ShoreTel Acquires Cloud-based M5 NetworksShoreTel Acquires Cloud-based M5 Networks

Both the opportunity and the threat of cloud-based services likely drove ShoreTel to action.

In yet another signal that cloud-based solutions are becoming an important part of the portfolio mix, yesterday ShoreTel announced the acquisition of M5 Networks. M5 is a New York City-based communications provider with over 2,000 primarily small and mid-sized business customers. Supporting approximately 75,000 users makes their average customer size 35 to 40.

While M5 may be a new name to many, I first began following them in 2003. I interviewed them for a project on the contact center needs of carriers and customers in what was at the time the IP Centrex market and have kept my eye on them in the intervening years as they have grown and flourished.

The contact center needs of M5's customer grew over the years, and as recently as April 2011 they acquired call center vendor Callfinity. Callfinity offered both a premise and hosted version of its solution. By October 2011, M5 had integrated the Callfinity solution into its hosted platform.

In the summer of 2011, at an analyst event conducted in conjunction with ShoreTel's annual partner meeting, CEO Peter Blackmore talked about cloud. Just 8 months on the job at the time, Blackmore had been tackling other fronts initially, e.g., increasing the company's international presence and expanding two-tier distribution. He discussed the fact that cloud-based services could be seen as either an opportunity or a threat, and reinforced that he was taking action to make ShoreTel "cloud ready."

Which brings us back to yesterday's acquisition news. Both the opportunity and the threat of cloud-based services likely drove ShoreTel to action. As the ShoreTel news came across my screen, I was listening to Interactive Intelligence CEO Don Brown talk about his commitment--and success--with the company's Communications as a Service offer.

What struck me most during the Interactive Intelligence call was a response to a question posed by a financial analyst about whether the cloud offer was being adopted by existing customers or new. CFO Steve Head answered that almost all of the cloud business was coming from new customers--that virtually all were brand new customers.

Companies happy with their existing solutions are not jumping to replace them with cloud-based solutions. But companies that have expensive legacy equipment are increasingly including cloud as a replacement alternative. ShoreTel's move in acquiring M5 Networks means they will have the portfolio breadth to fufill either need.