Analyst Joe Rittenhouse has a post on LinkedIn about Mitel’s current situation. He references a UC Today story about the debt service being $130M per quarter!
Comments on the LI post blame the wasted acquisitions and the CEO. The difference between Avaya and Mitel is the C-Suite. The same thinking that got you into a mess is NOT the same thinking that will get you out. Avaya got a new CEO. Alan designed a new strategy and like a great coach and General Manager starting putting players into position to execute the plan.
This is what is lacking from most service providers.
You cannot get to where the puck is going with the same team that is staring at the puck going in the net. The leadership has to embrace the new strategy, then sell the workforce on that plan. Then you have to get buy in on the plan from everyone. Not head nodding, but actual buy-in. The employees have to clear the cache on the old ideas (like PBX on-premise head) and embrace the new idea (like cloud).
The “new” idea at Mitel is to chase Avaya cast-offs. Mitel has been trying to do that for years. Now they have tired and angry partners.
Small business still likes the on-premise PBX, especially inexpensive units and a SIP Trunk. However, as the business size grows, so too does the demands of any technology. AI and CX are buzz words but they do make any business owner think if they are positioned for the future, especially before they make another purchase.
Many new service offerings for the VSB (very small business) that include a single pane of glass, omni-channel, web chat, AI and texting are available reasonably for VSB. HELIOS, Net2Phone and a few others already have live clients and use cases. That isn’t the market Mitel partners are in, yet that could displace some of their smaller clients with functions that Mitel can’t fulfill.
Zeus says what I hear often: “a massive on-premises user base still present in the mid-market”. That’s what Avaya and NEC said, too. Look, the on-premise hardware business is declining. It dovetails with the telecom copper market – or wireline as a whole. It make take a while till it isn’t a viable business model anymore. The industry knows that any long-in-the-tooth partners of NEC-Mitel-Avaya are not about to embrace cloud comms now. They will ride out the PBX business plan of the last 20-30 years until sunset. That doesn’t mean Buyers will though.
Bankruptcy always makes customers and partners nervous. Avaya getting 2 of them in short order makes many if one will work for Mitel.
Massive debt and a lack of cash are what killed all the early fiber companies, AT&T, Lumen (CenturyLink/Level3), and many VoIP companies. It may be what kills the TSB/TSD players.
One super agency has at least $30M in debt at 13% and one TSB has at least $15M in debt at 13%. The interest payments alone eat up much of the 20% they keep. Payroll eats up a lot more than that. Many of the TSBs are top heavy. They are constantly updating their portal software. These things eat cash.
The TSBs keep telling the Trusted Advisors to get more wallet share, sell other services, land-and expand, sell solutions from multiple vendors. They yell all this at TAs because network sales are 80%+ of the sales and on every renewal it declines a little bit.
There is a reason network is 80% – it is easy and reliable and quote to cash is fast. Everything else that is in the catalog: software, cybersec, AI, etc., is a longer sales cycle, has many moving parts, has unknown vendors, and the commissions aren’t so great that partners are going to chase them.
Any sales rep will look at a comp plan and discover how to get the most pay for the least friction. The least friction is the point!
The long-in-the-tooth partners will likely stick with what has worked for 15-25 years. Why change now in the dusk of the career?
The funny thing is that many people used to refer to this business as a lifestyle business – and yet vendors and TSBs want the partners to change their lifestyles now. Maybe the next wave of partners.
Since I got into tech in 1996 as a VAR, then in 1999 as a telecom agent and in 2002 as a consultant, bankruptcies have piled up in this business. Caruso’s book highlights about a dozen of them, but there were many others. There were also several vendors who left the channel or oscillated in the channel (VZ!).
Over the last 30 years, it has been a wild ride. For the most part, I wouldn’t suggest partners take advice from vendors or TSBs on how to run their business – unless they invest in you, then I suggest you get a good lawyer to review that contract. Talk to other partners. Talk to customers. What do they want? My journey has not been sketched out. I was just watching where the puck was going and trying to help my clients get there sooner than if they didn’t hire me.
We are at a strange place in time. Businesses need Advisors at a time when the TSBs are in flux, partners are retiring, the technology hype is huge and the next step seems uncertain. The economy and the political environ are not helping.
The analysts and the media tend to offer hope and a positive outlook on every turn. I don’t think they have ever uttered a cautionary note. Caruso, in his book, Bandwidth, mentions an analyst often. That analyst pumped up numerous companies that mostly ended up liquidated, but he and his employer stood to gain from the positive reviews. To keep the party going (the dinners, the free travel, the invites), you have to go along. That tends to mean that most CEOs in telecom don’t often get criticized or questioned. The quarterly mentality and eyeballing the stock price are not necessarily proven indicators of long term success.
I think that is how we get stuck with these vendors going BK. No real criticism. Every product, press release and event is met with applause. What a fake feedback loop.
Well, one thing is for certain: businesses need telecom services and Trusted Advisors will be available to fulfill that demand.