Mitel CEO: 'We're Going To Clean Up Our Act' On Channel

When Richard McBee became the new CEO of Mitel in January, he kicked off many months of discussion with shareholders, customers, employees and Mitel channel partners, trying to get a sense of why Mitel's financial position had faltered and why the once-proud networking and UC company was leaving so many partners cold.

In the channel, at least, he found out the answer pretty quickly.

"I heard, 'Don't compete with me!" McBee said, when asked about the feedback he received from Mitel partners. "When I can't differentiate myself from the manufacturer, and the manufacturer competes with me, I can't win. [Channel] guys differentiate themselves around what they can provide. We were eating margin away from channel partners."

At Mitel's Business Partner Conference in Hollywood, Fla., this week, where many Mitel partners will be meeting him for the first time, his goal is to make several things clear to Mitel channel partners.

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"We're going to clean up our act," said McBee. "We haven't been as good a partner as we could have been. This is a rip-off-the-Band-Aid [event]."

McBee is a 20-year IT and telecommunications veteran, and as of Jan. 17 assumed stewardship of Mitel from outgoing CEO Don Smith. Previously, he was president of the Communications & Enterprise Group at Washington D.C.-based Danaher Corp., responsible for more than $700 million in direct and indirect sales for carrier, enterprise and SMB markets.

At Mitel, McBee has his work cut out for him. Mitel recently passed its one-year anniversary as a public company, but has been strained under the disappointment of its April 2010 IPO, in which shares of the company were priced below expectations and fell 12 percent after their debut.

From a market perspective, things didn't improve much throughout the year, and in late March 2011, Mitel's stock hit a low point of $4.01 per share. Analysts have questioned Mitel's traction, especially with much bigger and better-known unified communications competitors like Avaya, Cisco and Microsoft, not to mention scrappier upstarts like ShoreTel, making gains.

Mitel cut about 20 percent of its workforce last year, and closed out its fiscal 2010 with $647.9 million in revenue. Its fiscal 2011 ended on April 30, and it is scheduled to report fourth quarter 2011 and fiscal 2011 results on June 30.

McBee knows all this. Speaking with CRN earlier this week before the partner conference kicked-off, he sounded an optimistic, yet realistic tone.

"Mitel is a really good company," he said. "But our channels haven't been working for us. We've created channel conflict beyond anything that should have been there, and our growth has been hampered by it."

Dogged by years of conflict with Mitel's direct sales force, Mitel channel partners became consistently frustrated with their Mitel engagements, McBee said. And the conflict was no illusion.

At one point in his travels, he said, he visited a Mitel field office that was divided into two sides: direct sales representatives on one, and indirect, channel-facing representatives on the other. What he was told, McBee said, was the two sides were kept entirely separate because if the indirect reps brought potential customers in to the office, the direct sales representatives would try to steal the business.

"We're really working in that kind of environment? You've got to be kidding me!" McBee said.

Now, nearly six months into his new job, McBee has taken up the task of rebuilding Mitel's channel strength within his responsibility to grow the company.

Next: McBee's Plans For Mitel Channel Growth

One of the first major moves happened in early May. McBee and his management team confirmed a restructuring that resulted in several executive departures, including former President and COO Paul Butcher, and the reorganization of Mitel into three business units.

As of May 1, Mitel Communications Solutions will focus on unified communications, collaboration and services sales, Mitel NetSolutions will drive network and hosted services, mobile services and broadband connectivity, and Mitel DataNet will distribute third-party products to partners and customers.

McBee, at the time, also confirmed plans to focus Mitel's channel sales on the midmarket, specifically companies in the 100 to 2,500 employee range. Mitel won't leave large enterprises or small businesses behind, McBee said, but customers between 100 and 2,500 are looking for best-of-breed solutions that go beyond just a transactional networking sale. And they aren't necessarily tied to the big players like Avaya and Cisco.

"We're not the biggest in the market," McBee said. "Cisco, Avaya, they're going to do what they do, they have a lot of channel partners. We want to be number two for a channel partner that has two lines. That 2,500 down to 100 marketplace, it's not as important to them to have Cisco or Avaya, and they're not going to get locked into an architecture with us."

McBee sees Mitel's advantage in its technology. In November, Mitel released Freedom, a UC architecture that delivers UC applications via a cloud-based software stream, and according to Mitel, can save organizations 45 percent in corporate mobility costs and as much as 85 percent in communications servers normally needed for UC.

McBee said Mitel will continue to push Freedom, and also focus on the channel opportunity for voice virtualization, on which it partners with VMware.

"We're a leader in virtualization," McBee told CRN. "Some of our competitors say they have a virtual solution, and it's virtual as long as it rides on their servers. If you're going to be truly virtual, it has to ride with other chosen applications. We've got a great partner in VMware, and we've got a product that works."

Do Mitel channel partners need to have a virtualization competency to partner with the vendor going forward?

"If they're not doing it, they're certainly going to be thinking about it, so partners have got to be knowledgable," McBee said. "These guys have got to be able to speak that language. That's not necessarily a threat, it's just a natural evolution of the business."

NEXT: New Channel Programs, Partnerships Coming For Mitel

Throughout the past six months, Mitel has continued to update technology and make adjustments to the resources it offers channel partners.

In late March, for example, Mitel updated its Mitel 5000 Communications Platform for SMBs with better mobility support -- an extension that provides single number and calling capability between desktop and mobile devices up to 10 associated devices in a group -- and an embedded conferencing tool that enables eight-party conferences and up to 20 conferences simultaneously. Its mobile device presence has been similarly growing; in early May, Mitel extended its Mitel UC Advanced mobile portal, which runs on Freedom, to Research In Motion's BlackBerry Playbook.

On the channel side, back in February, Mitel went live with a new partner program called the Technical Accreditation Program or TAP, which lets Mitel partners achieve designations in the categories of Voice, Moility, Contact Center and UC and receive better rewards from Mitel for promoting those specialties, including marketing and branding resources. Unique to TAP is that Mitel recognizes certifications achieved from other vendors with whom its products can be integrated, such as VMware and RIM. Mitel will also focus on greater vertical specialization for partners, according to McBee.

The changes to Mitel are gradual, McBee emphasized to CRN. But they're also clear.

"It's not going to happen overnight," he said. "We're going to be very methodical and very purposeful about how we go about doing that. But we're not going to be moving new business direct."

In the U.S., Mitel does about two thirds of its business indirect, and McBee wants to see partners as a "force multiplier" for the vendor. That doesn't mean adding a lot of new partners -- "We have a lot of good guys already," McBee said -- although Mitel isn't opposed to that, either.

"We have a pretty good regional, local network," he said. "But we don't have as many bigger regional or national partners, so we want to get a balanced portfolio."

What'll make him happy, a year from now, is if Mitel can successfully grow its top line and restore its credibility among partners.

"Operating margins and gross margins are improving," he said. "For a partner, if a partner does well, we do well. I think if we've got a good onboarding process and things moving really smoothly, we'll know it. We'll hear the positive reinforcement coming from the channel."