Business and Pleasure

Sholto Macpherson

Whatever heights Brett McInnes, Panasonic Australia’s director of its Communications Products Group, rises to in IT, his most discussed achievement occurred during his first years out of university when he worked at Telstra to move its free directory service over to the charged “12” number codes.

So you’re the guy who started that?

“Yeah, unfortunately I’m the guy. I’ve got friends who introduced me to their grandmother [saying], ‘he’s the guy’.

Obviously it was a fairly political project which took a number of attempts by Telstra to get it.

“At that time the primary reference for directory information was still the White Pages or the Yellow Pages. The number of calls ran into the couple of hundred millions and it was still very much a labour-driven service answered by real operators and very expensive, with no revenue recovery.”

McInnes then went to the UK to work for telco MCR WorldCom in strategy and planning with its marketing team, and took part in raising bill revenues from $200 million dollars to $2 billion.

Grandmothers around the world may never forgive him, but McInnes is hoping that his next venture will make his current employer just as happy.

After two years running its business telephone systems division, McInnes is heading up Panasonic Australia’s new Communications Products Group, which covers all telco products for the home and business markets including cordless phones and IP-PBXs.

The group launched in August last year under new managing director Steve Rust and is the first time in the world the vendor has brought home and business into the one division.

The division’s principal categories are cordless phones on the consumer side and PBX, conferencing, network devices such as HDPLC adapters and IP cameras.

The IP camera range is due to launch this month or the next.

Almost a year into CPG’s existence, McInnes claims the team is coming together after a period of reorganising and investment in sales and the channel.

Panasonic’s cordless phone business is well established, and most of the growth is expected to come from the IP PBX market.

The vendor is already starting from a strong position, with an estimated 30 percent market share in the under 100 extensions in Australia, and is number one in the world for IP PBX.

Panasonic sells only IP compatible PBXs; the last TBM-based system shipped in 2004, although a range of hybrid IP PBXs, the TDA series, has been in the market for four years. Panasonic launched a pure IP system in July last year with the TDE series which McInnes said is exceeding expectations.

“I can’t give you exact sales figures, but I can tell you that the volumes are pretty much on par now with our TDA hybrid products. So that tells you that the market for IP telephony and particularly in the middle market has really accelerated in the past two years.”

McInnes said that according to Panasonic sales figures, IP installations as a percentage of total sales increased from two percent to 15 percent over 18 months, which he attributes to growing education of the end-user market and channel.

“In terms of what we term as value-add product penetration – with net products such as IP solutions, voice processing units, conferencing decks, and mobility solutions – we have gone from about 17 percent of our basic systems sales to well over 40 percent within the past 12 months.”

He said the pick-up in IP sales has a lot to do with the vendor’s “pedigree” in the SME market.

“Everything that we do is designed for an SME customer. That includes our sales and technical programs in training our dealer channel.”

McInnes sees the PBX market as still in a transitionary phase, although the past year was a watershed for Panasonic with the release of a number of new products, including soft phones, CTI software number, mobility applications and messaging products.

The main app on the market is the communications assistant, which was launched last year with the TDE range.

It integrates with Microsoft Outlook so you can call people directly from the address book, set rules for how you would like to be contacted, as well as presence management and instant messaging features.

“With the launch of that product we really moved from a box-shifting space business model to a solutions-driven business in which the TDE platform really becomes a Unified Communication platform.”

As always with new technology, the biggest question is whether the mainstream market is ready to go out and buy it.

Ask a vendor, and the SMEs are rioting in the streets to get their hands on the latest gear.

But UC is another slow burner that is only just coming onto the horizon for SMB.

McInnes said the “acceleration” of the IP telephony market over the past couple of years has prepared the way for UC.

“The end-user is very well educated in terms of IP telephony now and certainly there is a very high level of awareness even at the small business end of the market. The next battleground for vendors and resellers is the applications market and that’s why we are seeing the debate and level of commentary on Unified Communications pick up.”

He also points to a recent report which found that more than 20 percent of the small business market is using some form of voice over IP technology or service.

If so many SMBs are already trialling IP telephony platforms, then maybe they can be sold on the applications in UC beyond cost savings, goes the argument.

Unfortunately, even if SMEs are now familiar with IP telephony, they may still be in the dark about UC.

“I think the overwhelming majority is confused about what Unified Communication actually is.

There will be an ongoing debate over the definition for Unified Comms and whether the future of that sits with the infrastructure side or in the desktop software side.

“At the end of the day we view that it’s going to be the customer who defines what applications are important. The vendors who will be successful are the ones who listen to the customer.”

Panasonic, like other vendors, is investing heavily in its IP channel and herding resellers through training accreditation programs to address the industry shortage in integration skills.

Poor integration can botch an installation and not just cause problems with one particular customer; if the bad news makes it into the media, it could damage the vendor or even the technology. No vendor wants to see momentum for UC undone by a sloppy reseller, especially not one of their own.

Then again, no vendor wants to miss out on sales by holding back its channel, which will become all important in the battle for market share for the nascent technology.

“Those vendors who develop or acquire those skills the quickest and through a business model that nurtures partnering rather than competition within the channel are going to do the best and be the most successful.”

Panasonic isn’t about to sign up “every corner store” to sell its products, said McInnes. Instead it has faith in its channel, which is built on relationships on average 11 years old, he said.

Free training days for the 80 PBX dealers have increased by 250 percent in the past 12 months to 200 training days a year.

Good prospects for UC are SMBs with a mobile workforce, staff who telecommute, or those looking for desktop applications that can improve productivity, such as teleconferencing or instant messaging.

The big step-up in productivity is supposed to be presence management, where the UC system finds each employee wherever they are at all times – “ubiquitous contactability” in industry jargon.

This will eliminate those endless games of phone-tag and give SMBs a way to project a more professional face to customers.

As always, the exact benefits vary on a case by case basis, admits McInnes.

The newer technology doesn’t mean bigger margins for resellers, but the average value of the sale is increasing, said McInnes.

The main game is positioning the IP PBX as a platform for UC.

Resellers can then make more from handsets, extra telephony services, and other hardware.

In the Australian market, mobility remains an important application and the vendors hope it will reveal itself over the next 12 months to be the killer app to kickstart the UC market.

One interesting mobility app from Panasonic is due for release in three months. A PC soft phone for PDAs uses a wireless network overseas to connect to the PBX in Australia and dials extensions without the need for or expense of international dialling. “If you’re travelling in Hong Kong with a 3G phone you could have all the features of calling across your PBX,” said McInnes.

The killer feature for UC may not be mobility after all but just getting current technologies – phone, instant messaging, fixed and mobile – to work together nicely among themselves and with existing systems and services.

Rather than bells and whistles applications, the vendor which provides the best integration with the least amount of headache will find it easier to win business among penny-pinching SMBs.

“Two major issues with customers are always going to be around convergence issues, their equipment and services. You have to take into consideration their investment in their current hardware and the issues with legacy equipment in pitching an upgrade or forklift solution.
Along with that goes the expense aspect of it all. Getting back to the cost application and understanding the total cost of ownership are always going to be important no matter what develops in terms of the technology side.”

With this in mind, Panasonic is launching a new generation of IP PBX products at the end of the year called the NTT series, a rack-mounted system which moves further down the integration path by including an in-built server.

Communications vendors could find themselves stuck with handset sales if software companies can provide similar services through web browsers.

The ubiquitous Skype has rolled out some conferencing tools that might find traction among price-sensitive SMBs reluctant to fork out thousands of dollars for hardware.

McInnes admits that ROI is important to SMBs, and that until the productivity or cost savings clearly outweigh the purchase price, UC
will take a lot of work from vendors rather than the market itself.

Still, many SMBs lack the technological firepower to test and install IP platforms themselves, and Skype and others of its ilk provide fairly basic features.

Vendor products offer quality support and trusted advice through the dealer channel, something that free software can’t match.

So how much better can Panasonic do? “It’s a tough market out there without a doubt.

There’s a lot of blurring of the lines between vendors now, with infrastructure providers in the comms industry.

The challenge is one of integration – winning in the marketplace [will mean] understanding small business requirements and tailoring solutions rather than a cookie-cutter approach.”

McInnes said the new products released this year and a heavy applications focus have put Panasonic in a good position. Bitter grandmothers, in lounge rooms everywhere, are no doubt hoping he’s got this one wrong.