Nortel CEO and president Mike Zafirovski and Microsoft CEO Steve Ballmer recently unveiled what the companies call a “joint road map” to offer unified communications technology to enterprises. The companies’ alliance, created last July, calls for the deployment of three VoIP-based technology platforms: the UC Integrated Branch, Unified Messaging and Conferencing.
The three applications will use both Nortel technologies like VoIP and native SIP interoperability and Microsoft’s Exchange Server 2007.
One analyst said he thinks the relationship between Microsoft and Nortel is predicated on both companies’ long-term prospects. While collaboration-based software isn’t widespread in the enterprise market yet, it will be important in the future.
“What’s driving all this is basically the ‘ITification’ of the telecom market, in which hardware will become increasingly commoditized and the margins will be more attractive on software and services,” says Ron Gruia, principal analyst in emerging telecom for consulting company Frost & Sullivan.
“Historically, one of the major issues with Nortel is that it still has an engineering mentality. In other words, they believe they can do everything and that makes it tough for someone to partner with them.”
The strategic alliance is what one Nortel representative calls a broader long-term plan to evolve with market demand.
“I think we are transforming ourselves. In this world of software, you have to partner. We’ll have a very heavy focus on research and development still,” says Tony Rybczynski, director of strategic enterprise technologies for Nortel.
“Very few people talk about what kind of infrastructure will be required in supporting or managing the software. Microsoft certainly owns the desktop and saw in our vision that unified communications at the desktop level is paramount.”
Microsoft is framing its Nortel partnership as part of the software giant’s move towards more networked, less stand-alone operations.
“We’re joining products together, bringing our sales reach into our enterprise customers and taking advantage of Nortel’s growing systems integration practice,” says Ed Wadbrook, director of VoIP strategy with the real-time collaboration group at Microsoft.
Still, Nortel-Microsoft’s partnership is generating questions about the stability and timing of the corporate alliance. For example, Wadbrook says the timing of the partnership has nothing to do with the consumer launch of Windows Vista.
“We try to align as many of our business groups around a series of major releases. It wasn’t predicated solely on the release of Vista.”
Gruia also thinks that while this alliance could be fruitful for both Microsoft and Nortel, both companies may also have to forge ahead with other partnerships in the future simply out of necessity.
“Let’s not kid ourselves. If you want to maximize revenues, you’ve got to play both sides of the fence here. It’s beneficial to Nortel in the short to medium term, but in the long-term they have to be cognizant of the fact Microsoft will seek out other similar alliances with Nortel competitors,” he says.
In terms of the Canadian market, while Nortel has a firm concentration of business, Microsoft sees the relationship as capitalizing on the networked software trends in enterprises.
“Discreet markets like the Canadian markets have more of an appetite for serving the small business customers as well as the branch and remote locations of large enterprise customers,” says Wadbrook.
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