NEC Delivering an Advantage for VerticalsNEC Delivering an Advantage for Verticals

At its annual conference for channel partners in June, NEC shared a status report on its UC business and discussed how it intends to continue competing in the rapidly transforming communications and collaboration markets.

First, NEC shared data from telecom advisory firm T3i Group showing it's leading the industry in number of communications lines shipped (licenses/devices), with a 13.3% share of the total. In fact, the NEC enterprise team indicated the communications business grew 5% globally in 2017, meeting its goals. In North America, a 2% growth exceeded the industry average, NEC claimed, for a gain in market share in 2017.

However, line share for Cisco, Avaya, and Mitel is very close. In fact, the lowest market share of the three, for Mitel, is 11.3%, according to T3i Group. So, the top four industry players are separated by less than 2% of share, and together have about 50% of the market.

Of course, these are worldwide figures, and while NEC enjoys a strong presence in Asia and some other global markets where TDM -- basic telephony -- is strong, the other three are stronger in North America. As a result, NEC's overall revenue per line may be lower than some competitors'. This is because it sells more basic, competitively priced telephony lines than higher-value UC lines in Asia and elsewhere. At its Collaboration Summit earlier this year, Cisco estimated that 47% of the total North American communications line market is still TDM, which by my estimation places the slower adopting global market (North America included) at about 55% to 60%.

Vertical Orientation & Adjacent Advantages
Overall, two things became clear at the conference.

First, NEC is focused on verticals in which telephony is a strong buying influence. Verticals like healthcare, education, and hospitality are defined by having large numbers of service and information workers and a dominant percentage of endpoints being traditional telephony devices, without advanced collaboration needs. While the advent of team collaboration tools (potentially used without significant collaboration, as I've written previously on No Jitter) may change this dynamic, today these are major verticals that require telephony first and extended business communications features second. This is a clear focus for NEC and its channel partners, as evident from the discussions and success stories shared at the event.

Note that this extends to the contact center, for which NEC said it's well-positioned to deliver for organizations that have large telephony requirements.

The second focus is on business communications adjacencies that are part of the NEC portfolio. In a recent No Jitter article, I discussed how adjacencies have been critical to the Cisco and Microsoft rises in business communications. Additionally, I argue that adjacencies may define the next wave of transformation.

NEC is a large industrial conglomerate with a focus on electronic solutions, including servers, storage, and a range of other IT components. At the event, two major adjacencies took center stage. The first is facial recognition, technology in which NEC has invested heavily and is ahead of the industry. In fact, in National Institute of Standards and Technology (NIST) testing of facial recognition algorithms for speed and accuracy, the NEC solution regularly has received top honors over the last few years. Clearly facial recognition has several values in communications, so NEC is focusing on that technology as a lever.

Continue to next page for more on NEC adjacencies and positioning

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The second is a new workflow orchestration product that integrates with a range of processes and applications, including those related to the Internet of Things. The solution is intended to enable micro-business processes as well as other orchestration, but includes integration into the communications aspects. While companies like Cisco and Microsoft are focused on their team collaboration products for micro-business process implementations, the NEC solutions may have advantages in other ways, including the integration of other NEC IT elements.

One key challenge for NEC is the transition of the channel partners to selling and supporting these new solutions. That some have begun the transition was evident at the event, but so too was that a large number still haven't begun to do so.

With shrinking average cost/revenue for monthly communications seats, one key point for channel partners is how they can increase the revenue per customer by adding in new products and solutions --this, of course, being a critical component of a successful value-added reseller/integrator business model. A key measure of NEC's success will be the uptake by its traditional telephony channel of the new adjacent solutions. Cisco faced a similar issue in the early VoIP days, when its data channel struggled with voice deployments. Just as opportunity, training, and channel mergers enabled the Cisco channel to sell Call Manager, NEC is focused on transformation to sell the NEC adjacencies.

Core Positioning
From a traditional communications platform perspective, NEC continues to improve its products as well as accelerate the availability of a cloud offer. As discussed at the event, NEC has a new licensing strategy that enables companies to migrate licenses from smaller separate systems to a centralized core system. This is designed to enable both migration from nodal branches to a converged central system or to the cloud.

In a world where product differentiation is often less important than solution adjacencies and sales position, NEC continues to provide a solid product underpinning. Interestingly, consultants in attendance at the event had almost universal praise about how generally challenge-free NEC solutions are.

Overall, I came away impressed that NEC, in many ways like Mitel, is growing and winning in our industry, without the hype of video, collaboration, meetings, and teams. While most of the industry pundits and press focuses on the Microsoft-Cisco battle for teams and video, NEC and Mitel are quietly winning half of the market share of the four big vendors (24.6% market share of the 48.2% total T3i attributes to NEC, Cisco, Avaya, and Mitel). They are accomplishing this by focusing on the core elements of communications, telephony, basic collaboration, and contact center.

While NEC has partnered with Vidyo for a video solution, video may not be a major buying driver for its customers. NEC customers instead are focused on dependability and telephony today, and the adjacencies are clearly of interest in the same markets and verticals. For example, facial recognition has strong use cases in all of the NEC vertical focus areas. NEC adds in the adjacencies and the scale of a large global organization to compete in an ever-complex market.

Based on what I heard and saw at the event, for companies that are not totally knowledge worker (read my whitepaper about worker types and communications needs) organizations should include NEC (and Mitel) as companies to consider as a business communications solution provider.

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