Zeus Kerravala of ZK Research and I hop on the K&Co Tech Pod discuss Mitel’s move to relocate IP phone production to Germany and what it reveals about the future of enterprise communications, including why the desk phone death narrative is greatly exaggerated.

Key Takeaways

  • The Frontline Worker Reality: While phones may be legacy tech for knowledge workers (20% of the workforce), 80% are frontline workers who still rely heavily on physical devices, representing a $2 billion annual market.
  • Made in Germany Manufacturing: Mitel’s partnership with Gigaset brings German engineering excellence, shortened supply chains, reduced costs, lower carbon footprint, and TAA compliance for government contracts.
  • Strategic Post-Restructuring Positioning: Following debt elimination of $1.15 billion, new leadership, and a strengthened board, Mitel is executing a hybrid strategy while competitors go SaaS-only.
  • Data Sovereignty Matters: European data privacy regulations are driving organizations back to on-premises and hybrid solutions, creating significant opportunity in Mitel’s core markets.
  • The Last Man Standing Advantage: With Avaya’s shift upmarket, Mitel is positioned to capture mid-market and SMB customers who need more than cloud-only solutions can provide.

The News

Mitel announced a strategic move to relocate IP phone production to Germany, partnering with Gigaset to manufacture one million devices annually. This announcement comes at a pivotal moment for the company following successful financial restructuring that eliminated $1.15 billion in debt, the appointment of new CEO Mike Robinson in September 2024, and a revamped board of directors featuring industry veterans from Vonage, GTE, and HP Poly. While much of the industry narrative focuses on cloud-first and SaaS-only strategies, Mitel’s device production move signals a contrarian but strategically sound bet that physical devices aren’t going away—they’re evolving into critical components of hybrid communications infrastructure.

Analyst Take

In a recent conversation on the K&Co Tech Podcast with fellow analyst, Zeus Kerravala of ZK Research, we explored why this production move matters far beyond manufacturing logistics and what it reveals about where enterprise communications is actually headed versus where vendors think it should go. Watch our full conversation here:

The Frontline Worker Market Everyone Forgets

As Zeus so aptly stated, “Phones are legacy tech for knowledge workers, however, we only make up about 20% of the workforce. The other 80% are frontline workers, and most of them do use phones.”

This is the fundamental insight that cloud-first vendors consistently miss. While analysts and knowledge workers communicate across multiple channels — email, Teams/Zoom/Webex, Slack, text — frontline workers in healthcare, retail, hospitality, manufacturing, and emergency response still depend on physical endpoints. They can’t carry smartphones. They need reliable devices that won’t fail when connectivity drops. They require simplicity, speed, and tools that just work.

According to Frost & Sullivan data cited by Mitel, this represents approximately $2 billion annually, hardly a legacy footnote in anyone’s business plan. Yet most UC vendors have abandoned this market in their rush to chase cloud revenue.

Made in Germany: Strategic Manufacturing Excellence

Mitel’s partnership with Gigaset isn’t just about moving production, it’s a multi-dimensional strategic play that addresses supply chain resilience, quality, compliance, and sustainability simultaneously.

The relationship actually originated through Mitel’s Unify acquisition, where Siemens phones were already designed and manufactured by Gigaset. Those devices were known for exceptional build quality and durability. Now Mitel can bring that same German engineering precision to its entire phone portfolio.

The benefits cascade through multiple dimensions:

Cost Efficiency: Despite moving from China to Germany, costs remain the same or decrease due to dramatically reduced shipping expenses for European customers.

Supply Chain Control: Rather than managing parts across global supply chains (remember pandemic-era shortages?), Mitel now controls manufacturing in a single location, reducing delays and uncertainty.

Sustainability Impact: The carbon footprint reduction matters enormously to European customers. Moving from Asia to Germany significantly reduces Scope 2 emissions for Mitel, which flows through as Scope 3 benefits for their enterprise customers.

Compliance: TAA compliance opens doors with US government contracts that require domestically manufactured or allied-nation equipment.

Speed to Market: Shorter lead times mean faster device refreshes and the ability to flip competitive install bases more quickly.

The beauty of this strategic move is that instead of having to ship parts all over the world, Mite can now control it all in Germany. The cost should be the same, or even a little less, because shipping costs will be so much lower.

Post-Restructuring Strategy: Execution Time

What makes Mitel’s current position particularly interesting is how the pieces have come together. Unlike competitors who restructured and then redefined strategy (a backwards approach that often fails), Mitel spent years under former CEO Tarun Loomba refining its strategy before executing the financial restructuring.

The timeline tells the story:

  • June 2024: Emerged from financial restructuring, eliminating $1.15 billion in debt
  • July 2024: Announced new board of directors comprised of heavy-hitting industry veterans bringing a wealth of diverse experience
  • September 2024: Appointed Mike Robinson as CEO — a post-restructuring execution specialist
  • October 2024: Announced Made in Germany production move

Everything is in place for Mitel to go and capitalize on the market. They have shed the debt, they’ve got the product roadmap in place, now it’s time to execute.

The competitive landscape has conveniently aligned as well. As Zeus noted, Avaya’s shift upmarket leaves significant mid-market opportunity. In addition, we are seeing European data sovereignty requirements favor on-premises and hybrid solutions. Geopolitical tensions are also driving reshoring and supply chain localization. All arrows point toward Mitel’s strategic positioning.

The Hybrid Reality Nobody Talks About

Here’s what the cloud-only narrative consistently misses: enterprises in regulated industries — healthcare, government, critical infrastructure — aren’t interested in going full cloud. Data sovereignty matters. Operational control matters. Security and compliance requirements often mandate on-premises or private cloud deployments.

Mitel serves 75+ million users across 100+ countries through a partner ecosystem of 6,000+ partners. This 50-year-old company didn’t survive by chasing every trend, it survived by solving real customer problems.

The market for devices is here and it’s here to stay for the future. And as AI drives renewed interest in on-premises infrastructure (look at NVIDIA’s impact for example), vendors offering only cloud solutions leave significant customer segments completely underserved.

On this front, Zeus made a compelling comparison: “It’s a little bit like Dell 20 years ago. They were trying to do cloud, but very quickly realized that market was moving to other vendors. So, they retrenched and became a really good server vendor. Even though something’s perceived as legacy, you can make a lot of money off it if you execute well.”

Devices as Edge Computing Infrastructure

Looking forward, the conversation around “desk phones” misses what these devices are becoming. Modern IP phones have cameras, sensors, advanced displays, and processing capabilities. They generate telemetry data on usage patterns, collect information about worker behavior, and can serve as intelligent edge computing devices.

While Mitel hasn’t fully articulated this vision publicly yet, the potential is clear. AI at the edge — noise cancellation, smart routing, predictive analytics, compliance monitoring — doesn’t require constant cloud connectivity. In conference rooms, AI can optimize audio for all participants, manage camera positioning, and ensure everyone is heard properly.

We believe the phone does indeed become an edge computing device down the road, and there’s a bigger story to be told here, and that presents a compelling opportunity for Mitel as well.

Why This Matters

I used the word “contrarian” to describe Mitel’s strategy. Zeus said that he thought it was practical, not particularly contrarian.

I think we’re both right. The vendor-driven narrative says cloud is the only path forward. The customer reality says different industries, different workforces, and different regulatory environments demand different solutions. One-size-fits-all thinking doesn’t work in enterprise communications. A contrarian approach rejects popular opinion or current practice, which is exactly what Mitel is doing, rejecting that vendor-driven narrative that cloud is where it’s at. And to Zeus’s point, it’s also a practical move!

Companies that solve real problems for real customers, rather than pushing what’s easiest to sell, build sustainable businesses. Mitel is doing exactly that for a significant customer base that needs hybrid solutions, physical devices, and deployment flexibility.

Will there be a day when all UC is in the cloud? Maybe. But we expect it to be a long time in the future.

Final Thoughts

Mitel’s Made in Germany production move represents far more than a manufacturing decision. It’s a statement about strategic clarity coming out of restructuring, about understanding customer needs versus chasing vendor narratives, and about investing in supply chain resilience and customer choice.

Devices aren’t dying, they’re evolving. And companies like Mitel that recognize this reality and invest accordingly are positioning themselves to capture enterprise customers who need more than cloud-only solutions can provide. One million devices at a time, Mitel is proving that practical beats trendy, and customer-focused beats vendor-driven, every single time.

 

This article was originally published on LinkedIn. 

 

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