The article originally appeared in the Jan./Feb. edition of INTERNET TELEPHONY.

ShoreTel (News - Alert) has seen a lot of change in the past few months. And as they say, change is good – at least it seems to be in this case.

Armed with a new cloud strategy; a spate of recent high-level hires; and revved up marketing, sales and product release efforts, ShoreTel in November reminded its partners gathered in Orlando that it is working on something big. The company aims to make itself into a communications powerhouse.

And, so far anyway, it seems to be doing a pretty decent job.

ShoreTel was highlighted in Synergy (News - Alert) Research’s market share summary report for the first quarter of 2012 as the fastest-growing player in the U.S. enterprise IP telephony market and No. 3 in terms of market share. ShoreTel grew its U.S. enterprise IP telephony revenue market share from 6.5 percent in fourth quarter 2011 to 7.7 percent in first quarter 2012, resulting in market share growth of 19 percent.

In contrast, the Synergy report shows, Avaya and Mitel (News - Alert) experienced declines in market share of 9 percent and 4 percent, respectively.

ShoreTel CEO Peter Blackmore at the ShoreTel Champion Partner Conference said the company’s most recent financial year saw the company grow 15 percent in a market that was basically flat. In fiscal 2012, ShoreTel won 4,600 new customers, representing 46 percent of the business; nearly doubled the number of wins of over 1,000 seats; expanded vertical selling (winning five new state contracts); added sales presence in South Africa, India and the Philippines; implemented two-tier distribution in the U.S. and Canada; and increased overall partner satisfaction from 7.72 to 7.74.

In the fourth quarter, when the company made a lot of changes to help spur its growth, ShoreTel had the best quarter in its history. And ShoreTel’s NetPromoter Score, which is now at 63, is the highest in the industry, said Blackmore, adding that Cisco is the next best in the industry at 40 and “it goes way down after that.”

About a week following the November event in Orlando, ShoreTel came out with quarterly results for July through September 2012. In discussing these results, the company said its total revenue increased 39 percent from the first quarter of fiscal 2012 to $75 million. Revenue declined 4 percent; ShoreTel attributed this to seasonality.

For the first quarter, total recurring revenues, including the monthly recurring revenue from the cloud division and the support revenues from premises customers, grew to 33 percent of ShoreTel’s overall business. Service providers accounted for approximately 9 percent of the company’s billings in the quarter. And the company’s international revenues came in at $8 million for the quarter, meaning they were up 19 percent from the first quarter of fiscal 2012.

ShoreTel’s premises-based business added more than 1,100 new customers and generated revenue of $59.3 million, a 10-percent year-over-year increase in what is a seasonally lower first quarter. In the premises business, ShoreTel saw a 9-percent increase in product revenues to $45.8 million over the first quarter of fiscal 2012. 

Service and support revenue were each up 16 percent from the year ago quarter to $13.5 million.

On the cloud front, ShoreTel increased the total number of seats deployed to 78,000 as of Sept. 30, representing a 36-percent increase over a year ago. Cloud bookings, the company added, were up 22 percent over the September quarter last year.

And revenue was $15.7 million, up 27 percent over last year and up 10 percent from the fourth quarter.

David Petts, the company’s new senior vice president of worldwide sales, said ShoreTel is growing rapidly and set to take on some of the giants in the industry. The closing slide of his presentation featured a ShoreTel logo feasting Pac-Man-style on Cisco.

Expanding from a premises-based provider of “brilliantly simple” IP phone solutions with built-in unified communications and contact center functionality, into a company that also offers these capabilities via the cloud and to mobile devices is a central tenet to the new strategy.

Also key is increasing its name recognition; in an effort to make that happen, ShoreTel is spending 30 percent more on marketing than it spent last financial year, Blackmore said.

Faced with a build-vs.-buy decision on the cloud front, ShoreTel opted for the latter, purchasing M5 Networks (News - Alert) in February. As TMCnet columnist Peter Radizeski of RAD-INFO Inc. reported at the time: “M5 Networks migrated off the BroadSoft (News - Alert) M6 platform to its own softswitch in 2010. It is a good sign for the industry that a premise PBX maker sees the light and buys a hosted PBX provider.”

Blackmore explained that “to really stand out, we bought a cloud company. That’s the second company we bought in two years.” The other acquisition was of enterprise mobility platform outfit Agito Networks, a $11.4-million deal announced in October 2010. (Expect new offers from ShoreTel on the mobility front in the not-too-distant future.)

M5 was the best of the 25 cloud candidates ShoreTel looked at, he explained, because it had the lowest churn, the highest ARPU and the highest customer satisfaction rate of any company in its category. In an October Q&A with Network World, Blackmore said ShoreTel just had its first full quarter (the June quarter) with M5 “and their bookings gross was 43 percent higher than the previous year, which is excellent.”

The industry is changing, Blackmore said, and to be successful ShoreTel needed a premises business and a cloud business “and both of them live together.” During his ITEXPO Austin speech in October, Blackmore also emphasized the fact that ShoreTel sees cloud- and premises-based UC as two sides of the same coin, saying “there are two ways of providing a [UC] service to a customer, but they are one market, not two markets.”

However, it should be noted that sales of ShoreTel Sky, the name of the company’s cloud-based offer, currently don’t count against channel partner sales quotas. Responding to a question at the Orlando event about this matter, Petts said this is an improvement upon the previous cloud option ShoreTel had for prospects before it bought M5 – which was to lose the deal completely.

But he added that ShoreTel is working to create more incentives around cloud sales.

During his speech at the ShoreTel Champion Partner Conference, Blackmore highlighted Gartner data indicating the cloud will be 42 percent of the market by 2015.

“There will be more change in our industry in next 48 months than there has been in the last 10 years,” said Blackmore, who added that change will be driven by changes in technologies, business model changes, and external factors.

The quarter in which ShoreTel took on M5 and made other big moves – such as fundamentally changing the way it goes to market, its partner service structure and its approach to engineering so it can introduce more new products than ever before – was “amazing,” according to Blackmore.

But ShoreTel’s expansion into the cloud has not been without growing pains. Superstorm Sandy in the Northeast knocked out service for ShoreTel Sky customers in the New York area just months before ShoreTel was able to put a failover plan in place. Blackmore said ShoreTel Sky will have complete failover by the first quarter of 2013, adding, “I think we’ve managed the customers very well despite that.”

In addition to the M5 acquisition and new cloud strategy, other recent changes at ShoreTel include the company’s move to simplify the role of the direct interface to all gold and silver partners, Blackmore explained yesterday. Members of the ShoreTel channel partner team used to work with 30 to 50 partners, but now can focus on around 10 companies, he said. ShoreTel also created an independent sales team to cater to service providers, he said, and strengthened its support organization.

To head up the channel partner effort, ShoreTel brought Joe Vitalone back into the fold. Vitalone did a stint at LifeSize between his first and current gigs at ShoreTel.

Vitalone is just one of several recent new hires ShoreTel has made in an effort to expand growth.

“We’re going to take this company, with your support, to brand new heights,” Blackmore told the crowd of channel partners yesterday in Orlando.