added a person in charge of federal accounts. None of this is rocket science. It's basic blocking and tackling and leveraging our distirbution.
How do you need ShoreTel VARs to grow with you?
Our sweet spot is the 20-to-5,000 range. We have customers that have 16,000 to 17,000 phones, but our target is the midmarket -- the expanding midmarket is what I call it. In that market, we're in about 10 to 20 percent of opportunities. When we get to the table, we win against all our competitors at least 50 percent of the time. We have a product that is brilliantly simple: customers love it, partners can make money be selling it, and we have world class customer satisfaction rates. So my main issue is simple: I'm not in enough opportunities. That's where our distribution partners will help us most.
If you're looking at opportunities vertically speaking, where are the best and richest for ShoreTel VARs?
The city and county governments have been phenomenal for us. Frankly, I was trying to figure out why that is, and the answer is that the City of West Sacramento isn't competitive with the City of Chico, isn't competitive with the City of Fresno, isn't competitive with the city of Rochester. Quite the opposite. These folks all talk to one another, so the viral nature of our products has been effective. The other common thread in verticals is the telephone intensity of the business. What I mean by that ... well, take branch banking, where we're strong. Banks make their money by loaning money. When someone wants to have a home loan, they call the local number for their branch and extend directly to the loan officer. If the loan officer isn't there or is busy, the call goes to another branch and is answered by a loan officer there, not an answering or messaging service. Things like that gain business. The branch banking and financial institutions industries are strong for us, and so are professional services, healthcare and education. The nature of our product is that it is not a location-based product. It's one system, not 18 individual systems in 18 places all tied together. If your administrator is adding John Combs' name and contact to the system, all 18 locations automatically update.
As your channel grows, what types of partners are you looking to attract? Folks with vertical specialties? Folks with strong IP and UC bases? What's the target solution provider for ShoreTel?
I'll give you a few ways to look at it. First, we have people who specialize in a vertical. We have a software development kit that allows them to customize apps for particular verticals, such as patient info systems for healthcare. That brings something unique to the customers, and that's something that they could go in with and have over other ShoreTel partners that don't have it. The next segment of partners is folks that have grown up with telecom, and then there are the ones who came from data networking -- who sold WAN, LAN and moved into IP -- and we find that their financial models match very well to ours. The other category is new for us: business applications. In cooperation with IBM in particular, we're looking to get more folks from the Lotus world -- the applications world -- and help them to integrate UC into their portfolio as well. That's a newer partner category that I'm particularly excited about.
Next: How ShoreTel Gains From Avaya-Nortel and Others
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