A History of Self-Destruction in the Telco Business

In recent years we have seen several providers struggling financially or even closing up shop. Starting with Nortel, then Avaya, next Toshiba Telecom. These were all industry giants with successful products. What went wrong?

Certainly the issues were complex and there were many contributing factors that we will not discuss today. But one overriding point catches our attention as a vendor:

The failure to adjust to meet contemporary market demands.

Innovation is everything. There is no doubt that our industry has embraced The Cloud, SaaS, and other software- and Internet-based technologies with vigor and certitude. The Cloud PBX market is growing at an Compound Annual Growth Rate of 14.9%. The UCaaS market at a rate of 25-30%.

This leaves providers with two choices: adjust to meet demand or get left behind.

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Nortel

Nortel was one of the best in the world of telephony; an industry giant. Nortel on-premise systems were well built and long-lasting. The quality of their product is not in question. However with the emergence of the Cloud, the industry as a whole began to evolve. Consumers no longer wanted expensive hardware and physical telephone systems. The advantages of VoIP, the Cloud, and other modern software-based technologies are simply too enticing.

While Nortel did make the initial transition from PBX to IP-PBX and even developed a Business Communications Manager (BCM 50), that was as far as they went in evolving to meet customer demand.

Sadly it was not enough and well, we all know what happened next.

Read our other posts about what happened to Nortel. 

Avaya

Avaya, another industry giant with a solid product, came to the rescue and bought out Nortel. However their success quickly turned to a Chapter 11 bankruptcy. Their mistake was similar to that of Nortel – a failure to evolve with current trends.

The Wall Street Journal puts it best:

“Avaya illustrates the potential pitfalls of buying big, established technology companies at a time of near-constant innovation. Private-equity firms often use borrowed money, or leverage, to buy a company with the hopes of juicing their gains on an eventual sale of the investment. But if economic conditions worsen or the competitive landscape changes, the buyout debt can become difficult to manage.” (Wall Street Journal)

Avaya’s corporate telephone systems worked great and scooping up what was left of Nortel only strengthened their offering, but when VoIP and other internet-based services hit the market the competition became overwhelming.

“The [Avaya] bankruptcy underscores the challenges telecommunications companies face as they transition to software and services from hardware” (Retuers)

Toshiba Telecom

Along the same lines as Nortel and Avaya, we can all agree that Toshiba’s telecom products were stable and functional. The issue has never been about the products themselves, but rather their failure to adjust according to market demand.

To be fair, Toshiba did make attempts to evolve with the industry, but unfortunately it was too late. By the time Toshiba released an IP product, the cloud was already beginning to trend. Despite their best efforts, it was just too late to catch up.

Read more in our blog post What Happened to Toshiba Telecom?

We keep seeing this pattern of legacy and on-premise providers either shutting down, going through financial trouble, or ultimately doing a major overhaul and switching to the cloud.

But our concern goes beyond that. These companies failed because they were not prepared to adjust as soon as the cloud hit the market. So the question is – what is next?

Everyone is abuzz about the cloud, but technology is certainly not going to stop innovating now. The cloud is the top technology of today – what about tomorrow?

Success in this industry is dependent on the ability to anticipate future trends and adopt them as soon as – or before – they hit the market.

What about your provider? Do they offer the latest trends? Do they have a plan for the future?

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Q&A with Stephen Corrigan, former 3CX Director of Sales

3cx3CX has a great product. That is how we want to preface our discussion of 3CX and its changing business practices. There is no point in beating around the bush or denying the obvious. Their Windows-based PBX fills a unique need and seems to work well.

The 3CX business model is another story. But we will leave the telling of that story to Stephen Corrigan, former Director of Sales for 3CX.

stephen-corrigan-interviewQ: What was your job at 3CX?

SC: I began my career at 3CX as a Channel Manager, responsible for the UK market, rising to the position of Sales Director with global responsibility for growing the VAR channel. Latterly moving to the USA as General Manager and Vice President of Sales, tasked with establishing a direct local presence and opening the 3CX office in Dallas, TX. Tasked with managing business in the USA, recruitment and training of staff, and revenue growth.

Q: How long did you work there?

SC: I enjoyed six and a half successful years at 3CX.

Q: What was the 3CX business model like?

SC: Interesting question. The business model changed over the years, from exclusively 100% channel-focused to a mix of channel and direct engagement.

Q: What do you mean by “direct engagement”?

SC: There seems to be more of a focus on the end users today than there ever was before.

I am a firm believer in the channel and work to provide the channel with the tools, technologies, support and services to make their business a success.

Let me give you one example. While I was at 3CX, it was not possible for 3CX end user customers to order directly from 3CX. All sales transactions had to go through a partner. Yet we see today that 3CX end user customers can directly order maintenance, upgrades etc. from 3CX. Anything except new licenses, as of today.

Q: How does this affect 3CX partners?

SC: People have started recognizing that 3CX is not very partner-friendly and that 3CX will take their business away from them.

There are any number of channel parters selling 3CX in your local area right now. These are all competition to you as you have to promote the 3CX brand to your opportunities. You work hard to win over a prospect and then have to tell them the product is 3CX. That prospect is going to walk out of your office and go look up 3CX. He is going to find out he can get a free license for a year and wonder why he should pay you for something that is free.

Worse yet, all of your competitors are listed publicly on the 3CX website. So when you introduce 3CX into the opportunities that you have worked hard to nurture, what is the first thing they are going to do? Research a bit more about 3CX and uncover your competitors on their website. This is not a smart move!

Wouldn’t it be much better to build your own brand, deliver advanced Voice and Unified Communications services to your customers with your own brand, promote your own brand, not that of the manufacturer? This is what builds loyalty and value in your business.

Let me give you one more example: To receive free updates your customer has to have a valid maintenance contract with 3CX. To activate the maintenance contract you are obliged to provide full end user details, including contact details. Why? These are YOUR customers, not the manufacturer’s. Working with your customers is what pays your bills and adds value to your business. And as we see, your customers can now upgrade and renew their maintenance directly from 3CX. This is a threat to your business.

Q: Did anything else contribute to your decision to leave 3CX?

SC: 3CX was, and is, predominantly architectured for on-premise deployments

But the market is always changing, with new pressures and challenges faced by our biggest resource, our channel partners. Back in late 2013 the signs were obvious that their was a seismic shift in how Voice and Unified Communications were being delivered to the market. We were seeing the advent of Cloud Telephony, and I was being lobbied by the channel to provide our channel partners these options.

My aim was to provide our channel partners with a fully managed Cloud infrastructure upon which our partners could build their sales and business. Unfortunately this approach was not accepted.

Voice and Unified Communications have many unique requirements and demands when delivering over the Cloud. And as good and useful as services such as Amazon AWS and Google Cloud are, they are not well equipped to deliver the real-time services demanded by Voice and UC.

Ultimately 3CX were not willing to make the investment necessary for our partners to compete successfully in this new space.

Q: When you speak with 3CX customers now, what do they say?

SC: By and large 3CX partners still like the product. The issue that the overwhelming majority have is dealing with 3CX and their business model.

3CX is all about 3CX. All about building the 3CX brand. That is okay, but how does this help their partners build value in their own businesses?

Q: Do you know of any 3CX partners that have left? Why?

SC: Yes, many of the friends that I speak to have stopped providing 3CX.

There is a growing uneasiness in three areas:

1. 3CX is unable to deliver the robust, high quality Cloud solution that the market is demanding. We are seeing Cloud services growing while on-premise is stabilizing, if not declining.

2. The changing business model of 3CX with direct end user customer engagement is seen as a threat to the partner’s own business.

3. The lack of being unable to brand the 3CX product with your own brand image is akin to acting as a sales agent for 3CX, building value in the 3CX brand, not yours. Surely it should be the other way around?

Q: Looking back, was leaving 3CX the right decision?

SC: Yes, for sure. I get real satisfaction from working with partners and seeing their business, their brand, becoming more successful and seeing their value growing.

Q: If you could give one piece of advice to 3CX customers right now, what would it be?

SC: Look beyond the product. Given the maturity of technology today, there is really very little difference in what different products deliver. Look at how easy working with your provider is – are they willing to go that extra mile? Look at the business model – is it all about the manufacturer? Look at how the company can help you grow, help you succeed, and help you!

To hear more from Stephen, read his blog post: Reasons to move from 3CX (and other IP PBX systems) to Bicom Systems… I did

Or contact Stephen directly at sc@bicomsystems.com.

 

3CX Resellers Finding an Alternative: Day 2 at IT Partners in Paris

Day 2 at IT Partners in Paris was even more productive than the first day. With non-stop traffic to the booth all day, we were able to have conversation after conversation with resellers that are not happy and looking for something new.

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Above all, these companies feel betrayed. Some have learned that their provider is actually scooping up support and maintenance renewals right out from under them, completely undermining the reseller channel. This is incredible to us. Our network of resellers are our partners – the heart and soul of our business model. These companies are making sales and delivering to their customers only to realize that their provider used them and will steal that customer for themselves. What happened to loyalty and trust?

We are thrilled to be partnering with Fonia in France and able to assure these frustrated entrepreneurs that providers that work with them do exist. We have all of the pieces for a VoIP/UCaaS company and are committed to developing long-term relationships with each of our partners. If you are ready to get started, please contact us today: www.bicomsystems.com/contact

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3CX Resellers Finding an Alternative: Day 1 at IT Partners in Paris

Bicom Systems had a magical few days just outside the gates to Disney World in Paris, France last week. We were at IT Partners collaborating on a booth with Fonia, our newest partner in France.

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Day one was animated and insightful. With a constant flow of visitors to the booth, the reactions to our demos and solutions were a bit like kids in, well, Disney World. But not everything is fairy tales and pixie dust, we heard quite a few complaints about other providers as people stopped by to chat.

The common theme from resellers of these providers coming by the booth was that they are tired of their provider not playing fairly or as a team. These companies pour their time and resources into a solution only to have their provider revise the game plan, forcing them back to square one. It is frustrating to work with a partner and solution that seems to be pushing them out of the equation in an attempt to eliminate the channel and sell directly. Roller coasters may be fun inside the park, but they have no place in a successful business relationship.

One theme of note was with 3CX now offering free extension licenses. Resellers were of the opinion that this policy now ended any prospect of them working to build up their portfolio of End User customers. The risks of their working in vain were becoming too strong.

Fonia sympathized with their frustration, but then went one step further. The booth presented PBXware as an alternative solution, delighting visitors with a breath of fresh air. The new interface in PBXware 5.0 has been a real crowd-pleaser; but even more than that, visitors are excited to find a new face in town that is willing to work with resellers. Far from inexperienced, Bicom Systems has been delivering solutions throughout the world for nearly 15 years, but the partnership with Fonia has afforded us a much more tangible presence in France.

And that reseller relationship is exactly what has so many people enchanted. Our success is no more than that of our smallest partner, so we invest in those relationships long-term. As they say just inside the park, “happily ever after” is our goal with each of our resellers. Another highlight at the booth was that Bicom Systems offers a complete VoIP and UCaaS solution. There is no need to deal with other vendors or try to fit mismatched pieces together. A one-stop shop plus a partnership.

We have given some sneak peaks about what’s coming up in PBXware 5.1 and the feedback has been astounding. Suffice it to say: people are asking how to sign up on-the-spot.

We’d like to express a big thank you to Fonia for hosting the booth and helping to get the word out about Bicom Systems establishing a presence in France. With over 5,000 resellers in attendance and Fonia already well-established in the market, this experience has been worth every minute. Bicom Systems sent out staff from Canada for the event and for a road trip to visit resellers in France next week.

To end with a quote from Walt Disney himself: “The way to get started is to quit talking and begin doing.” If you are ready to get started, contact us today: www.bicomsystems.com/contact

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Reasons to move from 3CX (and other IP PBX systems) to Bicom Systems… I did

Note from the editor: We are excited to have our first post from Stephen Corrigan, former Sales Director for 3CX and newest member of the Bicom Systems team. Below he shares his experiences in the industry and what inspired him to leave 3CX and come to Bicom Systems.

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The telecommunications industry has seen some dramatic changes over the decades – from Centrex to digital Private Automatic Branch Exchange (PABX) – most recently in the early 2000s with the advent of software based IP PBX systems such as Asterisk for Linux and 3CX on Microsoft Windows, providing much needed convergence and integration between the IT and Telecommunications worlds.

But the market has moved on once again, from these earlier, predominantly on premise, systems, which are seeing declining sales, to a subscriber based services model, where multiple communications channels: voice, video, messaging (chat), collaboration, screen sharing, file transfer etc., are delivered over the internet directly to your customer’s employees.

This is a fundamental change, a change that many of the existing incumbent manufacturers just cannot deliver upon.

The Unified Communications as a Service (UCaaS) market is estimated to grow to over $96 billion annually, with the North American subscriber base set to grow dramatically from 11.6 million today to over 27 million subscribers by 2023, that is a cumulative annual growth rate (CAGR) of between 25-30%.

So, with the changing landscape you are being asked yet again to make decisions and changes to your business, your model, your infrastructure, your services and reevaluate your current technology business partners. Are they delivering for you?

If your technology partners are only providing PBX software, like 3CX and many others, then they are emphatically not and are not producing for you!

In today’s market, you need to offer your existing and new customers not only improved core services, but also the ability to engage with you in the manner that they are now accustomed to and provide more self-service capabilities.

Our relationship with technology has changed. Just look at our own personal lives and see how we interact with technology today. We are all consumers of technology and are willing to pay monthly subscriptions for what we want and desire, whether that be entertainment with Netflix, Hulu or Amazon, or our cell phone contracts so we can keep up with the newest handsets as soon as they are released; we do our shopping 24/7 from the convenience of our home, as we do our banking. We also want control over our subscription based services, adding or changing our subscriptions, engaging with our service providers using an online portal 24/7 – We want that convenience and simplicity.

Businesses are no different. No longer do businesses wish to make a purchasing decision and invest in technology with a minimum of a 5-year lifecycle, being stuck with that decision. Just like us personally, businesses are consumers of technologies, subscribing to the services that their business needs to operate such as Microsoft Office 365, SalesForce.com (and other ERP/CRM systems) and of course Telephony and Unified Communications. And for very good reasons – it’s simple, it fits within their budgetary constraints, there are no equipment costs, no maintenance costs, no system management costs, and no vendor lock-in, just simplicity and convenience.

In today’s changing market it is no longer sufficient to sell and install PBX equipment on the customer premise. Buyers do not want that and they are voting with their wallets. You need to provide businesses more – flexibility, simplicity, and convenience.

In addition to providing core Unified Communications functions, you need to offer your customers methods of engaging with you on the basis that they want. You need to offer them comprehensive online services where they can sign up for your service, creating an online portal from where they can order additional products and services from you, upgrade their existing service plans, view and pay their bills, automate the billing process, automate the credit card or PayPal payment process, customer care functions where your customers can raise and track trouble tickets. In three words – flexibility, simplicity, and convenience.

And finally, delivering the service over the Internet requires some additional skills and technologies, from infrastructure to server and network virtualization so that you can deliver robust, fault tolerant, redundant services 24/7 to your customers with 99.999% uptime.

If your current technology partner cannot provide you these additional functional layers over and above a PBX, it is time to reevaluate.

So what can you do about this today? Well, you have several options open: (1) do nothing, business as usual, (2) invest the necessary cash in building out your own technologies and infrastructure to deliver these services, (3) work with existing service providers as an agent on a commission basis, but that is not very satisfying and does not create value in your business, or (4) do something different – engage with Bicom Systems.

Bicom Systems provides all the necessary pieces for the ITSP jigsaw. With Bicom Systems and our private white label UCaaS platform you can build:

  • YOUR Business by leveraging our infrastructure, investment, technologies people and expertise to tap into the booming UCaaS market.
  • YOUR Brand by marketing and delivering UCaaS services in your own unique brand on a local, regional, national, or even international basis. Creating value in your business.
  • YOUR Way, you set pricing and service plans, you do it all your way, you’re in total control.

3cxOnly by changing can you survive and prosper in this market. Bicom Systems can help you make the change and get you there.

Learn more by visiting www.bicomsystems.com or by contacting me directly at sc@bicomsystems.com.