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Is Shoretel the Next Nortel?

Posted by Randy Kremlacek on Fri, Jun 08, 2012 @ 06:55 PM
  
  
  
  
  

Nobody Knows, The Telecom Trouble I've Seen....

I’ve been in the telecommunications business since 1987. During that time I’ve seen many PBX manufacturers rise and fall. Miraculously, I can think of only one manufacturer who has survived - Mitel. But even Mitel can't honestly lay claim to that distinction as they’ve been through bankruptcy and have been bought and sold several times. So, no PBX manufacturer has shown long term financial success.

The Case of the Mysteriously Disappearing PBX Companies

In every generation of PBX technology, there has always been a company wshoretel the next nortelho has risen quickly to become the darling of the industry. Curiously, they have always been the most expensive PBX on the market in their time. Even more interesting, they have a nasty habit of disappearing into the PBX sunset.

To wit:

  • Executone – sold, re-sold, disappeared
  • Rolm – sold to IBM, quietly retired
  • Isoetech – sold to Executone, disappeared
  • Nortel – declared bankruptcy, assets sold to Avaya

Is Shoretel Next?

Today, the declared esteemed supreme PBX manufacturer is Shoretel. It shares many of the same characteristics of yesterday’s fallen PBX manufacturers:

  • Proprietary technology
  • Fanatic cult-like following 
  • Arrogant management
  • Premium price compared to competitors

In a triumph of hope over common sense, the Shoretel marketeers have been able to convince otherwise smart IT folks that they have re-invented the PBX to a point where there is no competition. Part of the allure is the high price that such a “market leading” product demands.

If it costs more than everyone else, it’s got to be better. Right? Wrong. 

Let’s take a closer look at their pricing and financials:

Gross Product Margin

Shoretel spends excessively on marketing. To make up for this high overhead, they have no choice but to sell their product at a premium price. In their last financial statement, Shoretel reported a whopping gross product margin of 66%.

For those of you without a financial background, that translates into a 300% markup! Does your company mark up your products by 300%? The luster dims substantially when a Shoretel PBX buyer realizes that for every dollar they spend on Shoretel equipment, only 33 cents goes into the design and manufacture of the product.

Flagging Stock Price

Shoretel delivered their first PBX in 1998. The company went public in an IPO in 2007, with a closing price of $12.15. Shoretel has yet to show a profit in 14 years of existence.

In fact, in their last quarter, their losses were over triple from the previous quarter. Now, five years later, with the stock currently trading at $4.00, investors have lost their patience. Shoretel either needs to become profitable or they will join the list alongside Nortel, Rolm and company.

No wonder they need to sell their product at a ridiculously high prices.

Shoretel is No Apple

The list of technology companies that were truly able to make it big on a closed, proprietary system are short. Apple. That's pretty much it.

The Shoretel solution is based upon a closed, hardware-intensive technology while the industry is rapidly moving to hosted PBX and open source telecom solutions. This is not going to end pretty. 

Open-source PBX competitors such as Digium with their huge cost advantages are already eroding Shoretel’s precarious position.

 

Looming Architecture Redesign

Shoretel is facing a major re-design of their architecture to fit into this new low-cost world. Where will they find the money to move to this new model? They’ll need to cut costs but that’s going to be a tough road as they must pay top dollar for talent being located in the very heart of Silicon Valley.

ShoreTel Text Logo

So, don’t look for any Shoretel “deals” any time soon – the company must squeeze every profit dollar they can out of every sale to have a hope of survival.

Unless they make some dramatic moves in a very short period of time, Shoretel will become the next footnote in PBX history as the last greatest proprietary PBX manufacturer.

If you're in the San Francisco Bay Area and are looking for a more affordable and open sourced business VOIP system for your company, give Teledynamic a call. We'll set you up. Call (800)729-2310

 


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Comments

Randy, 
 
Thank you for your amusing post on your site. It's so unfortunate that you are under pressure to post such inaccurate information on your own website. You failed to mention that Nortel had significant debt before Chapter 11, whereas ShoreTel does not. You failed to mention that ShoreTel is the fastest growing all IP solutions provider.  
 
 
 
As for our solutions, I guess the 21,000 businesses that use them are the ultimate judge of who is winning in the market. Gartner doesnt even list your company as a player in the UC industry, whereas they rate ShoreTel a strong positive. The only company to earn this for to years in a row. 
 
 
 
You may find attending an anger management class to be valuable. 
 
 
 
Best wishes, 
 
Posted @ Monday, June 11, 2012 4:07 PM by Bernard Gutnick
Randy, 
 
Too bad the ShoreTel guy doesn't read the financial news. Facts are facts. I do think ShoreTel has interesting technology and that they may be moving in the right direction since acquiring M5, but there is nothing in your analysis that isn't repeated all over the Telecom industry. No one wants any other company to fail, but the companies that usually do fail are unprofitable. 
 
Thanks, 
 
Steve Guthrie
Posted @ Tuesday, June 12, 2012 10:14 AM by Steve Guthrie
I recently got a ShoreTel-based quote and to me it looked just like an old-school PBX vendor quote, with tons of add-ons, options, extras, and technical jargon all designed to confuse the buyer or lull them into a sense of helplessness. Bad move. I was able to do the same project with a newer PBX entrant for about 50% less than the ShoreTel solution. 
 
ShoreTel's underlying technology is good, but so was Nortel's. That's not enough. 
 
You're being disrupted ShoreTel! Figure out how to innovate around your own laziness and greed if you want to survive.
Posted @ Tuesday, June 12, 2012 3:29 PM by John Proffitt
Great article. It continues to amaze me how many customers consider Shortel as a good alternative. How long can a company stay in business losing money year after years? Why buy a proprietary hardware based solution that requires that you stack all these boxes together. They should follow in the footsteps of their competitors like Mitel and Cisco that have software based solutions that can be virtualized. THere should be now need for propriety servers in this day and age.  
 
 
 
P.S. Don't forget Hitachi, Fujitsu, and Panasonic DBS who have all left the market in the last few years as well.
Posted @ Tuesday, June 12, 2012 8:49 PM by Anonymous
Great dialog!  
 
 
 
But you're just ignoring the facts. Sure - Cisco, Mitel and ShoreTel all offer virtualization solutions. But Cisco sells plenty of their MCS7835 servers to run them. As does Mitel with their 3300MCD. As does ShoreTel with our sdmin, contact center, unified messaging and more on VMware 5. In fact, we have more than 2,000 businesses running VMware, and have over 2,000,000 users.  
 
 
 
Nothing compares to the economics of our sealed solid state Linux appliances for resiliency. Just do the math. 
 
 
 
But you're missing the most important point. Just because something is virtualized, it does not mean it is easy to manage. Just take a look at how you configure trunk routing tables on Cisco UCM. Or how Mitel manages user licenses over multiple sites. Or how Switchvox configures features on their 355 box before their system load becomes a factor. 
 
 
 
When you add it all up, that's why the customer satisfaction scores and net promoter scores are the highest for ShoreTel. Just ask the customers. 
 
 
 
As for financials, ShoreTel doesnt have any of the issues our competitors face. Avaya has 7 billion of debt - we'll see if they survive or make it to an IPO. Mitel faces debt issues even after their IPO. Cramer's view - look it up for yourself. 
 
 
 
But the only thing that really matters is having satisfied customers. We're growing fast at 20%+, and customers love the product.  
 
 
 
If you happen to be in Sunnyvale, stop by and I'll show it to you. Or join us on ShoreTel Live this Friday, and see for yourself. 
 
 
 
 
 
 
 
Posted @ Tuesday, June 12, 2012 11:30 PM by Bernard Gutnick
Randy, 
 
 
 
Great article. I am bias as I am a Digium reseller so I found myself nodding my head up and down while reading. As a Digium reseller when I ask a customer what other systems are they considering and they respond ShoreTel I know one of the objections I will have to overcome is "What did you forget"? This is because SHoretel is always dramatically more expensive, and I have to show the client they will get a great system at half the cost. Is ShoreTel a good system? Sure, but in my opinion it is overpriced and the fact it is proprietary makes it an inferior product thus the reason I decided to sell Digium rather than Shoretel. 
 
 
 
To Randy- The one thing I found amusing/odd is the first response was from ShoreTel. You must have someone's attention. Keep up the good work, and hope to see you in Atlanta this year! 
 
 
 
Kind Regards 
 
Vincent Preece 
 
Posted @ Wednesday, June 13, 2012 9:46 AM by Vincent Preece
Mitel user licensing for users across multiple sites is easy, simplified and flexible... Especially when you have a Virtual MCD environment as opposed to Hardware Controllers :)
Posted @ Thursday, June 14, 2012 7:40 AM by Chad Hardaker
You can't get around the fact that Shoretel's stock price is around 4 bucks a share and dropping steadily.  
 
 
 
There's also that silly "no profit in over a decade" thing to get around. That's a tough one. And that "20%" growth thing is amusing, too. 6.5% to 7.7% is indeed 19% growth. But then from 1% to 2% is "100%" growth. But Shoretel is still well under even a 10% market share.  
 
 
 
They'd need to more than double their 1.2% growth to barely scratch 10% of the market. 
 
 
 
Then there's their "virtualization" solution, which not surprisingly, isn't 100% virtualizable on vmWare 5.0. You still need a ton of their proprietary hardware, then to a physical to virtual deployment, and you STILL can't take full advantage of things like vMotion. 
 
 
 
So far the only PBX vendor who can completely virtualize every single one of their applications on vmWare is Mitel, and you can do it without a SINGLE piece of their proprietary hardware. With SIP trunks, all you need is an off-the-shelf router and industry standard servers. 
 
 
 
Try that trick, Shoretel.
Posted @ Thursday, June 14, 2012 8:05 AM by Bob
For a company doing so well, isn't it somewhat strange their CEO John Combes left really without a valid explanation. Then at a high point the VP for Global Sales (Don Girskis) leaves to pursue philanthropy opportunities but then quickly reappears as the VP for Sales with VOIP & Wireless (doesn't sound too philanthropic to me). Their VP for global mobility solutions (Shoretel's highest profile solution) Vasili Triant leaves (after a few months in that position) and re-appears at LiveOps. The head of EMEA (John Howard) only lasts 2 years. In Australia they are now on their 4th Regional VP in 6 years. In Australia they have been through 6 distributors and lets not mention the level of staff churn (ouch)! Sounds like a really happy camp.
Posted @ Thursday, June 14, 2012 8:32 PM by Anonymous
@ Bernard G. 
I love when people quote technology inaccurately. Mitel has for almost 2 years now been able to virtualize EVERY applications under it's UC portfolio. In regards to your statement "as does Mitel with their 3300 MCD". Mitel is and has been a software company. With their Freedom architecture you pick the platform (ISS, ESX, Cloud, etc) and we play in that sandbox. ShoreTel forces you to play in their sandbox, which in any technology space does not favor the customer only the manufacturer. 
I find it funny that you mention that ShoreTel plays in the VMWware space, but you fail to mention your ShoreTel Voice Switch hardware? Can you virtualize this, which is the most important piece of any UC provider? So what if you can virtualize your applications, everyone can, virtualize your call control and then lets talk. Visit vmware.mitel.com and then go to vmware.shoretel.com (doesn't exist) or Google Shoretel and Vmware. You get only 1 valid return from October of 2010 - ShoreTel receives VMWare Ready Status. Sounds dated to me. 
As for managing licenses over multiple sites, simple (not to quote ShoreTel). Mitel has, and has had had a Dedicated License Manager giving the end user the ability to manage all licenses from a single pane of glass. Time to update your competitive analysis folder. 
5 years ago ShoreTel had good competitive info on most PBX manufacturers, but 5 years ago was a long time. Time to spend more marketing dollars on updating your mud slinging campaign. Rather than picking apart other manufacturers focus on offering enterprise customers end to end, cloud ready solutions freeing them from walled garden architectures. But don't take my word for it, read for yourself!! http://www.mitel.com/why-mitel/freedom
Posted @ Friday, June 15, 2012 5:50 AM by Eric C.
Why is there all this talk about Mitel? Mitel's virtualization doesnt seem to matter to customers. They had this for years, and their revenues has still gone down from $735m in 2009 to $649m in 2011. Their last quarter was really concerning - revenue down to only $121m down from $213m in April 2011.
Posted @ Friday, June 15, 2012 10:40 AM by
Simply put, y original position is that Shoretel has proprietary technology and they've lost money for 10 years and that puts them in a very tenuous situation.  
 
I've seen a few posts here from Shoretel, touting their growth and customer satisfaction. bgutnick@shoretel.com writes, "But the only thing that really matters is having satisfied customers. We're growing fast at 20%+, and customers love the product."  
 
Nortel had great growth and customers were fanatical 
Rolm was the absolute darling of the industry and crashed into oblivion 
I used to love my Kodak camera, too. 
 
My point is that the telecom industry is brutal and when technology changes, some prominent players who are behind the shift get swept away. It's my opinion that Shoretel is exceptionally vulnerable. Hardware-based solutions are so 1990's. Mitel's got it right with their immersion into virtualization. Digium has it right with their open-source, standards-based Switchvox solution. 
 
I just see a looming dead end for the orange company. In my opinion, their underlying technology has fallen out of favor and they are living on a marketing diet of smoke, mirrors and flatulent press releases. 
 
randy 
Posted @ Friday, June 15, 2012 12:18 PM by Randy Kremlacek
Thanks for sharing your view. I'm going to drop off of the discussion, but wanted to provide a final comment. 
 
 
 
It's still all about the customers and results. Many companies have talked about virtualization, only to see their revenues either flat or declining. If you were a ShoreTel customer, you would understand why our approach is so attractive. And as someone posted earlier, Synergy Research just reported the findings which highlight our gain in market share. 
 
 
 
We'll see who has the better results in the months and years to come.  
 
 
 
It's still all about having satisfied customers. And we continue to have more new customers join us every day. 
 
 
 
Best wishes. 
 
Bernard Gutnick
Posted @ Friday, June 15, 2012 4:42 PM by Bernard Gutnick
When i looked at a voip system i didnt find the feature set of an asterisk, digium, or trickbox to satisfy our company needs. We wanted reliability, simplicity, scalability and easily maintained. The ShoreTel system met our needs and i got to keep my job as a telecom analyst. This whole Asterisk thing is a nice experiment for the 20 user community that has lots of time to fiddle around with it. Nobody ever got fired for buying Nortel or ShoreTel or Cisco because it works and is supported in a manner that business demands. The Asterisk stuff works if properly configured but its feature set may not apeal to everyone. Its always amusing to see how bashing the competitors is supposed to increase the sales person credibility. This useless negativity actually puts Digium and the combative sales person in a negative position. Buy from people you like and trust that sell good products. The customer gets to choose want they want from who they want.
Posted @ Wednesday, June 20, 2012 11:02 PM by Brian
Brian, 
 
It is always a slippery slope when talking about a competitor. Ironically, my initial blog article was borne out of a situation that one of my salespeople encountered in the field. We had proposed an open-source Digium Switchvox solution and our competitor had proposed a proprietary Shoretel system. The competitor also provided a Shoretel/Switchvox competitive comparison that had been written by Shoretel. It was very, very unkind to Digium and also was woefully out of date and riddled with inaccuracies. 
 
As I did my research to counter Shoretel's FUD piece, I dug in pretty deep. I started seeing some things that caused me to take pause. I just wrote what I think I see. I've been in this business long enough to pick up patterns. Anyway it looks like we've had many different opinions expressed and in the end, everybody made their points and we all learned. 
 
As to the comment about "it's a nice experiment in the 20 user community that has lots of time to fiddle with it", I'm not so sure I agree. One of Digium's competitive advantages is that they fly below most large company radars. However, if they didn't, people would discover that open source telephony has 18% market share if you are to believe the research done by Eastern Management http://www.easternmanagement.com/Images-%281%29/pdf/Open-Source-2011.aspx 
 
To quote them, "The size of a company does not bear on whether it uses an Open Source PBX to handle business communications. Hundreds of companies we surveyed have more than 1,000 employees. Dozens have more than 20,000. Two thirds of businesses with Open Source PBXs have multiple locations, though not necessarily with an open source PBX." 
 
I think that calling Digium's Asterisk or Switchvox "a nice experiment" is a bit of overstatement. Over Teledynamic's 25 years in business we've literally sold thousands of PBXs. Based upon that experience and selling Digium products for over three years, I can tell you that Switchvox is a quality competitor to Shoretel, Avaya, Mitel and the rest.  
 
My .02 and 1/2 <BG>! 
 
randy
Posted @ Monday, June 25, 2012 1:58 PM by Randy Kremlacek
Being a large Nortel reseller in the past, and now being a ShoreTel reseller for over 8 years, I can say first hand that there are little to no comparisons you can make between the companies or products. We've been extremely happy with their channel program, flexibility in margins/concessions and innovative products. We have them in small offices of 6 people all the way up to a large enterprise with thousands of handsets and over a hundred branch offices. No complaints here from us or our customers. Overpriced? Compared to what? A low end, open-source product with limited support? Sure a Dlink router and a Cisco router both route, but...
Posted @ Thursday, June 28, 2012 9:54 AM by Gino Capito
It is pretty sad when the Senior Director of Marketing at Shoretel has to monitor the blogs of Technology users to plead his case for the Shortcomings of Shortel. All I have to say is that I have yet to meet anyone in a "C" level position that has lost his job for buying Cisco VoIP. But I have met people that have lost their jobs for purchasing Shortel, Mitel, and others. Just Sayin!  
 
 
 
please read link 
 
 
 
http://www.thestreet.com/story/11561272/1/shoretel-inc-stock-downgraded-shor.html 
 
Posted @ Thursday, June 28, 2012 12:47 PM by Joey
It's interesting that you note ShoreTel's margin of 66%. That happens to be Cisco's margin as well. Making money is a good thing. Something Avaya and others have not had the opportunity to do since ShoreTel and Cisco came on he scene. By the way, Isoetech bought Executone not the other way around. Then president Alan Kessman sold it and bet it all on an Indian National lottery that never happened. Mitel, AVAYA and other legacy PBX companies are losing market share to a company that simply built a better mouse trap. How else do you explain ShoreTel's growth in a flat economy?
Posted @ Monday, July 02, 2012 10:12 AM by Craig Yancich
Digium is cheap. It has to be. ShoreTel is cost-effective. I'm flattered that you think we are such good salespeople that we can fool so many PBX buyers, but that's an absurd suggestion in a competitive marketplace! 
 
 
 
Having sold IP telephony since 2001, I've heard companies like CISCO and Avaya poo-pooing ShoreTel, as ShoreTel continued to modestly grow. The bogey man has always been their finances, but this red herring doesn't work anymore. 
 
 
 
Over-priced? If you ignore the cost of complexity and total costs of ownership over ten years, there may be some way to paint ShoreTel as pricy. 
 
 
 
As to the blogger who criticizes the solid-state switches for being distributed (and hence providing real redundancy and 99.999% up-time); you don't understand the design. Distributed architecture is an advantage, not a short-coming that needs remedy. I sleep well at night, knowing my mission-critical customers will be in service. 
 
 
 
Digium may be a more cost sensitive solution, but it will never gain ShoreTel's market share, sales results or market capitalization.  
 
 
 
And, we really do need to wait ten years to see if it survives. One way to tell if it's successful will be when the losers it displaces harp away on blogs about their finances! 
 
 
 
We looked at Digium, but part of selling systems cheaply has to hurt the seller and the manufacturer eventually. I think, by contrast, ShoreTel is priced right, for both seller and manufacturer, and especially to the customer. Duh! 
 
 
 
Complaining about marketshare and ShoreTel's focus on marketing investments at the same time really takes Chutzpah! 
 
 
 
ShoreTel remains debt-free. Worry about someone else, unless that concern is really cover for an attack, or jealousy for what ShoreTel has accomplished.  
 
 
 
At some point, when ShoreTel's sales and market share hits the steep grade on the S curve, the profit will be there. 
 
 
 
A ShoreTel system investment enables a mission-critical user to simply and cost-effectively experience 99.999% uptime, with virtually no effort or programming skills to manage thousands of end-users. And the end-users love the result. 
 
 
 
Who are you trying to kid?
Posted @ Monday, July 02, 2012 10:46 AM by Zoltan Keve
No where in the discussion here is what is right for any particular customer. Something I learned early on in sales was to ask the initial starting question that asked "What is your criteria". Hard-selling salespeople can't wait to throw off their chest their product without listening properly to the needs to begin with. It's like the customer's needs are an obstacle to maneuver around. The point here is that customers don't all have the same needs. For some, price upfront is the biggest issue. It's fine to talk about TCO over 10 years, but what if the customer is a small company with challenging financials? Most of you guys I'll bet will write that customer off because they can't afford your solution. I like to invest in people and will wait for something down the road. There are plenty of customers that I can talk to in the meantime who can and will invest in the products and manufacturers that I promote. 
 
Isaac
Posted @ Tuesday, July 10, 2012 7:41 AM by Isaac Martens
Shoretel meets the needs of the majority of business's and it does so quiet seamlessly. Having sold Cisco for years I stumbled into a client who needed my assistance setting up a Shoretel system they acquired. It took me less than 4 hours to get it 100% completed .. with no prior exposure. I waited the next morning for the flood of calls asking how to transfer, or my phones doing this or that, etc.. my phone never rang.. it was right then and there I said enoughs enough and stopped selling Cisco and called Shoretel to be a partner. Price isn't really a concern for us or our clients, reliability and simplicity is and while I liked Cisco's earlier UC SMB solutions (Cme, etc) with every new release the bugs just kept multiplying and I was fire fighting simple phone issues up until we started selling CME 9.5 w/9900/8800 Series SIP phones and just couldn't do it anymore.. oddly enough two of our clients were major investors in Shoretel yet used Cisco and ever since we acquired them as clients they kept asking if they could switch back to Shoretel and I always thought Shoretel was gimicky and quickly dismissed it as childs play compared to Cisco.. now I'm trying to back pedal. Maybe I'm just old and don't care to dick around with unreliable/cool new integrated technologies and while it does bother me a bit that the Shoretel system is so much more closed than the Cisco systems it does atleast do what i need, Microsoft UC integration with the check of a box, software that actually works on the desktop (you ever used Cisco's SMB software.. wow.. what junk).. I think Shoretel serves the SMB market quite nicely. I would probably do a full blown Cisco CM solution for a 5+ site 1000+ employee client but never again will I sell CME/UC500/UC300/Etc..
Posted @ Thursday, July 19, 2012 2:50 AM by Marcus
Randy: 
 
Congrats on stirring up the conversation. I have had some great wins against Shoretel. Yes - they have some great features, especially (at a cost) their N+1 redundancy story. (Actually, that is one of the only things positive I can recall about their solution.). But overall their style of licensing every little feature causes customers to spend an inordinate amount over time. When I list all of the features they get from a Digium Switchvox system and list the costs of the comparable features in the Shoretel, the sale is won.  
 
Simple example... With Digium SwitchVox we can enable 1 user or 10 or 100 to work from home. There is ZERO extra cost over the basic user license and a phone. My demos kick Shoretel ass when I just plug in a phone on the customer's network and it just plain works across the public Internet. For Shoretel, there's a required license to use an InGate product they call a "Telecommuter Module" to enable telecommuters, at GREAT cost. Do they think customers have unlimited funds?  
 
And they even charge customers if they want to use remote phones over VPN!!  
 
How dare they slam Digium. Whatever publicity that earns them they fully deserve.  
 
As for comments about there being a problem with charging too little for systems (something about selling systems too cheaply and how this hurts both the reseller and manufacturer), we have very strong margins, and a consistent ongoing managed services business built around those SwitchVox customers. Choosing to sell SwitchVox was one of our best moves in our 19 years in business.  
 
And for those thinking the Digium SwitchVox system is "an experiment" presumably just because it is built on open source Asterisk, think again. It is a fantastic, well-supported product that works consistently from install to install. It is not custom built the way pure Asterisk apps can be.  
 
See you in Atlanta at Astricon in October, Randy.  
Posted @ Saturday, July 21, 2012 12:47 AM by Michael LeBlanc
As a customer of Shoretels I can tell you they definitely have their pros and cons. The bitching I see from industry players about virtualisation is really not something that is a deal breaker for SMEs, especially those with small remote offices. In Australia the cost of an E1 line is around 1/3 the price of a business grade synchronous internet connection ($700 vs $2000+ p/m), this is where Shoretel comes out on top allowing for reasonably priced localised call control and termination but still giving us centralised administration. It would be nice though to have the choice of virtualised voice switches at our head office rather than worrying about multiple expensive bits of legacy hardware.  
 
There are two things that really irk me with Shoretel, the first is their insistence on keeping the 'Microsoft' model of licensing where every little feature is an additional cost, in this day and age surely mailboxes, IM, SIP extensions and mobile access are standard features and should be included in the basic extension license. The second thing is their interoperability with standards based solutions. Sure they have SIP integration, however it feels like a second class citizen, this is something that should be front and centre, especially as many enterprise endpoints (e.g. conference phones) are SIP based. Also their video calling is completely proprietary which means that for us it is not worth a thing as we are not able to call SIP video endpoints at other businesses. Aside from this their support is great and the fact that the backend is easy to pick up for new staff means that the business is not left in the dark if I leave, which is not the case with most other systems.  
 
The argument about their pricing is not my experience, we looked at Cisco, Avaya & Shoretel, when push came to shove Shoretel matched the Avaya price which got them across the line. Their handset pricing is reasonable with a Shoretel 265 generally coming in around $50 cheaper than a Polycom 670. 
 
As I said there are definitely pros and cons and I can see why Shoretel would not be suitable in many business cases, but for us it came in at a good price and was the best solution, I just wish they would make their licensing a bit easier.
Posted @ Wednesday, August 15, 2012 7:29 PM by Daniel Davis
what i find interesting about all the comments here is that they are all looking back not forward. softswitch, multitenanted, cloud based based PBX does away with all of this and the vendors who dont offer this quite simpley wont be around in a few years time. No one wants to tie up capex any more, and hosted exchange, archiving, backup, office 365, google docs etc are driving SME,s to the cloud. PBX and VOIP are next. So historical comparisons about on premise PBX vendors arent relevant any more un less you are in the business of replacing them like we are.
Posted @ Wednesday, August 22, 2012 7:03 AM by Aiden Callaly
What about these teleco's that eliminate employees as their strategy for earning profit. Like Mitel. What about their four or five President's in 18 months. Pretty soon they will be left with one secretary, answering their own phone system and a stock price at $.05 per share.
Posted @ Monday, September 24, 2012 7:50 PM by Lenny
Lenny, 
 
This might be re-cast as a story about a race to the bottom.  
 
In the last quarter Mitel lost $2,000,000 on $138,000,000 in revenue. 
 
http://finance.yahoo.com/q/is?s=MITL+Income+Statement&annual 
 
In the last quarter, Shoretel lost $21,000,000 on $246,000,000. 
 
http://finance.yahoo.com/q/is?s=SHOR+Income+Statement&annual 
 
So, Shoretel had 78% more revenues but a 1,000% greater loss. Which one of these financial powerhouses is the better choice for your next business telephone system. 
 
My point all along is that you should be working with a PBX maker who is financially viable. All of awards and trick high zoot features mean nothing if the maker has disappeared leaving you with a box of outdated software. 
 
Digium has proven that there is such a thing as a profitable profitable PBX business. They've shown a profit since 2002, a full decade while their youthful competitors, Shoretel and Mitel continue to spew red ink.
Posted @ Tuesday, September 25, 2012 4:42 PM by Randy Kremlacek
Great post and follow-up discussion! 
 
 
 
I've installed, managed, and preached any number of hardware/software voice and UC solutions over the past two decades, and will say that ShoreTel has been the easiest to promote, install, and maintain. System hand-overs to clients were easy too, since they didn't need rocket-science, Cisco Engineers to run the systems, or computer science degrees to write mounds of code to make things happen. 
 
 
 
Although I agree they have to make money to stay alive, it's difficult for me to discount my very positive experiences with their products. 
 
 
 
Also, I've had the system reliably virtualized for five years now with no problems - so I'm unsure about parts of this posting. 
 
 
 
In a shell, ShoreTel has made me a ton of dough, and has proven to be ultra-reliable in some really difficult environments. 
 
 
 
I had not heard of Digium until this post - so I'm off to do some research while my ShoreTel system reliably works...
Posted @ Friday, September 28, 2012 12:10 PM by Jonathan D. Pollard
I'm surprised nobody mentioned Toshiba, they have done a great job of migrating long time existing customers to the IP world. Toshiba's new IP Edge is price competitive,long term warranty and support,and a very smooth server based solution with an attractive high tech look.
Posted @ Wednesday, October 03, 2012 6:33 PM by Fred Stoeger
Lots of names being bandied about here but i dont see anyone talking about the impact that the cloud will have on all of these legacy companies. In an SOA world PBX and Contact center functionality are just services and not siloed technology stacks. Customers will not pay for features and functions they dont need or use and are far more interested in how their telecom infrastructure integrates with their existing IT infrastructure. Vendors that cant deliver this are history no matter how strong their revenues and balance sheets look now. Adapt or die, its that simple !
Posted @ Thursday, October 04, 2012 7:52 AM by Aiden Callaly
Randy, 
 
Great meeting you at Astricon and chatting about the industry. Shoretel, Cisco, Avaya, even Switchvox... it really comes down to just a couple things. First of all, can we agree that for 95% of the SMB and most of the enterprise with the possible exception of high volume call centers, these products all basically deliver the same feature set to the customer. They make and receive calls, handle voicemail, conferencing, auto-attendant, ACD, desktop call control interfaces, web based admin and perhaps call recording. What the decision point then comes down to is 1. Do I trust that the company is going to be around long term, 2. How easy is it for me to understand WHAT I am purchasing, what I get AND what I dont get or need to pay more for, and 3. Can I reliably predict the Total Cost Of Ownership over the lifecycle of the product. 
 
Barracuda Networks CudaTel product addresses these 3 points in a very different and disruptive way then Shoretel, Cisco, Avaya, et. al. Allow me to illuminate: 
 
1. Barracuda has been around over 10 years with thousands of customers and hundreds of thousands of users. We are here for the long haul! The CudaTel product specifically is based on the Open Source FreeSwitch, a high volume, highly reliable softswitch technology, and works with industry standard devices (SIP Phones, Gateways, etc.) 
 
2. A CudaTel quote has 1 to 3 line items... That's it. The Server, Energize Updates (EU) which get you upgrades, updates and access to USA based, Live answer 24/7 technical support, and Instant Replacement (IR) which provides for advanced replacement in the event of a hardware failure. In the likely event you dont have a hardware failure on an IR protected server, we will replace it every 4 years with the latest version of the model you have deployed! That's it! Yes you could add a line item or two for SIP Phones or you could use myriad softphones, some of which are free. Compare that to the typical 3 PAGE quotes I see from competitors and you understand how we are simplifying the procurement of IP Communications platforms - I reviewed one last week that had a line item ($15) for a power cord.... REALLY? Like no-one wants to power the thing up, right.... 
 
3. EU and IR are available as 1, 3 or 5 year contracts (renewable). Purchase the Platform, EU and IR for 5 years and you won't ring our cash register again for 5 years! Why you ask? Because CudaTel is sold with NO per-user, per device or per feature fees... It's ALL included. Platforms are sized based on concurrent call models and are all non-blocking! 
 
The breadth of features available in MOST IP PBX solutions today dictate that the real value is in the business model. I feel Barracuda got it right on this one! 
Posted @ Friday, October 26, 2012 1:31 PM by Brad Pitt
Great read. We were a nortel dealer until the collapse and does this hit home. We looked into a shoretel dealership but decided to go the avaya route. Mainly because of the ridiculous cost of the shoretel system. I did really like the product I saw but avaya seemed overall better. I also noticed the lingering low stock price and feared another nortel incident. We are now also a hosted provider. The problem now is that when we quote both hosted with avaya it blows avaya out of the water. Not even close. And avaya is considerably less expensive then shoretel. I cannot wait until my first hosted bid vs shoretel. Yes 10 
Years ago when money was people 
May have spent twice as much for a product, but not anymore. We work with a Cisco dealer also and within minutes of a sales meeting (when I try and get a feel for which product the customer is interested in) they make it very clear that they want something cost effective and that won't become obsolete in 4 years. Then there was the argument that hosted is unreliable. If installed properly they are more reliable then a premise based system with disaster recovery and everything in the cloud. 
 
It's now become a no brainier to most clients. And I saw a post above saying something about 20 million users? Avaya has 300 million users. Just for comparison  
 
I liked the product but the business model and failure to get with the times will be their demise
Posted @ Monday, February 04, 2013 3:13 PM by Dan
Well Randy, the new technology (such as Twitter) allowing ordinary people to air their views is in many cases a marvelous innovation, but does open the door to jaundiced and inaccurate views being peddled as fact! 
This blog is a clear example of that. 
I have been in the industry for over 20 years and worked for and with many of the companies you have mentioned, and without question I can state that the energy and innovation that is present in ShoreTel today is like nothing else I have experienced. 
The management and leadership are in no way arrogant but the exact opposite and their drive to excel via their NPS scoring, (ensuring that customers are always considered first), does promote a 'cult' like following but for the right reasons. 
The debt gearing is among the strongest in the industry and is set up to assist the meteoric growth that is underway. 
The support and adoption of 'open' technology to support a wider audience is central to the ShoreTel philosophy and I must say that calling IP a proprietary system is staggeringly crass. 
Lastly, the price/value equation is fantastic for ShoreTel and I urge anyone thinking of improvong their business around their communications to take a serious look. 
Anyway, I hope that you can take your green, red or blue glasses off and take a balanced view of the market before you shoot off another blog like this! 
Regards, David G.
Posted @ Monday, February 11, 2013 4:56 AM by David Gill
Guys: it'd be crazy for anyone to invest in a proprietary PBX that cannot be virtualized. Shoretel is so old school. I believe the company will not survive. M5 acquisition was done out of desperation.
Posted @ Wednesday, February 13, 2013 9:08 PM by Peter Gabriel
The problem Shoretel has now is that its M5 acquisition will cannibalise its existing on premise business. The other problem is that they are a PBX vendor not a contact centre vendor despite all of their content light press releases. Marketing and hype are not the same thing
Posted @ Thursday, February 14, 2013 2:08 AM by Aiden Callaly
David, 
 
I appreciate your comments. There are always two sides to every story. Lehman had plenty of fans in 2007. As to your comment "meteoric growth that is underway", all market research I see show a very dismal market for PBXes going forward. From Infonetics: "The global PBX/KTS system market declined 4.6% to $2.06 billion in 1Q12 from the previous quarter"
Posted @ Thursday, February 14, 2013 10:25 AM by Randy Kremlacek
Back to their m5 acquisition  
 
I don't know if you guys know this but they only use the linksys spa phones on shoretels hosted (easily the worst sip phone out there) 
 
And they charge triple what many hosted providers do 
We just blew one away
Posted @ Friday, February 15, 2013 3:39 PM by Dan
I find both ends of the discussion quite interesting. Through the many phone systems I've worked with, starting with NorTel in the 90's and moving into InterTel, ShoreTel, Mitel, Cisco UCM, etc, is that ShoreTel has provided the greatest amount of uptime. For our organization, a down phone system creates a greater loss in revenue than what the price tag of the phone system was in the first place. 
 
Secondly, virtualization makes sense in a lot of places, but the fact is that virtual hosts use spinning media whereas ShoreTel switches don't. And if a switch fails, we have spent very little for redundancy to increase our uptime to 99.99999%. No outages to date in 9 years. 
 
The only comparison I can make between ShoreTel and NorTel is the fact that it works all the time, with or without a server running. I'm not concerned with ShoreTel's stock, just their product and managing it without a PHD.
Posted @ Wednesday, February 27, 2013 1:10 PM by Monte
And another senior member of the management team leaves after 9 months in Job. Joe Vitalone VP Channel Enablement off to a competitor.
Posted @ Monday, March 11, 2013 10:54 PM by Anon
As is states- in Australia they have had 6 distributors in less than 5 years and the APAC Director is a cocky prick who loves Telstra. Their good staff leave and they do the wrong thing in the Channel. Shame, its a great product, just becoming an IBM of the early 1990's..
Posted @ Sunday, March 31, 2013 9:46 PM by anonymous
This has been a very interesting read. I am more than familiar with the ShoreTel product as I supported it on a national level for over two years and I'm also able to program the asterisk language and worked on a large number of different SMB and Enterprise PABX products. 
The ShoreTel PABX did give you a high level of integration that much is true however it was only because it leveraged its Microsoft Server and Windows based platform, that aside my biggest problem with it was it totally lacked the vast majority of telephony features and what it did have were really really restricted. 
Take away the Communicator side of it and you really didn't have anything advanced at-all. If you didn't have communicator running you couldn't even get CLI Name appearance but lets not go there... 
I'm not going to turn this into a ShoreTel bashing exercise however I will agree that there is too much Bling and not enough telephony which is their biggest downfall and where others will win every time.
Posted @ Tuesday, April 02, 2013 6:22 PM by anonymous
I read this article with great interest as our company was a Shortel reseller in Australia for over 6 years (one of their first in Australia actually). We cannot agree more with the sentiment of the author- sadly the Vendors attitude and strategy as described in this article was a large part of our reasons for separating from the relationship.
Posted @ Tuesday, April 02, 2013 6:51 PM by Ashlee Ball
Really this is very Interesting.
Posted @ Tuesday, May 07, 2013 11:53 PM by Stock Downgrade
2 key senior sales execs leave within weeks of each other. 
Joe Vitalone leaves to head up the US sales team for Mitel, closely followed by Tim Gaines again to Mitel. The senior churn now must be a major concern for Shoretel. Interested to see what spin Bernard puts on that one.
Posted @ Wednesday, May 08, 2013 11:55 PM by Anon
Opps their goes another one. CEO Peter Blackmore on his way out. The senior management & executive churn is staggering.
Posted @ Sunday, May 12, 2013 7:50 PM by Anon
The exodus of top management from Shoretel is not only continuing but it's moving up the food chain and gaining momentum. 
 
Peter Blackmore lasted less than 2 1/2 years at the company. At this point, they have no replacement. Maybe one of the old Nortel executives could be dusted off for the new Shoretel CEO position. 
 
Previous CEO John Combs had predicted that Shoretel would reach $1B in sales by 2009 when explaining their losses, "We need to make the investment to capitalize on the huge potential" In 2012, they stood at $306M in sales.  
 
14 years of continuing losses and revolving door in the executive suite at Shoretel. Just how long will it be before it comes crashing down. Investors, I think it's time to Shor-TSell! 
Posted @ Monday, May 13, 2013 2:18 PM by Randy Kremlacek
Shoretel filed an SEC K-8 notice yesterday, required any time there is a change in directors or principal officers. The filing disclosed the following Shoretel senior management departures: 
 
Shoretel Chief Strategy Officer, Dan Hoffman resigned. 
 
Shoretel Senior Vice President of Engineering and Operations resigned. 
 
 
On May 9th Shoretel CEO resigned.  
 
Three Shoretel Officers have resigned in less than a month. This constitutes a major leadership exodus from Shoretel. What's going on?
Posted @ Thursday, May 30, 2013 11:00 AM by Randy Kremlacek
You can add Eva Hahn VP for Corporate development and legal council to the list as well, she jumped in March
Posted @ Monday, June 03, 2013 9:21 PM by Anon
ShoreTel is flattening the org and it all makes perfect sense. Spin it any way you want but Asterisk is for the same kids that like to play with legos. Other than Ava Hahn the balance were all let go. And are attorneys hard to find and do they impact revenue and innovation?
Posted @ Saturday, June 08, 2013 10:03 PM by Fud Farmer
Fud Farmer - interesting comments - apart from Ava the others were all let go? What planet are you living on. Spin it anyway you like but isn't strange that they seem to be replacing the ones that are leaving - that doesn't sound like flattening. It sounds like hemorrhaging to me.
Posted @ Tuesday, June 11, 2013 9:34 PM by Anon
As much as the competition hates to admit it, ShoreTel has been doing very well. The key players that recently left all hit huge incentive payouts based on revenue. Most were brought in to accomplish a specific goal as ShoreTel positions itself for it's next big growth. My guess is that this will occur when, to every lay person's surprise, Avaya can no longer support their massive debt. Their only hope will be Obama.
Posted @ Tuesday, June 11, 2013 9:56 PM by Reason
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