Siemens Enterprise Communications: Strengthened Channel Means North America UC Gains

Siemens Enterprise Communications on Monday confirmed the latest version of its OpenScape unified communications platform, part of an ongoing product and channel blitz that finds the UC vendor aggressively going after market share in North America after a few stagnant years.

Siemens spent the past three years largely re-evaluating its North American prospects and re-tooling its management team. It emerged from a painful restructuring in 2011 with what partners have described as a well-thought out channel strategy, as well as an armful of impressive customer wins at a time when the major UC players are freshly distracted.

"Everyone had questioned our viability," said Chris Hummel, president for North America of Siemens Enterprise Commiunications and its global chief marketing officer, in a recent interview with CRN. "We were a $6 billion business and now we're a $3 billion business. Those are the facts. In the U.S. we needed confidence, and now our aspirations can get bigger and we can set our goals a little higher."

Siemens Enterprise Communications is joint venture of German conglomerate Siemens AG and investment firm The Gores Group, which owns 51 percent of the company. It's an established communications brand, particularly in Europe, but it's overall global market share slipped to 8.1 percent in 2010, according to Gartner, and at that time, sales had been declining for half a decade, particularly in North America, where sales fell by 32 percent from 2009 to 2010.

With the growth of unified communications behind dominant players like Cisco and Avaya and their sizable channel ecosystems, it was a bad time to be declining, especially with market alternatives like Microsoft and ShoreTel starting to come on strong.

[Related: VAR500 M&A: 20 Recent Networking Channel Acquisitions Worth Watching ]

It was about that time, however, when Siemens Enterprise Communications' new leadership team began to form. Hummel signed on in April 2010 following many years at SAP and before that, Oracle. He was only a few months behind Siemens Enterprise Communications CEO Hamid Akhavan, who joined in February of that year. Channel chief Patrick Kehoe, senior vice president of strategy, planning and indirect business, arrived in July 2010 following 10 years at MarketBridge.

These days, Hummel doesn't have to talk about Siemens Enterprise Communications in terms of things that might happen -- they are happening. The company grew orders 26 percent from 2010 and 2011, and also notched some statement-making sales wins. Though he declined to name which state, Hummel said Siemens out-gunned both Cisco and Microsoft for a $50 million state government communications contract last year.

As they built their new team, Hummel and his lieutenants also focused on hires with channel expertise. Those included Andy Howard, vice president of channel collaboration, who worked for Telmar Network Technology and Advent and Andhow Growth Consulting before joining Siemens in July 2011.

Other key hires included Tom Boyhan, the former president of sales for VAR500 power Shared Technologies, which was acquired by distributor Arrow in 2010, and Paul Comeau, the former COO of Xeta Technologies -- another former VAR500 player that was acquired by Paetec in 2011 -- and now Siemens' senior vice president, services, North America.

But among the most important moves, Hummel said, was an 18-month revamp of its channel program to open up more previously direct-only opportunities to solution providers and expand its distribution relationships and partner incentives.

Kehoe told CRN in December that Siemens' channel approach had been "sub-optimal," and Siemens needed to be a lot more clear with partners about everything from field engagement to compensation. Siemens' Go Forward! program now offers everything from demand generation tools to an online partner fund and new specializations around cloud and UC applications.

Those initial efforts seem to be paying off; Siemens Enterprise Communications' indirect channel revenue is now 25 percent, and as of December, the company had about 190 registered U.S. partners. Siemens Enterprise Communications itself grew profits 50 percent year-over-year, and its growth is coming at both the high and low ends of the market: its top six partners, which include AT&T and Verizon, collectively grew Siemens revenue more than 40 percent from 2010 and 2011, and licenses of OpenScape UC to SMB customers also grew 47 percent year over year.

"We're No. 2 in the world in SMB in this space," Hummel said. "We didn't even know that until we adopted a market-driven company approach."

Next: Siemens' Channel Relationships

Siemens has cemented relationships with major U.S.-based solution providers like Arrow S3 -- the Arrow unit that now houses the former channel businesses of both Shared Technologies and Cross Telecom, a top Avaya VAR Arrow bought last year -- and Black Box Network Services, the Pittsburgh-based network infrastructure and communications integration giant, to help with distribution. But it's most important relationship for SMB is Ingram Micro, with whom the company signed a distribution agreement in last fall.

Kehoe and Howard said Siemens had chosen Ingram for both its depth and expertise, but also that Ingram's many rivals are tightly tied to many of Siemens' major UC competitors, including Avaya, which cut Ingram as a U.S. distributor following its integration of Nortel's former enterprise unit.

Ingram Micro is now selling and supporting Siemens Enterprise Communications' OpenScape Cloud Service via its Cloud marketplace, initially to U.S. channel partners and soon in Canada.That offering, which Siemens launched a year ago, brings UC capabilities as a service to customers in the range of $5 to $35 per user per month, with many different add-ons and "booster packs" available.

Renee Bergeron, vice president, managed services and cloud computing, Ingram Micro North America, told CRN the Siemens relationship was an important one for the distributor.

"OpenScape has been a winning solution in large enterprises, and by virtue of offering it through the cloud, they can bring it to the SMB at a cost-effective price," Bergeron told CRN. "We looked at the Siemens solution [last summer] and this was a solution that was built on a sound enterprise architecture that had implemented multi-tenancy correctly and could scale fluidly for an SMB customer."

The Siemens offering is one of 44 solutions by 26 different manufacturers in Ingram's Cloud Services portfolio. Ingram VARs can sell the solution as a service to SMBs in one of several different packages, which can be adjusted to add different features as necessary. Bergeron said OpenScape presented a compelling alternative to vendors like Avaya and Cisco, whose best-known UC solutions are largely on premise.

Next: OpenScape Updates Include Scale, Mobile Reach

Siemens is building out new capabilities for its OpenScape platform, as well as organizing its channel partners, with cloud, mobility and IP communications trends firmly in mind.

According to Siemens' own State of Enterprise Communications 2012 Study, which was released this week and polled 1,100 enterprise respondents in January 2012, pure IP infrastructures save enterprises more than 43 percent over traditional PBX systems. But most enterprises aren't prepared for rip-and-replace infrastructure or a complete IP overhaul; 91 percent of Siemens' respondents said they run IP communications next to legacy PBX in a hybrid environment.

Mobility has also taken hold; Siemens found that most enterprises had just 20 percent of endpoints dedicated to phones at headquarters locations. That de-centralization -- and the embrace of cloud computing services that goes with it -- is happening now: 16 percent of Siemens survey respondents said they had cloud services in place, but nearly half said that cloud services were part of their 2012 communications plans. Web collaboration, UC and video conferencing dominate the list of cloud services those organizations plan to deploy.

"The opportunity is pretty well mapped out now," said Rick Puskar, senior vice president, global portfolio management for Siemens Enterprise Communications. "Managed services are an area where we see our partners really benefiting from some of these transitions. As customers moves into these scalable UC environments, that's a big opportunity to help them."

The latest OpenScape additions reflect a lot of those trends. To version 7 of the platform comes support for up to 500,000 users per system (or as few as 100 users), unified presence, messaging contact and directory integration, and a range of mobile capabilities, including open support for all major mobile OSes, smart phones and tablets.

"We're really proud we were able to come up with one single user experience functionality," said Jan Hickish, vice president, UCC suite, global portfolio management, at Siemens Enterprise Communications, who also noted that Siemens can offer UCC capabilities for Apple iOS and Google Android with integrated voice and a "swipe" feature that allows for fixed-mobile convergence and handover between various phones.

Version 7 will also offer built in XMPP federation with other UC, messaging, collaboration and social media tools, including cloud-based Google Apps. Overall, several pieces of the OpenScape portfolio -- Voice, Session Border Controller, Branch, Management Suite -- have seen numerous deployment and infrastructural additions, from PSTN gateway for Branch and higher capacity support for analog lines, to virtualization support for all OpenScape elements.

Hickish said Siemens Enterprise Communications' goal was to consistently upgrade the platform toward this various cloud and mobility trends but also maintain the flexible, open standards approach that Siemens says is its key differentiator against Cisco, Avaya and Microsoft. In the past year, Siemens has added Desktop Video Conferencing, IPv6 support, SDES protection, and a Session Border Controller and Skype Connect trunking option for that Session Border Controller.

Siemens' Hummel said the North American UC market is ripe for alternatives, what with Cisco bogged down in restructuring and Microsoft just hitting its stride on a UC software strategy with Lync. Hummel said there's an especially good opportunity to take share from Avaya, which some VARs see as distracted by its forthcoming IPO, and is experiencing ongoing executive turnover and angering solution providers with margin squeezes and program adjustments.

"Far be it for me to comment on my competition, but it does seem interesting that top executives are leaving right when they're looking to do an IPO," Hummel said of Avaya. "We're pretty stable -- we've clicked. There are always people that are going to get once-in-a-lifetime opportunities and we support that, but if we find good talent, we will find a role. Our team is in place."

Hummel said Siemens has been keen on fostering a collaborative atmosphere where executives are forthcoming about problems and his team can be plainspoken about how to grow.

"We have no-holds-barred meetings," he said. "We drop rank and drop role, and we just talk about what's going on in the business. We've learned to look at this in a very diverse sort of way."

Channel partners will be watching for how the cultural shift and growth turnaround at Siemens helps it grow this year, and beyond.

"We're very impressed with what they've done," said Ingram Micro's Bergeron, who said Siemens took its time with the OpenScape Cloud offering and spent extra months fine-tuning the platform before launch. "They've invested a lot. I think they're going about it the right way."