If you thought the segment for Dealer Management Systems (DMS) was going through some turmoil, you will be shocked to hear that it pales by comparison to the shake-up in the market for business telephones and communication solutions.
The big news? In July 2017 Mitel announced the acquisition of Toshiba’s Unified Communication assets. Shortly after, Mitel declared the buy of ShoreTel and its hosted cloud platform ShoreTel Sky. Earlier this year, Avaya – a Top-3 vendor in North America – announced its Chapter 11 bankruptcy. Avaya is a provider of the very popular small-medium business solution Avaya IP Office (IPO). Also, last year Polycom which many CDK Global dealers are using, announced it got acquired by private equity firm Siris Capital Group, LLC.
Mergers and acquisitions are common in this dynamic technology field. Many of you may remember prominent names like Intertel, Nortel, Aastra, Alcatel-Lucent, all of which have failed and/or have been bought over the years. As we have seen in these cases, the companies’ assets got absorbed by the investor, existing products got discontinued, and end-users were the ones left in tech limbo.
If you feel about your phone system as a long-term investment for the next 10-15 years, then you should first consider the financial stability of each telephone manufacturer in your decision. There is a reason that government agencies are prohibited from accepting bids for a project from any vendor that is in the midst of a bankruptcy. There are myriad implications of mergers, acquisitions or bankruptcies, but here are some good reasons not to engage with fragile telephone manufacturers:
Although VoIP phones and unified communication now depend much more on software, hardware still matters. That mainly applies to the proprietary gear that runs the software (e.g. controllers), and to the actual phone endpoints (physical phones). Other network equipment can be handled by independent providers like Cisco/Meraki, Adtran, or Hewlett-Packard (HP). If your phone vendor is forced to discontinue its product lineup, then dealers will have limited access to hardware replacement for redundancy or add-on gear for accommodating growth. Dealers would have to look at the secondary market for their equipment needs. Increasingly, shortage of available gear drives up the price of the available hardware. Extended warranty plans typically will be voided.
Software is the secret sauce for dealers pursuing advanced call-flow management to run BDCs, improve call visibility, introduce mobility features for Sales, and others. Unlike Digium and the open Asterisk platform, the vast majority of telephone manufacturers run their phones on proprietary software and communication manager suites. Therefore, discontinuing phone software leads not only to a lack of capabilities, but also to the termination of ongoing software updates (software assurance) which will dramatically lower the life expectancy of your dealership phone system. You can see how important phone software updates are by comparing how often Samsung and Apple provide new versions of their Android and iOS systems. Ongoing software assurance also covers security aspects – not a place to compromise.
Phone systems are not typically sold and supported through the manufacturer itself, but through a network of certified resellers or partners. If a phone manufacturer declares bankruptcy or gets acquired by another company, what becomes of the certified partners, many of which exclusively represent just one phone vendor? Most certified resell partners cannot survive on simple support agreements to maintain (discontinued) phone systems for dealers, especially as parts become unavailable. Resellers only make commissions when selling phones. If a phone manufacturer discontinues its lineup, resellers will eventually be forced to switch to other telephone manufactures, leaving dealers without a partner capable of supporting their existing phones. Most will need to acquire a new system at significant cost.
If you want to know more about dealership phone systems and how we can help you negotiate the right price and terms, please reach out and ask us about our available Gillrie Telephone System Survey results.