“I tell ya… you’ve got to have thick skin. Because for everybody who likes your strategy, there’s always going to be someone who says ‘this guy’s a toad'”
Mitel CEO Richard McBee may just be the world’s most sanguine business leader. Sitting in the telecommunication’s company’s London offices in Bishopsgate, he radiates good cheer, emphasising many comments with an enthusiastic grind of a fist into his palm. It might be the hot yoga he’s recently taken to doing with his wife’s encouragement, or it could be the sheer pleasure of being one final regulatory step away from successfully delisting after a $2 billion private equity buyout that left 97.5% of Mitel’s shareholder’s happy; Elon Musk, eat your heart out.
Either way, the enthusiasm is infectious.
McBee, a United States Air Force Academy graduate and telecommunications industry veteran who was appointed as Mitel’s CEO in January 2011, is on a whistle-stop European tour that he describes as being a “bit like speed dating”, as the company rolls out its strategic plan to customers, partners and leading analysts before it exits public markets (pending final approval from regulator Team Telecom).
In a 40 minute conversation with Computer Business Review he covered the company’s tie-up with Google, what we’ll dub “the Internet of Rats” the outlook for UCaaS and more.
Who, What, Where, Why, When?
Mitel, for those not paying attention, is an Ottawa-headquartered telecommunications behemoth that sells both “Unified Communications” (UC) infrastructure – from traditional IP equipment to newer fangled “Unified Communications-as-a-Service” (UCaaS) gear; essentially subscription-based enterprise telephony meets public cloud; the two coexisting somewhat awkwardly in the eyes of some analysts.
With final regulatory approval of a $2 billion private equity buyout led by New York’s Searchlight Capital Partners potentially just weeks away – he hopes by early October – the company’s executive team is preparing to hit the road running under its new owners. (The deal was signed off by 97.5 percent of Mitel’s shareholders on July 10; they will receive $11.15 per share; a healthy 24 percent premium on 90-day average price before the deal, which was announced in April).
How did the deal come about?
The Mitel Rationale for Going Private
“One of the deal theses was that they really liked our strategy and our leadership team. They spent a lot of time doing their due diligence on each of us as a person (I got a lot of calls from people in the distant past who said: ‘Hey, are you looking for a job, because I just had someone asking a tonne of questions about you!’) The shareholders got a good premium, which is my mandate, but ultimately the investors thought we are being treated unfairly in the public markets, while in the customer markets we’re doing really well… So they thought ‘let’s let this thing run and take it back out at a different valuation’.”
So a return to the markets is on the cards?
“Anytime from the first day to the first three-five years”.
Why were public markets being “unfair”?
“I think it’s an age-old problem. You’ve got two parts of a business. Our UCaaS business is a $275 million hot, sexy space that’s growing fast… then we have a very profitable, billion dollar, low-growth business. I’m a firm believer that the share price of a company is fair market value, plus greed, minus fear.”
He adds: “Some of the fear in the business was that maybe the billion dollar business is going to shrink. We exhaustively showed people why both businesses are great to be in; one gives a lot of profit, and as people move to the cloud we’ve got that growth too; but to get the benefit of that 15-20% UCaaS growth could take three to five years. Our guys said: ‘We’ll get into that today and when the aggregate growth mix changes, we’re going to be there.’ That’s why they took us private…”
“There’s Always Going to be Someone who Says ‘This Guy’s a Toad’ and Unfortunately, We’re All Human.”
You must have some sympathy for Elon Musk then…
He laughs and chooses his words carefully. “I tell ya… Being a CEO… and dealing with social media is one of those things you’ve got to be really careful about. You’ve got to have thick skin. Because for everybody who likes your strategy, there’s always going to be someone who says ‘this guy’s a toad’ and unfortunately we’re all human.”
The bigger picture strategy meanwhile remains the same, he says; a focus on customer acquisition in the UCaaS sector and growth through acquisition. (Mitel snapped up ShoreTel for $430 million last year and made an audacious, but ultimately doomed attempt to buy Polycom for $2 billion too).
In Europe, where Mitel earlier this year secured its millionth UCaaS seat (or individual end-user licence), he says the smaller companies are adopting UCaaS faster than ever, and the plan is continue to offer both a customer-owned solution and a subscription-based UCaaS business with high levels of customer care.
A Push on “Customer Success”
The shift to a subscription-based service is a big one for a 45-year-old company and, asked how much of a shake-up that is, McBee is frank: “It’s radical. Anybody in any industry that’s going through that move from a traditional transactional business to a subscription-based business… it is a radical shift.”
The market is estimated by research house Synergy to be seeing UCaaS “seat” quarterly growth consistently over the 300,000 mark, and yet “UCaaS penetration into the large business and enterprise segments has barely started, pointing to years of future growth”.
The cloud is clearly coming for your telephone and conference system. As McBee puts it: “The last time there was a big revamp of systems in a lot of companies was Y2K. There’s a lot of old systems out there… I love this business because you can look out the window and anywhere that has a phone is a potential target: we’ve got two-man stores and we’ve got customers with 650,000 users…”
What exactly can these new phones do anyway? “Things like twinning with your mobile, so if you need to leave the office you can switch effortlessly to your mobile or vice versa; again, seamless moves from video to voice…”
In a Subscription-Based Market, Someone can go on Social Media and go ‘My System Sucks’ – We Pick Up a Lot of Business that Way
One of the other major consequences for a business of a shift to subscriptions is the need to constantly service customers; move from reactive to proactive responses and then use data to offer predictive services too. The relationships with customers also fundamentally change. As he puts it: “In a subscription-based one, someone can go on social media and go ‘my system sucks’ – you’ve got to be on it. One of our big sources of leads is competitors in the social media space… ”
Partly with these changing relationships in mind, Mitel earlier this year teamed up with Google to create smarter contact centre AI solutions.
AI to IoT
“We’ve always been an innovator; we were the first in the market to virtualise UC, for example. We recently got our millionth contact centre seat and there are a lot of calls for things like ‘reset my password’. They last thing you want is a highly paid technician to get that call. We’re a classic case for Google as we have 70 million endpoints around the world; a big proportion of those endpoints are business customers. We’ve got a lot of data; it’s at the proof-of-concept stage but if chatbots and virtual voice assistants are not flawless now, they will be; it’s coming…”
On emerging technologies that can tie in with Mitel’s business, the Internet of Things (IoT) is another that stands out for the CEO.
“IoT is really interesting. One of the funniest examples I’ve come across was a guy in rodent control. His job was to get drivers to go and check then empty all these black rat traps you get in some US cities. I couldn’t get enough drivers. So he got a little pressure plate in each trap, as soon as it got it he was notified with a UC app that ‘trap 32 has to be emptied’ and as a result he was able to handle his business with 35 percent less people and trucks. It just goes to show that with IoT, wherever there is an event, there’s an event there’s the ability to fundamentally change the business model.”
“Are we going into the IoT business? No? Are we going to link to IoT to give machines a voice? Absolutely.”
With that, it’s time to wrap up. One last question: “What do you do when not working?”
“I run marathons; well , now half-marathons every quarter and I’ve recently taken up hot yoga too; my wife’s suggestion. It’s great; keeps you really limber!”
And with that, he’s off, still bubbling with energy.