ShoreTel’s Next Act?

by Dave Michels

Over the past few years ShoreTel has gone through the largest transformation of all UC companies.

Don Joos was named CEO in August, 2013. Evidently he looked around and decided to change everything. The company primarily competed on simplicity with simple products – and it resonated. That’s because most of the UC industry over-complicated things. I met Joos for the first time in October of 2013. He shared with me his plans for re-inventing ShoreTel. It was exciting, but I wanted to write-off part of his optimism with ‘first-time CEO’ syndrome – that would have been a mistake. ShoreTel was effectively two companies at this time with very little in common between its cloud and prem businesses. He wanted to unify them – applications, products, and management. He wanted to re-organize the company and redesign the portfolio all while maintaining growth and profitability – sure, why not?

Joos outlined three stages to his plan: Foundation, Migration, and Acceleration.

Foundation was mostly around cost structures and reorganization. He combined the reporting structures. He hired Pankaj Malhortra as SVP of the combined engineering team. He promoted Pej Roshan to VP of Product Management, and hired Mark Roberts as CMO.

Migration had widespread implications. The company migrated many of its processes including: CRM to, redid its website, redesigned its channel programs.  The company’s engineers started working on “One ShoreTel.” It introduced a new ShoreTel phone that worked with both premises and cloud as did several new applications such as Mobility. ShoreTel introduced support for virtualization to consolidate separate products. But the big project was a planned consolidation of both prem and cloud into the same platform and architecture. That occurred last week when ShoreTel launched Connect.

Connect is effectively its premises-based platform on steroids – now powering premises-based implementations and its new cloud-based service. You can read more about it in this free TalkingPointz 2Pager. The new ShoreTel Cloud will gradually replace ShoreTel Sky. Connect leverages elements of ShoreTel Sky such as the billing system. Although Connect is based on the same premises-platform, its changes are significant enough to warrant a new name. For example, the desktop UC app Communicator is being replaced with an all new web-based interface.

The release of Connect is a big deal for ShoreTel – it’s been years in the making, and has consumed the company’s engineering talents (which are distributed around the globe). And as Joos predicted, Connect was built while the company continued to grow both revenues and profits. The release of Connect marks the beginning of the end of the Migration phase.

Joos describes the Acceleration phase as the manifestation of the Foundation and Migration phases. He expects to see things accelerate across the board such as recurring revenue (expected to exceed 50% of revenue this year), increased demand for hybrid deployments, increased growth internationally, and increased sales momentum. That makes sense conceptually, but I think it’s going to take more than the release of Connect. That has me wondering – what’s next?

Connect is being launched on the heels of a relatively strong quarter. The results were announced earlier this month and included an increase of 6.5% in revenue over last year. William Blair is maintaining its “outperform” rating.

Engineering has been focused on Connect. I am not suggesting the product is done (products are never done), but certainly the release should free-up engineering talent. I also wonder about marketing. It would make sense to accelerate marketing with the release of Connect. Cash in the bank, a new platform, and freed organizational capacity seems like a powerful combination for something interesting to happen.

It seems unlikely that Joos and team are going to sit back and relax – What’s next?