ShoreTel Sheds Light On New Cloud Division Strategy

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With ShoreTel's $146 million acquisition of M5 Networks closed and M5 now doing business as ShoreTel's Cloud Division, its top executives have begun the delicate business of creating an integrated channel strategy.

ShoreTel solution providers told CRN following the acquisition that it behooves ShoreTel to move quickly on firming up how it will sell cloud solutions through the broader ShoreTel channel. Several ShoreTel partners have asked about a potential white-label program, for example, and whether they'll be able to "hold the paper" when selling those services.

"For the moment, we haven't gotten there," Peter Blackmore, ShoreTel's CEO, told CRN at an event for analysts and channel partners in New York last week. "We want to get this right, and a lot of partners haven't got that much experience in cloud yet. There are many differences; your cash flow is different, for example. It's going to take us another three months before we go public on that."

Most partners and industry analysts have applauded the deal, which netted ShoreTel one of the more successful companies in the fractious world of hosted VoIP and hosted UC players. Blackmore said ShoreTel looked at 100 cloud networking companies beginning last summer and talked to 25 of them, with the field narrowed to a handful by the end of the year. ShoreTel decided on M5 in January, and the acquisition was revealed in early February.

[Related: ShoreTel Partners Gear Up For New Sales Chief, Program Changes]

Among ShoreTel's criteria were that the company be growing and that it understand market segmentation, Blackmore said. ShoreTel was also especially attracted to M5 having its own intellectual property -- unlike many hosted VoIP providers, it does not run a Broadsoft or other third-party switch -- and its ability to maintain a relatively low acquisition cost for customers, with demonstrated low customer churn.

M5 generated approximately $48 million in revenue in its last fiscal year, and about 60 percent of its business was through indirect channel partners, said Dan Hoffman, former M5 CEO and now president and general manager of ShoreTel's Cloud Division. Blackmore and Hoffman both noted that M5's average revenue per seat of $65 to $68 was quite a bit higher than the industry average of $45 to $50.

NEXT: ShoreTel Recruiting Partners For Cloud Pilot

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