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Apr 14, 2017

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Why did Toshiba Close its Telecommunications Division?

The recent announcement by Toshiba that it is shutting down its Telecommunications System Division took customers and dealers by surprise. But should it have been such a surprise?

Toshiba not keeping up with technological change

In our view, probably not. Technology goes through what John Chambers, the former CEO of Cisco, used to call ‘points of inflection.’ These are points where some new technology is about to dramatically displace an older technology. There were two key reasons to predict these trends. One, to make sure you understood the impact on your current technology portfolio, the other was to use it as a way to open up new markets formerly closed to you. The barriers of entry may have been too high until some new technology created an opportunity.

Solid and reliable isn’t enough

Toshiba have been selling office products for many years, including telephone systems. Their products were pretty reliable and offered a reasonably good feature set. Toshiba had been selling digital telephone systems that targeted the small to medium sized customer. And that blended well with the other office equipment they made. Often their office products dealers also sold the telecom systems.

Toshiba was never a leader in any particular area. They were not Contact Center experts nor did they offer the most advanced feature sets. What they did offer was reliability, dependability, quality products, a reasonable price and a recognized brand. Until, that is, they decided to shut the division.

Toshiba late to the game: Almost 10 years behind

As telephone systems migrated from hardwired, digital systems using TDM (Time Division Multiplex) to IP based systems in the early 2000’s, Toshiba, along with a few other vendors like NEC, Siemens, Ericsson and Hitachi, fell behind.

VoIP or IP based systems meant that your data network became your telephone switch and the application was separated onto an appliance (a dedicated server) or to software that could run on a customer provided server. It changed the game on how IT viewed telephone systems. No longer a separate tool, they now became another application that could reside in their data center. Vendors who were not offering systems on that basis were losing prospective customers. Existing players like Mitel were migrating quickly to IP based systems and integrating the demands of new technology including the feature set of the iphone as a devise off a voice server.  Just faster to the table than Toshiba.

Toshiba did not introduce the Toshiba IPEdge system, an IP based platform, until 2011. About 10 years after the market had moved in that direction; This in an age when whole new technology is adopted and then displaced in less time. Blockbuster had come and gone. The original iPod had morphed into the iPhone. Facebook had reached a billion users. And Toshiba took that long to bring an IP based system to market. Partly because they wanted to make it backwards compatible with their older, legacy technology. And it compromised their offer. 10 years late to market and it performed worse than the competition.

Cloud phone systems are the current innovation

While Toshiba was bringing out its IPEdge system, the market was experiencing the next inflection point. The market was moving to cloud or hosted systems.

This was not a stretch to predict. Applications were being placed on standard servers, often virtualized via VMWare or Hypervisor. Internet bandwidth was much cheaper and ubiquitous and mobile phone were everywhere. So those same applications or applications could be migrated to ‘the cloud’, offered cost effectively and used by customers anywhere.

We are sure that Toshiba decided that they were too far behind, had such small market share and had even dissatisfied past customers with its IPEdge that their only answer was to exit the market. It wasn’t even worth finding a buyer.

It is the stuff of business school business cases.

The Impact on customers?

While Toshiba has announced they will honor warranty (until supplies run out) and existing contracts, this is not a great situation for a business, especially one that relies on its communications platform. And truly, with the speed of business today, being in constant contact is a given.

It will be a huge challenge for any business that is still growing. How do they expand? Or a business looking for added functionality to handle mobile workers, clients that satisfy millennials, etc. Being caught in a status quo position is incredibly worrying.

Others may have been looking for new systems already. They had sweated their Toshiba investment. It might be a nuisance and cause them to ramp up their efforts to look for a replacement.

What to look for?

The reason Toshiba closed its Telecom division was likely the pressure from new technology and providers.

Customers can now choose from IP based premise systems or cloud based systems. They can both offer all the standard telephone features as well as advanced capabilities like unified communications – bringing text, chat, video, conferencing together.

Planning can become a challenge given that the last time you did this might have been 10, 15 or more years ago. It does mean going back to basics to determine your needs. Are you single or multi-site? Do you have a contact center? How many people work on the road (home office or mobile)? Things that would impact the type of system and features that would best fit.

A vendor that can offer both premise and cloud based systems will offer unbiased advice. A vendor that can offer solutions from more than one manufacturer is equally going to offer you more choice, walk you down the decision path to determine how best to meet your business needs.

It may be a time of concern but there is light at the end of the tunnel.

If you want to learn more about your options, why don’t you give us a call. We are experts in IP based communications systems. We also offer cloud and premise options. 

Call Felicity at 360.603.5304