What Happened to Toshiba?

On March 21st of 2017 the Toshiba dealer channel received letters announcing the wind down of the Telecommunications System Division (TSD.)  In plain English, Toshiba Telecom (Toshiba IP Phone Systems) is shutting down their operations, leaving their customers and value added resellers in a tough spot. This is an important lesson to learn as the industry continues to evolve to cloud-based platforms. The common belief across industry insiders is this is just the first domino to fall in the legacy phone system market as the new platforms and offerings continue to disrupt. 

Toshiba was founded in 1939 as a manufacturer of telegram equipment, and eventually brought Toshiba America Information Systems brought Toshiba Telephones to North America. During the age of digital phone systems, Toshiba was a leader in the small business telephone industry competing with companies like Mitel and NEC in a challenging market. The solutions were known for their incredible reliability, simplicity of use, and cost effectiveness.  For companies in need of traditional key system type telephone systems, Toshiba was the obvious go-to solution. 

Why did Toshiba Telecom fail? 

Despite Toshiba's strength in the market in the early 90's, as IP phone systems gained adoptions, Toshiba fell behind. Toshiba entered the market with a digital IP hybrid solution, known as the CTX, in the early 2000's but never understood how to take advantage of IP, leaving the door open to up and comers like ShoreTel and 8x8. The broader communications industry embraced Unified Communications, recognizing that software, not hardware was the driver for businesses looking to communicate. Recognizing this, Toshiba introduced their IPEdge product in 2011, much too late to gain back the market share lost to more dynamic solutions. For comparison Mitel, at one time a similar offering to Toshiba, released their IP offering in 2001, a full decade earlier. Today Mitel is growing and thriving, while Toshiba is shuttering their doors. 

Unfortunately, this lack of market vision continued to plague Toshiba even after releasing the IPEdge platform. The company decided to make the solution backwards compatible in an effort to simplify the migration of their existing base to the new platform. This allowed legacy phones and even digital cabinets to be a part of the Toshiba IPEdge solution, but the effect was not what they hoped for. New clients found the IPEdge platform cumbersome and challenging to manage, in no small part due to its complex backwards compatibility. The result was a product that was “IP” but still operated and was managed much like a digital platform, and without many of the advantages of new IP systems. The software was still a decade behind; management wasn’t friendly for IT minds, and the price point was in line with more innovative offerings. Toshiba also failed to see the growth of cloud-based UC solutions now dominating the market and struggled to create a competitive offering with the top players, further relegating them to a niche offering. 

Matrix Networks was a Toshiba dealer for more than two decades. We loved the reliability of the solution (systems we installed more than 20 years ago are still being used today) and the price point was perfect for the small business market. In 2007 Matrix Networks added the ShoreTel to our Mitel and Toshiba phone offerings. Over the next 4 years, we carefully observed these three players and saw Toshiba continue to fall further behind our core offerings. In 2012 our company made the strategic decision to focus our efforts on the products we felt had the best offerings for our clients and sold our Toshiba base to a small local value added reseller.  

What’s the effect? 

The results in the market from this announcement are limited in scope, as the installed base of Toshiba customers has shrunk dramatically. For those that have a Toshiba system or support them, the results will be somewhere between annoying and devastating. Toshiba announced they will honor warranty (until supplies run out) and existing contracts, but once these terms have run out clients will be stuck with an expensive boat anchor. Unfortunately many local dealers are likely to find themselves stuck between a rock and a hard place with support winding down and no product to sell. For companies that plan to grow or run into failing equipment, it will be challenging to find parts on a second hand market which tends to get pricey in these situations. A key advantage of modern IP phone systems is their steady stream of new features using software upgrades. Toshiba’s announcement means current clients will be stuck at their current status until a change is made. This will inevitably force the hand of many Toshiba customers to replace of their telephone system whether purchased last week or 20 years ago. 

What's next? 

For customers caught in this storm careful planning is required. Some companies may be able to continue using their Toshiba system for a period of time, and others will discover a more urgent need to make a change. The first step is having an honest discussion with your vendor, IT, and executive teams about what the implications are for your business. After establishing a replacement strategy, some research will be necessary. Toshiba clients haven’t had access to the cutting-edge tools included in Unified Communications platforms and will need to evaluate what/if these features can help the business. Just because there are fancy features out there, doesn’t mean that you need them. Often clients who have selected Toshiba want a simple phone experience. For larger multi-site companies you may want to evaluate a phased hybrid solution, bridging the gap between your legacy Toshiba and the platform you select going forward.   

There is a good likelihood your trusted Toshiba dealer is going to be severely affected by this announcement. This is a good time to look at a range of options, both cloud-based and premise, to understand the market more thoroughly. Make sure you partner with someone experienced in IP and cloud-based deployments who also has a wide range of products to offer. Cloud systems offer some advantages for clients stuck in the mud of Toshiba’s road. With a cloud solution, you won’t be tied to expensive hardware, giving you the flexibility to make changes as needed and protecting you from yet another boat anchor. The cloud solution also gives you the advantage of a proof of concept.  Most cloud products will let you trial the product before going live, a major advantage for clients forced into a change.   

If you have questions about this change and what to do next please contact us here at Matrix Networks.  With our experience in Toshiba Telecom and our diverse product offerings, we are a strong partner for navigating these waters. If there is anything we can do to help as you embark on this adventure, please let us know and thanks for reading!

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