ShoreTel: Agito Mobility Muscle Will Drive Enterprise Push

A lot's been going right for ShoreTel lately.

From a bulked-up product set to a retooled channel program, ShoreTel's been making strides in the networking and UC channels, and while it's still a relative minnow compared to some of the shark-like vendors that dominate the space, its claims of winning mindshare among solution providers and gaining market share are being taken seriously.

"It's a very cool product [set], and everyone who sees it loves it. It's got a little sizzle to it," said Don Gulling, president of Verteks Consulting, an Ocala, Fla.-based solution provider. "There's also a great community of resellers. Everyone's excited about it and you don't see the stupidity and backbiting you do in other places in the channel."

"They compare to Cisco and Avaya and their ROI over a period of years, including support and maintenance, is a much better value," said Trinh Pham, chief marketing officer and vice president of sales at OCx Network Consultants, a Denver-based solution provider. "With the economy being the way it's been for the last couple of years, companies and government entities are much more open to looking at options with reduced cost."

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Verteks and OCx are two examples of VARs that have thrown their support behind ShoreTel as the company carves out a position as a robust, lower-cost, channel-savvy alternative to the UC and IP communications titans, including Avaya and Cisco.

ShoreTel, in turn, has tapped into that channel momentum much more forcefully than in the past. In a move designed to make its channel strength more visible, ShoreTel in early January entered two-tier distribution in the U.S. and Canada with ScanSource Communications and Westcon Group. Around that time, it also revamped its Champion partner program to fine-tune the requirements for its Authorized, Silver and Gold tiers of partners, and add more formalized training and certification.

It's next big move, however, might be the most important yet. In October 2010 ShoreTel acquired Agito Networks for $11.4 million, a game-changing buy for the upstart UC vendor. It begat a Mobility channel program at ShoreTel almost right away -- something ShoreTel sees as a compelling route to enterprise-level business customers that might have brushed it off as an SMB-focused niche vendor in the past.

Founded in 2006, Agito's focus was UC products that integrate with an enterprise's existing PBX infrastructure to enable voice calls over VoIP connections -- a one-two punch that extends enterprise UC systems to the mobile edge but also cuts costs on international calls and makes enterprise-grade mobile communications less of an IT hassle.

Crucially, ShoreTel preserved one of the Agito mobility platform's most compelling features: it includes PBX and UC support for not only ShoreTel systems, but those of most of ShoreTel's UC technology rivals, too.

"It interoperates with Cisco, Avaya, Mitel, all of them," said Tom Hamilton, senior director, worldwide channels at ShoreTel. "That's where we're seeing a lot of interest because it complements UC practices customers have in place and gives them a cost savings. It's a technology lever to pull that they may not have had otherwise."

Solution providers saw the potential right away, ShoreTel said.

"It's a big deal," Verteks' Gulling said. "It's going to hopefully make ShoreTel more competitive in enterprise deals, because when you get into 1,000 seats and up, [customers are] looking at Cisco and Avaya, the two 800-pound silverback gorillas in this space. We've won a lot of deals against them. We're pushing mobility because no one had what Agito had, and now that's in ShoreTel mobility. Other folks will catch up, so it's very smart for ShoreTel to say, 'What do we have that's special and unique and different?' Because they won't have it forever."

NEXT: What Agito Does For ShoreTel

ShoreTel brought over about 30 Agito partners following the acquisition, said Annette Lorenz, director, worldwide channel marketing at the vendor. But the heart of the matter is ShoreTel Mobility, the new practice ShoreTel inaugurated to sell the platform. About 30 percent of ShoreTel's 900 global partners are qualified to push the mobility products now, Lorenz said -- roughly a combination of its higher-tiered Gold and Silver solution providers and service providers.

The program has been particularly attractive for Avaya partners, Hamilton added, because it allows them to sell ShoreTel without much disruption in their Avaya installed bases or Avaya loyalty rebates.

"They can complement what they already have," he said. "For us, it's been a trojan horse effect."

Partners have been finding better and more frequent reasons to go with ShoreTel. For UC and VoIP sales, OCx pushes the line exclusively. And Verteks, said Gulling, is now a Top 20 partner with ShoreTel, with sales up 170 percent with the vendor year over year for the first quarter.

That was after years of what Gulling called the "Kabuki theater" experience Verteks had with 3Com.

"We sold them for years, and it was a lot of 'are we in the game, or are we out of the game,'" Gulling recalled. "It was a lot of drama, all the time."

Legacy 3Com dealers are ripe for conversion, Lorenz said, particularly after HP's recent decision to place the 3Com VCX IP telephony line into "maintenance mode" a year after HP acquired 3Com -- a move that essentially put VARs on notice that the product set would be marginalized by HP.

HP-3Com VARs confirmed to CRN that ShoreTel has been making aggressive overtures following the HP fracas.

"We're looking at them, and they've definitely been making us feel wanted," said a top executive at an HP solution provider who asked that his name not be used because he's currently evaluating UC alternatives from several vendors. "It's a good product, and the name recognition isn't there but the [total cost of ownership] story is and the profitability is attractive."

ShoreTel has also successfully recruited a number of Avaya stronghold partners in the past six months, including Avaya power Xeta Technologies (itself acquired by Paetec in February).

What they're finding is a vendor that prides itself on listening to -- and dealing with -- channel headaches.

"It's not as if it was bad before, but they didn't listen as well," OCx's Pham said. "They're taking a look at the value the partners bring in, and Peter Blackmore's direction is that he wants his partners to really grow with him. He wants to take the company to multiple times the growth it is right now."

Gulling said that among the ways ShoreTel regularly assists partners, it's been proactive about aggressively discounting its demo equipment kits, three of which are required for Gold partners, two for Silver, and one for Authorized.

"They make partners demo it and test it and have it because they don't want people selling it who don't know what they're doing," he said. "They could have made that [requirement] really expensive, but they've lowered the bar basically as far as they can, and also brought down the training. If you're an interested partner and you qualify, you can basically get into this mobility practice for a few thousand dollars."

NEXT: ShoreTel's Financial Picture Shapes Up Strong

Solution providers are yoking ShoreTel momentum during a watershed growth period for the company.

Earlier this week, ShoreTel reported third quarter revenue of $51.6 million, representing 39 percent year-over-year growth and 8 percent sequential growth, and ShoreTel's fourth consecutive quarter of 30 percent year-over-year revenue growth or higher.

ShoreTel also showed non-GAAP profit of $602,000 -- putting ShoreTel into non-GAAP profit one quarter earlier than expected, according to CEO Blackmore. Blackmore, who joined ShoreTel in October following a stint at the top job at UTStarcom, said he expects 20 percent revenue growth for ShoreTel overall in its fiscal 2012.

Blackmore also said during ShoreTel's quarterly earnings conference call Tuesday that the company has made gains in brand awareness, citing benchmark surveys from 2009 and 2011 that showed ShoreTel's aided and unaided brand awareness nearly doubling over the previous four quarters.

ShoreTel 12, the next update to the company's UC platform and expected to include a UC conference bridge among other enhancements, is also due this quarter.

Solution providers like Gulling say they're firmly behind ShoreTel's strategy to build enterprise-focused solution providers that can gain ShoreTel credibility by winning 1,000-plus seat deals and building word of mouth among larger customers.

"They can't be just another brand that sells phones," Gulling said. "It's not like this thing was totally broken, but with a new CEO coming on, it seems to be 'Hey, we've got a good thing going, let's ramp up."