Competitive Strategy Leadership Award SMB Unified Communications North America, 2012 Frost & Sullivan s Global Research Platform Frost & Sullivan is in its 50th year in business with a global research organization of 1,800 analysts and consultants who monitor more than 300 industries and 250,000 companies. The company s research philosophy originates with the CEO s 360-Degree Perspective, which serves as the foundation of its TEAM Research methodology. This unique approach enables us to determine how best-in-class companies worldwide manage growth, innovation and leadership. Based on the findings of this Best Practices research, Frost & Sullivan is proud to present the 2012 North American Competitive Strategy Leadership Award in SMB Unified Communications to Vertical. Significance of the Competitive Strategy Leadership Award Key Industry Challenges Addressed by Superior Competitive Initiatives The unified communications (UC) market is rapidly changing. Frost & Sullivan points out that technology advancements are enabling ever-more powerful communications capabilities at lower and lower costs. As a result, UC solutions are no longer confined to the purview of large, sophisticated and resource-rich enterprise accounts. UC can now effectively meet the demands of price-sensitive small and mid-sized businesses (SMBs) as well and SMBs are adopting UC in notable volume. As more SMBs begin to embrace UC, Frost & Sullivan monitors the influx of vendors that are striving to capture the revenue opportunities. Newer market entrants are competing alongside deeply entrenched industry stalwarts, making it difficult for UC vendors to find the differentiation they need to get on customers short lists of potential technology partners. Nearly all UC vendors report to Frost & Sullivan that they are offering advanced solutions that they position as delivering feature sophistication and operational simplicity at the price points SMBs require. In a highly contested market, a well planned and executed competitive strategy gives the leading vendor a key advantage in terms of company positioning. Organizations evaluating communications solutions will often elect to align with vendors that successfully leverage market experience and competitive intelligence to develop differentiated solutions and marketing techniques. Competitive strategy market leadership is earned through a proven 2012 Frost & Sullivan 1 We Accelerate Growth
reputation for reliability and quality, as well as for disruptive innovations that address continually changing customer and end-user demands. Key Benchmarking Criteria for Competitive Strategy Leadership Award For the Competitive Strategy Leadership Award, the following criteria were used to benchmark Vertical s performance against key competitors: Leverage of Competitive Intelligence Execution of Competitive Strategy Impact on Market Share Competitive Brand Positioning (brand strength and unique market position) Impact on Customer Satisfaction/Value Decision Support Matrix and Measurement Criteria To support its evaluation of best practices across multiple business performance categories, Frost & Sullivan employs a customized Decision Support Matrix (DSM). The DSM is an analytical tool that compares companies performance relative to each other with an integration of quantitative and qualitative metrics. The DSM features criteria unique to each Award category and ranks importance by assigning weights to each criterion. The relative weighting reflects current market conditions and illustrates the associated importance of each criterion according to Frost & Sullivan. Fundamentally, each DSM is distinct for each market and Award category. The DSM allows our research and consulting teams to objectively analyze each company's performance on each criterion relative to its top competitors and assign performance ratings on that basis. The DSM follows a 10-point scale that allows for nuances in performance evaluation; ratings guidelines are shown in Chart 2. Chart 2: Performance-Based Ratings for Decision Support Matrix 2012 Frost & Sullivan 2 We Accelerate Growth
This exercise encompasses all criteria, leading to a weighted average ranking of each company. Researchers can then easily identify the company with the highest ranking. As a final step, the research team confirms the veracity of the model by ensuring that small changes to the ratings for a specific criterion do not lead to a significant change in the overall relative rankings of the companies. Chart 3: Frost & Sullivan s 10-Step Process for Identifying Award Recipients Best Practice Award Analysis for Vertical The Decision Support Matrix, shown in Chart 4, illustrates the relative importance of each criterion for the Competitive Strategy Leadership Award and the ratings for each company under evaluation. To remain unbiased while also protecting the interests of the other organizations reviewed, we have chosen to refer to the other key players as Competitor 1 and Competitor 2. 2012 Frost & Sullivan 3 We Accelerate Growth
Chart 4: Decision Support Matrix for Competitive Strategy Leadership Award Measurement of 1 10 (1 = lowest; 10 = highest) Award Criteria Leverage of Competitive Intelligence Execution of Competitive Strategy Impact on Market Share Competitive Brand Positioning Impact on Customer Satisfaction/Value Weighted Rating Relative Weight (%) 20% 20% 20% 20% 20% 100% Vertical 10 9 8 9 10 9.2 Competitor 1 10 8 8 8 7 8.2 Competitor 2 10 9 7 7 7 8.0 Criterion 1: Leverage of Competitive Intelligence Vertical Communications Inc. was founded upon a rich history in the communications systems market. The company known today as Vertical was established in 2004 through the merger of 1990s startups Artisoft and Vertical Networks, and Vodavi and Comdial, the latter both established market fixtures dating back to the 1970s. All four companies shared a common focus on the SMB market. That focus continues as Vertical uses its unique market experience, combined with legacy and next generation technologies, to provide small and mid-size businesses with communications systems offering both the functionality and simplicity they require. Through Vertical s heritage, Frost & Sullivan feels the company possesses the deepest understanding of traditional SMB requirements for higher value at lower prices. Today, more and more SMBs are seeking the business efficiencies that can be gained by evolving from traditional key telephony system functionality to more advanced, customizable solutions. Many vendors recognize these demands, but they often present legacy system architectures that are ill-equipped to support the robust system and end-user functionality sought by SMBs today. To accommodate features beyond basic call handling and voice mail, it is common to find legacy platforms with UC functionality bolted on an approach that adds unnecessary cost and complexity. 2012 Frost & Sullivan 4 We Accelerate Growth
Vertical has nicely leveraged competitive intelligence to take a different approach. The company s flagship Wave IP platform is a pure-ip -based system that truly integrates the full suite of UC applications (mobility, collaboration, desktop call control, soft client, IM, presence, conferencing, messaging, recording and more) into a single physical appliance. With its tightly integrated design, Wave IP reduces the costs associated with acquiring, maintaining and operating hardware and applications. In addition, Wave IP offers an integrated web-based management console for configuration, deployment, management and administration of all its user applications.. Criterion 2: Execution of Competitive Strategy As a result of merging four companies, Vertical amassed a large portfolio of communications systems that were largely disparate. Vertical took decisive action to focus its resources and provide its customers and resellers with a clear, forward-looking direction. The company instituted a phased retirement plan for all of its acquired platforms. In 2012, it consolidated its portfolio into three platforms that provide an effective migration path for all of its customers with installed legacy systems. Vertical SBX IP serves as a cost-effective IP key system for 20 or fewer users. The MBX IP is positioned as a large IP key system for up to 200 users. Wave IP is a high-value UC system for up to 500 users on a single system and allows networking of multiple systems to support larger or multi-site environments. All of these systems allow legacy customers to implement more advanced IP and UC applications capabilities, while prolonging the life of their investments in phones, gateways and other components. Frost & Sullivan feels that the decisive portfolio update is a critical part of Vertical s competitive strategy. The new platforms provide existing Vertical customers with effective migration options at a time when rival vendors are targeting them with compelling alternatives. The new platforms also arm Vertical resellers with highly competitive products with which to win new accounts and grow Vertical s share of the SMB unified communications market. Criterion 3: Impact on Market Share Vertical identified and captured opportunities that have been underserved by other vendors. Today, the company is very well established in vertical industries such as retail, health care, education, logistics and government. Vertical has been notably successful in the retail sector, where it reports that 14% of the top 100 retailers in the United States have deployed its systems. Reference customers include CVS Pharmacy (which has deployed Vertical technology in more than 8,000 of its locations, more than half of which have migrated to the advanced Wave IP platform), Advance Auto Parts and Toys R Us. Due to its success, Vertical expects 2012 revenues from Wave in the retail sector to increase by 44% compared to last year. 2012 Frost & Sullivan 5 We Accelerate Growth
Criterion 4: Competitive Brand Positioning Through organic growth and acquisition, Vertical has assembled an installed base of 250,000 loyal customers. The company is supported by a network of more than 1,400 resellers and some of the best known value-added distributors in the United States. Its current solutions portfolio continues to win Vertical new resellers that are seeking a technology partner in the evolving SMB unified communications market. Furthermore, an ownership stake held by global technology giant Ericsson-LG provides privately-held Vertical with additional credibility and assurances of financial stability. These assets and attributes, combined with its experience, make Vertical an appealing option for customers and partners seeking more than the status quo. Criterion 5: Impact on Customer Satisfaction/Value Additive licensing for user and systems applications can add cost and complexity to UC solutions. Recognizing this, Vertical employs a differentiated licensing model for its flagship Wave IP platform. Vertical simplifies and reduces the cost of ownership by charging a flat fee for its entire stack of UC applications, including mobility, desktop client, visual voice mail, Microsoft Exchange integration, instant messaging, presence, call recording and archiving, call handling and reporting. Such an approach makes it possible for SMBs to deploy UC across their entire business, replacing the islands of applications that stifle information sharing without deploying more complex and expensive alternatives. The Wave IP tool set also ensures users are matched with the appropriate functionality. Customizable templates empower administrators to quickly and easily provision user capabilities based on an employee s job function, location, seniority, preferences and other criteria. Wave IP definitively delivers the highest value in how SMBs deploy rich, comprehensive and pervasive UC in their organizations. Conclusion Unified communications are no longer restricted to the domain of large enterprises. SMBs are also proving eager to take advantage of the benefits that UC can deliver. However, vendors must strike the most reasonable balance between more sophisticated functionality and traditional SMB requirements for lower cost and simplicity. A strong and differentiated competitive strategy is required for success. Frost & Sullivan is therefore proud to recognize Vertical with the 2012 Competitive Strategy Leadership Award. 2012 Frost & Sullivan 6 We Accelerate Growth
The CEO 360-Degree Perspective TM - Visionary Platform for Growth Strategies The CEO 360-Degree Perspective model provides a clear illustration of the complex business universe in which CEOs and their management teams live today. It represents the foundation of Frost & Sullivan's global research organization and provides the basis on which companies can gain a visionary and strategic understanding of the market. The CEO 360-Degree Perspective is also a must-have requirement for the identification and analysis of best-practice performance by industry leaders. The CEO 360-Degree Perspective model enables our clients to gain a comprehensive, action-oriented understanding of market evolution and its implications for their companies growth strategies. As illustrated in Chart 5 below, the following six-step process outlines how our researchers and consultants embed the CEO 360-Degree Perspective into their analyses and recommendations. 2012 Frost & Sullivan 7 We Accelerate Growth
Chart 5: The CEO's 360-Degree Perspective Model Critical Importance of TEAM Research Frost & Sullivan s TEAM Research methodology represents the analytical rigor of our research process. It offers a 360 degree view of industry challenges, trends, and issues by integrating all seven of Frost & Sullivan's research methodologies. Our experience has shown over the years that companies too often make important growth decisions based on a narrow understanding of their environment, leading to errors of both omission and commission. Frost & Sullivan contends that successful growth strategies are founded on a thorough understanding of market, technical, economic, financial, customer, best practices, and demographic analyses. In that vein, the letters T, E, A and M reflect our core technical, economic, applied (financial and best practices) and market analyses. The integration of these research disciplines into the TEAM Research methodology provides an evaluation platform for benchmarking industry players and for creating high-potential growth strategies for our clients. 2012 Frost & Sullivan 8 We Accelerate Growth
Chart 6: Benchmarking Performance with TEAM Research About Frost & Sullivan Frost & Sullivan, the Growth Partnership Company, enables clients to accelerate growth and achieve best-in-class positions in growth, innovation and leadership. The company's Growth Partnership Service provides the CEO and the CEO's Growth Team with disciplined research and best-practice models to drive the generation, evaluation and implementation of powerful growth strategies. Frost & Sullivan leverages 50 years of experience in partnering with Global 1000 companies, emerging businesses and the investment community from more than 40 offices on six continents. To join our Growth Partnership, please visit http://www.frost.com. 2012 Frost & Sullivan 9 We Accelerate Growth