Partners: What Happened To ShoreTel's Cloud Strategy?

For all the optimism and excitement surrounding last week's ShoreTel Champion Partner Conference in Chicago, one subject was curiously downplayed: ShoreTel's ambition to sell hosted versions of its products through partners.

Both ShoreTel executives and ShoreTel VARs attending the conference told CRN that ShoreTel hasn't quite backed off the idea of more ShoreTel as-a-service sales through partners, especially unified communications sales. ShoreTel CEO Peter Blackmore listed cloud, along with U.S. sales, international sales and mobility, as part of ShoreTel's four-pronged growth strategy. And several partners do sell ShoreTel UC as a managed service already.

But following a lion's share of attention for the potential of ShoreTel sold as a hosted product at last year's partner conference, some ShoreTel partners and industry analysts wondered aloud why ShoreTel appears to have backed off that ambition.

During his keynote presentation, Blackmore described the cloud as both "an opportunity and a threat." In an interview with CRN in Chicago, Blackmore said the take-up of hosted solutions, especially in the midmarket and among larger customers, is hard to predict.

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"To be fair, it's building very slowly," he said. "It could change, and I don't want to miss out on a very natural opportunity if it does."

There are several ShoreTel partners already that sell both on-premise and off-premise versions of solutions, Blackmore said, but he and ShoreTel will continue to observe how fast it takes off before insisting more of ShoreTel's channel partners embrace it.

"I'm not sure how much hosted we'll see," he said. "Nobody does."

Several analysts raised the question in a later session with ShoreTel's top brass. Kevin Gavin, ShoreTel's chief marketing officer, acknowledged that hosted services were gaining popularity among small businesses looking to procure more of their IT as an on-demand, cloud computing solution.

But for larger businesses, Gavin said he doesn't see ShoreTel losing deals to hosted IP communications vendors in any significant numbers.

"It's not a real competitive threat. It's not threatening our revenue or our growth," Gavin said.

Don Gulling, president of Verteks Consulting, an Ocala, Fla.-based solution provider and top ShoreTel partner, said he understands ShoreTel's argument that it doesn't make sense to make it a channel-wide priority immediately.

If the company is pushing upmarket and seeing strong gains on its premise-based PBX, UC and CC solutions, Gulling said, an overly-dedicated push toward cloud might distract ShoreTel.

"I think it's just the economics. We can't make enough money and it's a lot of hassle, so you look at, how much hassle is there and how much potential revenue," Gulling said. "We did look at it, but I don't think we're going to see ShoreTel re-invent the wheel here. They have an on-premise SMB platform that works and they're looking to move upmarket, and I think that's the right direction for them."

Next: Was ShoreTel's 2010 Hype Too Soon?

Dave Casey, CEO of Westron Communications, a Carrollton, Texas-based solution provider, said he understands ShoreTel's position, but it's hard to deny an emerging market opportunity behind cloud-based UC.

"I think it's an important part of the space, and we're looking at several other ShoreTel partners who already sell it as a managed service," Casey said. "A lot of our clients are asking us for a turnkey solution."

Asked why ShoreTel likely backed off the hosted argument this year when it seemed such a priority last year, Casey said ShoreTel was still likely testing the waters.

"I think they did an experiment just to see if there is a market," he said. "I think there is a market, but they've got so many other irons in the fire right now, maybe it's one thing they didn't want to chase. But there are business partners of theirs that are chasing it so maybe they think that those who are doing it already will have that covered."

Other partners opined that ShoreTel's initial support for partners who wanted to sell ShoreTel's products as-a-service was lacking.

"The reason they're not talking about it is because they went to market with it half-baked," said a ShoreTel partner who requested anonymity. "It's going to take some time to get it right, and a lot of ShoreTel's regional partners just aren't set up for it yet. I think they've backed off talking about it this year because they realized they created too much hype around it at the last show and just weren't ready to deliver."

Westron's Casey said he has seen instances where companies with 150 to 200 employees that may have looked at a hosted solution in the past now prefer an in-house system because they do have the IT resources to support it. If ShoreTel is going after bigger accounts, he said, it is more likely to encounter midmarket-and-up customers that aren't embracing hosted networking as readily as small businesses are.

But ShoreTel's simplicity does make ShoreTel's platform a good fit for cloud services, he added.

"I do think ShoreTel is uniquely positioned to succeed there because of their architecture," Casey said.