Who's Not For Sale? Unified Communications Vendors, Hit Hard By Cloud Disruption, Are Scrambling To Make Deals

The unified communications landscape is being shaken up as vendors scramble to become cloud-oriented so they can meet the market’s demand for cloud-based UC solutions.

’The UC world as we know it is changing faster than some are even aware of,’ said Joe Rittenhouse, president of business development and managing partner at Crystal Lake, Ill.-based solution provider Converged Technology Professionals, which partners with Microsoft and ShoreTel. ’Anyone who has paid attention to the trends in the UC industry knows that there is a major interest for a lot of companies to pursue consolidation – Polycom, Avaya, Mitel, ShoreTel, etc.’

Industry veterans like Avaya and ShoreTel are hiring financial advisors to explore new strategic options, which could include the potential sales of the companies or selling off specific assets. Polycom is set to be bought by Siris Capital Group, while ShoreTel recently acquired cloud-based UC specialist Corvisa.

[Related: CRN Exclusive: Polycom Exec On Mitel, The Benefits Of Going Private, And Making The Right Investments For Partners]

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Mitel – which made a failed bid for Polycom – acquired cloud-based UC provider Mavenir last year and is actively pursuing more acquisitions, Mitel executives said during the company's recent earnings call.

Research firm Gartner expects more UC consolidation and increased user expectations, prompting an emphasis on vendors’ financial viability.

’The integration of on-premises UC with cloud and hybrid UC services continues to play an increasingly important role,’ said Gartner UC Analyst Bern Elliot. ’As the enterprise UC market continues to mature, we’re expecting more consolidation.’

Although market leaders Cisco and Microsoft have deep enough pockets to fend for themselves, others are taking more drastic measures as customer demand for cloud-based solutions grows.

The global UCaaS market is expected to grow from $15.1 billion in 2015 to $24.8 billion by 2020, representing a combined annual growth rate of about 11 percent, according to market research firm MarketsandMarkets. In North America, UCaaS generated nearly $4 billion in revenue last year, and research firm IHS expects the market to grow 11 percent annually through 2020.

In May, sources said Avaya's owners -- private equity firms Silver Lake Partners and TPG Capital -- were considering the sale of the company or selling off specific assets. Genesys Telecommunications, a call center software provider, is now in talks to acquire Avaya’s contact center business for around $4 billion, according to a Reuters report.

One executive from a solution provider, a longtime Avaya partner, said the vendor is trying to find its foothold in the cloud era by becoming a communications software and service provider. The cloud shift, along with a massive amount of debt, is making Avaya ’disrupt itself,’ he said.

’They need to live to fight another day right now,’ he said.

ShoreTel is also laser focused on providing more cloud and hybrid cloud solutions with an emphasis on UCaaS.

During its recent quarterly earnings call, ShoreTel revealed that its board of directors had formed a strategic advisory committee to explore options, which could include selling parts of the company or ShoreTel itself. ShoreTel hired J.P. Morgan Securities as a financial advisor and Fenwick & West as its legal counsel.

’From a ShoreTel partner’s perspective, I don’t look at this as a negative move and, moreover, this is exactly what I personally want to see,’ said Rittenhouse, at Converged Technology Professionals. ’They are all essentially exploring options as they should be. The worst thing to be doing right now is pretending we are not going through a tremendous change on how businesses are adapting.’

UC provider Lifesize made its strategic move by spinning out of Logitech earlier this year in an effort to become a cloud and UCaaS provider.

’What you are seeing is a realization, strategy, concern of some organizations," Rittenhouse said. "It’s indicating that they are looking to see if they have a strong cloud model that’s sustainable, scalable and how [they can] capitalize on it."