Ask Larry Ellison. Instead of trying to pry a company’s ERP or CRM application out of their business, he found it cheaper to buy the competitor and thereby grow Oracle (News - Alert) through acquisition. That makes a lot of sense because ERP and CRM systems are long lifecycle products, the customers invest a lot to customize them to make them fit their specific business and the users are hugely invested in the nuances of the user interface.
It occurred to me the other day as I was reviewing the Siemens-The Gores Group deal that we should see the same kind of change in enterprise IP telephony, shouldn’t we?
After all, IP PBXs have long life cycles, the customers invest a lot in configuration files and the users are hugely invested in the nuances of the user interface.
Consider the recent changes in the financing of the enterprise telephony industry (in no particular order):
- Avaya goes private
- Aastra Telecom (News - Alert) buys Ericsson’s PBX business
- Mitel (News - Alert) (a private company) acquires InterTel (a public company) and stays private
- Shoretel goes public
- Siemens Enterprise goes private (since Siemens (public) holds only 49%, it’ll be treated as an investment, not as a subsidiary)
- Digium, the home of Asterisk, acquires Switchvox
These all signal that despite the new entrants of Microsoft (News - Alert) and IBM in unified communications, the enterprise voice solutions market is still quite mature, and facing significant pressure as Siemens puts it — in the transition from hardware to software competencies.
But none of these, except maybe Mitel-Intertel refer to market consolidation.
As I see it, the transition to software will not happen quickly. This kind of industry restructuring will take years and years to execute. For example, although VoIP has been around for a decade (Cisco (News - Alert) bought Selsius in 1998) as an IP PBX service, hybrid digital-IP systems have been shipping the strongest. And large SIP PBX enterprise systems such as Nortel MCS 5100, 3Com VCX and Avaya’s distributed office haven’t really taken off despite the great advantages over the classic site-specific systems. New architectures take time.
Even more painful is to recognize the investment that USERS have made in learning how their enterprise voice service works. What ‘76’ means to voicemail users and how to forward a call to a coworker are all indicators of the scope of energy / inertia that have to be overcome. Don’t people always say, ‘ok, I’ll forward you, but if I mess it up, you’ll call right back, won’t you?’ Haven’t we figured out how to make that a reliable transfer?
That’s why I don’t think that industry consolidation has begun yet. Sure, industry refinancing. Consolidation? Not yet.
Peter Brockmann, a seasoned technology marketing executive, writes the Out of the Box column for TMCnet. To read more of Peter�s articles, please visit his columnist page.
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