Frank Stinson Partner & Sr. Analyst IntelliCom Analytics

1. E-01: Setting the StageAn Overview of a Rapidly-Transforming Enterprise Communications Environment Frank Stinson Partner & Sr. Analyst IntelliCom Analytics

2. Focus Of This Session • Introduction and Overview • Key Trends That Are Driving Transformation of the Enterprise Communications Space: • A Competitive Landscape Disrupted by Fundamental Architectural and Business Model Changes • The Emergence of Advanced Unified Communications (UC) and Collaboration Solutions Delivering Targeted Business- and End User-Specific Value • New Options Blending Premise- and Cloud-Based Capabilities to Deliver Advanced Applications to Specific Job Functions and Individual Users • Virtualization Initiatives Supporting All-In-One Packaging of UC Software Suites And Data Center Consolidation Efforts • How These Emerging Capabilities Factor Into Current Enterprise Deployment Plans • Key Parameters to Consider in Evaluating Voice and UC Providers • How Current Market Leaders are Positioned in This Context • Summary and Discussion 2

3. The Enterprise Communications Market Grew Strongly During The First Three Quarters Of 2010 After Experiencing A Historic Downturn At The Onset Of The Recession Which Impacted Even The Most Stable Of Providers Enterprise Communications Manufacturer Product Revenues – North America 1Q’07 to 3Q’10 Beginning of Downturn Year-Over-Year Growth -4% -1% -6% -16% -29% -27% -24% -8% +6% +12% +8% Source:IntelliCom Analytics, IntelliCom Market Performance DashboardSM, September 2010

4. The Downturn Coincided With Fundamental Delivery And Business Model Shifts – Now Accelerating – That Are And Changing How Business Communication Solutions Are Delivered And Who They Are Delivered By Software-Centric Voice and UC TDM IP Telephony Position of Voice Voice as a System Voice as an Application Voice as a Feature System Architecture Open Standards and Hardware Support, Session Management, SaaS/Hybrid Delivery Alternatives, SOA-based CEBP Enablers Central Processor Proprietary Servers and Appliances Key Customer Decision Attributes Business Process Integration, Productivity Enhancement, User Experience, Incremental Revenue Infrastructure Convergence, ROI / TCO Reliability, Functionality Decision Focus Site-Centric Network and Enterprise-Centric Enterprise Community / User-Centric Services Model Maintenance Shared Responsibility Management (Managed and Hosted Services) Applications / Solution Design and Integration, Business Consulting Source: IntelliCom Analytics, IntelliCom Market DashboardSM

5. Software-Centric Solutions Are Rapidly Approaching Mainstream, As More Than Half Of Global Businesses Will Have Embraced This Approach By Two Years From Now When do you anticipate deploying a fully software-centric communication architecture? Percent of Global Decision Makers IntelliCom Market DashboardSM/TMCnet Customer Survey (n=359), November 2010

6. Emerging Cloud-Based And Blended Premise/Cloud Solutions Add To The Growing Array Of Delivery Choices That Customers Must Evaluate In Making Current And Future Implementation Plans Feature Customizability Fully Open Solution-Centric Approaches Premise-Based Cloud-Based Blended BCS Packaging Models Next-Generation Native SIP IPT Platforms w/TDM-Enablement or 1st Gen IPT Migration All-In-One Voice/Data Appliances Evolutionary TDM/IPT Hybrid Systems 1st Gen Proprietary IPT Traditional TDM Systems Legacy Fully Proprietary Box-Centric Approaches Delivery Flexibility Industry Standard Hardware Proprietary Hardware Shrink-Wrapped Open Hardware

7. While Global Businesses Are Nearly Three Times As Likely To Prefer An All-Premise To An All-Cloud Voice And UC Solution Today, There Is Strong Receptivity To Blending These Delivery Mechanisms If you were to adopt a software-centric Business Communications solution, would you prefer to deploy the applications it supports on premise or in the cloud? Percent of Global Decision Makers IntelliCom Market DashboardSM/TMCnet Customer Survey (n=359), November 2010

8. SMB And Mid-Market Customers Expressed The Most Support For Blending Premise- And Cloud-Based Capabilities, But Small Businesses With Less Than 20 Employees Were The Most Likely To Prefer An All-Premise Solution If you were to adopt a software-centric Business Communications solution, would you prefer to deploy the applications it supports on premise or in the cloud? Percent of Global Decision Makers By Business Size IntelliCom Market DashboardSM/TMCnet Customer Survey (n=359), November 2010

9. While Cisco, Microsoft, and Mitel Now Directly Provide Cloud-Based And Blended Solutions, Others Relying More Heavily On An All-Premise Model Face Greater Competitive Exposure To Third-Party Hosted Services If you were to adopt a software-centric Business Communications solution, would you prefer to deploy the applications it supports on premise or in the cloud? Percent of Global Decision Makers By Manufacturer IntelliCom Market DashboardSM/TMCnet Customer Survey (n=359), November 2010

10. Virtualization Initiatives Add To The Open Hardware Options For Customers To Consider When Deploying Next-Gen Voice And UC Solutions And Help Better Support Both Enterprise Data Centers And Mid-Market All-In-One Packaging Description Examples • Legacy TDM Systems • Traditional voice system packaging on separate, proprietary boxes produced by the manufacturer • Limited synergies with the rest of the customer’s IT environment Proprietary Appliance • Most mainstream IP-PBXs • Call control and other communication applications run on open operating systems like Linux • Manufacturer utilizes open processor components to reduce costs but produces turnkey appliances for the customer to ensure availability Appliance w/Open Components • Microsoft OCS/Lync 2010 • Siemens OpenScape UC • Interactive Intelligence • Voice system vendor produces only the software-based elements of the voice and UC applications • Customers and/or systems integrators chose third-party servers and devices based on guidelines and/or certifications Software-Only on 3rd Party Server • Avaya Aura System Platform • Lotus Foundations (ShoreTel, NEC) • The provider utilizes virtualization technology to place multiple voice and UC applications onto a single server produced by them • This may save space and reduce power consumption while allowing the provider to position their full software suite at once Virtualization Enabling Voice/UC Co-residency • Mitel vMCD • Siemens OpenScape UC • Cisco UCS • Voice and UC applications are delivered as software-only solutions that run on an open virtualization platform • This allows these applications to be deployed on common hardware with business applications deployed in the data center Virtualization Enabling Data Center Consolidation • Mitel/Sun Ray • Mitel/VMware View • Cisco VXI • Thin-client desktop devices running all user communication and productivity applications displace the current PC model • All major user applications are shifted to centralized data centers broadly supporting the organization Desktop Virtualization

11. While Virtualization Is An Important And Growing Driver, Less Than 40% Of Respondents Would Deploy A Software-Centric Voice Solution Delivered On Third-Party Hardware If They Were Forced To Make An Architectural Choice Today If you had to make a choice to replace your primary voice solution today, what type of architecture would you select? Percent of Global Decision Makers IntelliCom Market DashboardSM/TMCnet Customer Survey (n=359), November 2010

12. Although Medium And Large Enterprises Expressed The Most Receptivity To Data Center Deployment Options Leveraging Virtualization, Larger SMBs Were More Supportive Of Software-Based Approaches In General If you had to make a choice to replace your primary voice solution today, what type of architecture would you select? Percent of Global Decision Makers By Business Size IntelliCom Market DashboardSM/TMCnet Customer Survey (n=359), November 2010

13. While It Is Not Surprising That A Significant Portion Of Customers Of Legacy Providers Still Express A Preference For A TDM Or Hybrid Model, Roughly A Quarter Of Microsoft UC Customers Do Today As Well If you had to make a choice to replace your primary voice solution today, what type of architecture would you select? Percent of Global Decision Makers By Manufacturer IntelliCom Market DashboardSM/TMCnet Customer Survey (n=359), November 2010

14. Communication- And Collaboration-Enabling Of Specific Business Processes (CEBP) Is Where Customers Will Ultimately Realize The Most Value From These Next-Generation Delivery Approaches IP Telephony Unified Communications Collaboration CEBP Infrastructure Convergence Personal Productivity Workforce Productivity Business Transformation Core Call Control Platforms Supporting Infrastructure End User Devices Centralized Management & Provisioning Unified Messaging Presence Management Instant Messaging Mobility Unified Clients Shared Workspaces Converged Conferencing Telepresence Enterprise Social Networking Comm. & Business Apps Convergence Event/Process-Driven Automation Reduced Latency Creation of New Services & Revenue Streams Technology Driven Benefits Business-Specific Benefits While Basic UC Applications Can Be Integrated With Some Legacy Voice Solutions, Advanced Collaboration And CEBP Integrations Tend To Require A More Software-Centric Approach Source: IntelliCom Analytics, IntelliCom Market DashboardSM

15. But New Voice Platform Deployments That Include The Full Range Of UC User Applications Still Account For Only About A Quarter Of New Installations Despite Considerable Vendor Push And Bundling • Bundled licensing approaches heavily discount UC point applications in new voice platform purchases, but often these entitled capabilities are not deployed on an enterprise-wide basis • With enterprise decision-makers still not fully convinced of the value of higher-level UC applications, sales remain driven by a vendor push model • New tablet user devices and linkages to social networking applications are intended to reach individual employees and build pull for UC and Collaboration applications within organizations • Broader UC market definitions including Call Control and Unified Messaging make the market and adoption appear higher but obscure the fact that individualized UC productivity applications remain in the early adopter phase Core voice features included in new call control solutions Integrated access to voice mail and e-mail applications UC user clients for accessing call control, presence, IM, converged conferencing, etc. Source:IntelliCom Analytics, IntelliCom Market Performance DashboardSM, September 2010

16. SIP Overlay And Session Management-Based Approaches Have Emerged From Providers Placing Growing Emphasis On Supporting A Multi-Vendor, Best-of-Breed Implementation Model End-to-End Architecture Best-of-Breed Approach A single provider delivers an integrated architecture blending premise- and cloud-based elements across the complete voice and Collaboration spectrum Customers select focused providers that are specialized in particular areas like voice and leverage open standards and interoperability initiatives to integrate with other value layers Focus • A common infrastructure may deliver a tighter integration of underlying applications and have advantages in terms of management and policy administration • An integrated infrastructure for premise- and cloud-based applications may address security concerns that typically arise within IT as a result of end users accessing public services • Customers may find the “single throat to choke” value proposition to be attractive as well • May better leverage existing investments where infrastructure, communications, and desktop applications from multiple vendors are already in place • This approach may be attractive to those in organizations where voice decision-making remains reasonably independent of other areas of IT that have responsibility for other Collaboration point applications and preferred vendors for them • Can select best applications available in each segment Advantages • Specialized voice vendors risk being marginalized unless they pursue high-profile joint-marketing and sales initiatives with those playing in broader collaboration layers • May require more upfront integration of disparate elements • Taken separately, individual pieces of a Collaboration value proposition may be less compelling to business stakeholders needed to build internal support • Inherent cost in building a new infrastructure vs. leveraging existing investments • Locked into a single vendor that controls all the key mechanisms through which an organization interacts, with some capabilities more competitive than others • Implementation requires a cultural mindset change within IT and perhaps even the organization as a whole Disadvantages

17. Increased Interoperability Support Coupled With Broadening Collaboration Value Propositions Has Disrupted The Competitive Landscape By Increasing The Influence Of Players In A Growing Number Of Adjacent Markets Voice Apps Open Hardware Core Voice SaaS & Hybrid Enterprise Apps User Devices Open Source Integration Services

18. While A Solid Core Telephony Foundation Remains Important, There Are A Number Of Architectural Enablers And Business Model Considerations That Will Drive Success As The Market Moves Toward Mainstream Acceptance of Software-Based Solutions IntelliCom Market Dashboard - Evaluation Parameters Solution Delivery Sustainability • Corporate Stability • Strategic Direction • Corporate Presence • Sustainability of Business Model • Market Position • Solutions Focus • Business Value Proposition • End-To-End Solution Delivery • Customization Options • Go-To-Market Model Fit Executing at the Business Model and Go-To-Market Levels Applications Infrastructure Applications Positioning • Support for Open Standards • Software Centricity of Call Control • Platform Hardware Delivery Options • Business Applications Integration Initiatives • Software Provisioning/Licensing Approach • Traditional Applications Portfolio • Unified Communications Focus • User Centricity • Business Process Positioning • Verticalization Building Architectural Enablers for UC and CEBP, and Positioning to Customers Based on Their Specific Business-Level Impact Current Functional Performance Deployment Flexibility • Scalability • Survivability • Feature Set • Management and Serviceability • Interoperability • IP vs. TDM • Distributed vs. Centralized • Device and Mobility Options • Hosted vs. CPE • Migration Strategy and Options Providing a Foundation of Core Telephony Features and Functionality

19. Established Providers Still Have A Substantial Advantage Over New Entrants Like Microsoft In Terms Of Core Enterprise Voice Functionality And Deployment Options, But Lync 2010 Is Beginning To Close The Gap Current Functional Performance vs. Deployment Flexibility IntelliCom Market Dashboard: Enterprise Segment Scores IntelliCom Market Dashboard: SMB Segment Scores Deployment Flexibility Index Deployment Flexibility Index Mitel Siemens Mitel Cisco Avaya NEC NEC Cisco Siemens Avaya Microsoft Microsoft Toshiba 3Com* IBM ShoreTel IBM ShoreTel 3Com* Current Functional Performance Index Current Functional Performance Index Deficient Challenged Competitive Well-Positioned Differentiated Enterprise Segment = 1,000+ Users SMB Segment = 20-250 Users Source: IntelliCom Market Dashboard, January 2011 * 3Com voice portfolio now owned by HP

20. A Mix Of Traditional Voice Providers And New Entrants From Adjacent Markets Are Leading The Shift Toward Software-Centric Architectures And Targeted Business- And User-Centric Applications That Best Leverage Them Applications Infrastructure vs. Applications Positioning IntelliCom Market Dashboard: Enterprise Segment Scores IntelliCom Market Dashboard: SMB Segment Scores Applications Positioning Index Applications Positioning Index Avaya Mitel Siemens Cisco Cisco IBM Avaya Siemens Mitel IBM NEC Microsoft ShoreTel Microsoft NEC Toshiba ShoreTel 3Com* 3Com* Applications Infrastructure Index Applications Infrastructure Index Deficient Challenged Competitive Well-Positioned Differentiated Enterprise Segment = 1,000+ Users SMB Segment = 20-250 Users Source: IntelliCom Market Dashboard, January 2011 * 3Com voice portfolio now owned by HP

21. Ultimately, Market-Level Execution Will Be Highly Dependent On Changing The Customer Conversation At The Go-To-Market Level And Having The Necessary Resources Needed To Drive Related Business Model Changes Solution Delivery vs. Sustainability IntelliCom Market Dashboard: Enterprise Segment Scores IntelliCom Market Dashboard: SMB Segment Scores Sustainability Index Sustainability Index Cisco Cisco Avaya Siemens Avaya Siemens IBM Mitel Microsoft NEC IBM Microsoft Mitel NEC Toshiba ShoreTel ShoreTel 3Com* 3Com* Solution Delivery Index Solution Delivery Index Deficient Challenged Competitive Well-Positioned Differentiated Enterprise Segment = 1,000+ Users SMB Segment = 20-250 Users Source: IntelliCom Market Dashboard, January 2011 * 3Com voice portfolio now owned by HP

22. Summary Points • The overall Enterprise Communications market has resumed growth but from a substantially lower position than prior to the downturn as customers adjust to budget pressures and attempt to make sense of evolving architectures and emerging applications • The market is now on the verge of mainstream acceptance of software-centric architectural models, but many customers still prefer to purchase such a solution as an integrated appliance packaged by the same provider as the software • While only a small minority of businesses would opt for an entirely cloud-based deployment model today, there appears to be wide-spread receptivity to blending premise- and cloud-based capabilities providing various combinations of voice and UC functionality • The rapid emergence and development of virtualization initiatives from a number of voice and UC providers over the past year has been met with strong receptivity among medium and large enterprise interested in leveraging this technology • While current leading UC providers are making good progress in adapting their delivery models to address, and in some cases help drive, the transition to software-centric approaches, ability to execute at the go-to-market level remains a key question mark for many • The pace of competitive developments among both traditional and emerging providers is accelerating as this transformation gains acceptance and momentum

23. Reach Information Frank Stinson fstinson@intellicom-analytics.com 1259 Route 46, Building 1 Parsippany, New Jersey 07054-4913 Main: 908-686-4477 www.intellicom-analytics.com