In January of this year, Mitel announced it had entered exclusive negotiations to acquire Unify, expecting to close in the year’s second half. All the regulatory issues have been cleared, and the two companies are set to come together.
This acquisition adds to the long list of companies Mitel has purchased to consolidate much of the on-premises unified commmunications industry. The list of companies Mitel has bought includes ShoreTel, Toshiba, Aastra and others. This also marks the end of the formerly massive Siemens Enterprise.
The company, once a powerhouse in the telephony industry, had been acquired by consulting firm Atos in 2016. When that deal happened, it didn’t make much sense, and Unify proved to be a square peg in the round hole of Atos.
Although it’s true that Unify’s share in the U.S. has dwindled to single digits, it still has a large installed base across the globe. The combined company will have an installed base of more than 75 million users in more than 100 countries with in excess of 5,500 resellers, service providers and others in its partner community. If one uses the generally accepted number of 400 million business desktops globally, Mitel will now have about 20% market share, which makes it the clear No. 2 share vendor, a shade behind Cisco Systems Inc. but well ahead of No. 3 NEC Corp.
One might look at the purchase and think there is much overlap, but the two companies are highly complementary. Mitel’s installed base is primarily small to midsized businesses, whereas Unify has many large enterprises. Mitel is very strong in the U.S. and Canada, where Unify’s home region is Europe, and they has maintained a strong presence there. Also, Mitel sold through the partner community, and Unify has a large managed services business.
Looking at industries, Mitel has its strength in retail and credit unions and is a de facto standard in hospitality. From its Siemens roots, Unify is widely adopted in the public sector, healthcare and financial services.
This acquisition also supports Mitel’s statement of direction, which is being laser-focused on driving innovation into the legacy, on-premises market. Both companies had many starts and stops with the cloud and have decided to partner with RingCentral, although the go-to-market models for Mitel and Unify are slightly different. Industry watchers often think of legacy as bad, but, in reality, if one can manage the business correctly, there is a tremendous amount of money to be made.
Consider the lock Dell Technologies Inc. has on the storage industry with its acquisition of EMC. Although on-premises storage is a market in decline, Dell manages it better than anyone and runs it highly profitably. There is no reason Mitel should not be able to execute a similar strategy.
Also, though all the industry focus is on communications moving to the cloud, that’s still only a small part of the market. The current installed base of seats that have moved to the cloud is about 25 million to 30 million, fewer than 10% of the overall 400 million. Though in slow decline, the on-premises market will continue to outnumber the cloud for at least a decade.
On a pre-briefing, I asked Mitel management about the product roadmap, and the plan is to keep both product lines going “business as usual.” The plan is to consolidate to a single hardware and software set in the longer term, but Mitel won’t force their customer’s hand. On the call, Martin Bitzinger, Mitel SVP of Product Management, stated, “That is absolutely the goal [consolidating hardware and software],” Martin Bitzinger, Mitel’s senior vice president of product management, said on the call. “From a user perspective, we want the value delivered from Mitel regardless of which platform is under the hood. This is both from a device and UC client perspective.”
This is a good move for Mitel, Unify and the customer bases of both. The additional share makes Mitel stronger, and for Unify, Mitel brings a parent company that understands and cares about communications and collaboration as opposed to Atos, which treated it as nothing more than a distraction. For customers that want on-premises or hybrid, quality devices and managed services, a stronger and consolidated company ensures more features and innovation into a product category that most other vendors now ignore.