By Alex Scroxton
A year on from its initial public offering (IPO), life in the public eye is working out for voice over internet protocol (VoIP) specialist ShoreTel, which recently posted record quarterly sales figures. However, for a little while it looked as if an unexpected patent lawsuit from competitor Mitel was going to spoil the party.
The suit claimed ShoreTel had violated four Mitel patents concerning automatic web page generation, portable user telephone profiles, automatic telephone feature selectors, and local area communications servers.
ShoreTel, which has always maintained that the attack was a blatant ploy to delay its floatation, responded in kind with a suit in Mitel’s native Canada, alleging its rival had infringed a ShoreTel-held patent. It is demanding monetary compensation for the alleged infringement.
One year down the line, CEO John Combs is undaunted by the court case, which is scheduled to be heard sometime in 2010 and is happy to discuss the ongoing situation, acknowledging that assuaging the doubts of partners and customers over ShoreTel’s business practices has been very important.
“Considering we had been in business for 10 years, when the suit was filed on the eve of our IPO the timing was interesting to say the least,” Combs says.
“To continue with the IPO we had to convince our legal counsel that the lawsuit was without merit, and our lawyers had to convince the bank’s lawyers that the lawsuit was not valid, and we managed that in 48 hours and still floated,” he adds.
Away from the legal world the picture is slightly more pleasant. “Anytime I get frustrated with the extra overheads associated with being a publicly traded company I just look in the bank, and having a strong balance sheet is comforting to me and to my customers. Financially we are stronger now than before the IPO,” he says.
Customer satisfaction
Tap ShoreTel into Google, then scan the analysts’ reports and the industry blog-rolls and one thing that quickly stands out is the high regard that ShoreTel’s customers hold for its services. Indeed, customer satisfaction is at an all-time high, helped by a series of rolling surveys that take place 90 days after installation, and after that on an annual basis.
The surveys comprise 38 questions requiring participants to rate various aspects of their experience on a scale of one to four, a “difficult scale”, according to Combs, because it eliminates the middle ground.
“You have got to be either above average or below average,” he says, adding, “Everybody in the company, from the receptionist to myself, gets incentive compensation based on customer satisfaction, so it has become engrained within the company.
“Our partners get incentives based on satisfaction levels too, so it is easier for them to reduce the cost of their equipment by driving higher customer satisfaction than it is by volume.”
Customer service incentives back up ShoreTel’s philosophy of making its internet protocol (IP) telephony kit easy to install and maintain, and differentiators include – to name just three out of many more – low total cost of ownership, longer lifespan and lower power consumption. They are all helping make more of ShoreTel’s estimated 8,000 customers “raving fans”, says Combs.
Migration to IP comms
When it comes to the partners, ShoreTel believes that satisfied customers will breed satisfied resellers as well.
“We made our decisions with their best interests in mind,” Combs explains. “They want to be able to go to their customers and feel good about the relationship because they are in that relationship for the long-haul.”
With committed partners and customers on board for the ride, ShoreTel hopes it will make the ongoing move from time-division multiplexing (TDM) to IP communications altogether easier to manage.
“The TDM ship is sinking fast,” says Combs, “and the folks coming from that business are struggling to keep up.
“Our competitors with roots in TDM are struggling with negative cashflow and cannot afford to invest in IP.
“Our plan is that now the economy has slowed we will accelerate our research and development investment and our distribution investment so that as the economic environment improves over time we will emerge as a stronger competitor.”
A ‘risky’ approach
Combs believes that although some will say it is a risky strategy to adopt during a downturn, it would be riskier still not to, saying that too many communications companies were taking a very conservative approach that left them “floating up and down on the tide”.
“We are not going to allow that to happen,” Combs affirms, “and we have got some aggressive partner development and distribution development plans.”
Resellers need to make conscious decisions, says Combs, on whether or not they are going to invest in making the transition themselves.
He says there will be further announcements from ShoreTel on its channel programme in the UK within the coming months.
There will also be a renewed technological push from the firm, with new products and tools expected in the very near future.
Combs hints at new applications to speed up the integration of instant messaging and presence features, and better integration on applications such as Microsoft customer relationship management or Salesforce. Better quality desktop video-conferencing is also on the cards.
Wisely, perhaps, throughout the transition to IP, ShoreTel is taking the view that it needs to mentor partners, whether they come from a voice or data background, as they become full service UC providers.
CV: John Combs
John Combs took a long route to his current position at the helm of ShoreTel with a resumé reading like a history of the American communications sector.
As a fresh-faced engineering graduate, Combs started work installing central office equipment at toll switching centres for the Bell System – Ma Bell, as it was affectionately known at the time – which maintained a virtual monopoly on the American telephone system until 1984.
He later moved into the PBX arena, spending time with Fujitsu Business Communications and heading up Mitel’s US business before getting into wireless comms in the early 1990s.
In this emerging sector Combs enjoyed stints with LA Cellular and Nextel before moving to start-ups in the late 1990s. It was after exiting a venture called LittleFeet in 2004 that he was approached by venture capitalists who invited him to consider a move to ShoreTel.
Combs admits that the prospect was not immediately attractive but says he was eventually swayed by the differentiation that ShoreTel offered against its competitors.
