What will happen to Nortel-Microsoft UC alliance?

If Avaya Inc. wins its bid for Nortel Networks Corp’s enterprise assets, it might want to consider preserving the partnership that exists between Nortel and Microsoft Corp for unified communications offerings if it wants a piece of the market, said one analyst.

“If Avaya does not pick up on that, then there is a lot of research and development, good will and investment that will go to waste,” said Brownlee Thomas, principal analyst with Forrester Research Inc.

Avaya will likely not be particularly interested in the alliance, but depending on what it learns of Microsoft’s position and the fact that the software giant has really taken advantage of that collaboration, it might consider continuing with it, said Thomas. Otherwise, Microsoft will just take that expertise in-house and use it, she added.

Avaya on Monday made a $475-million opening bid for Nortel’s enterprise units. Other interested suitors have the option of placing higher bids. On Tuesday, MPAM Wireless Inc. submitted a US$725-million bid for Nortel’s wireless assets. The bid from the New York-based affiliate of private equity firm MatlinPatterson, follows that of Nokia Siemens Networks’ US$650-million offer in June also for Nortel’s carrier wireless assets. MatlinPatterson has said it is also considering additional Nortel assets.

When the Nortel-Microsoft partnership was originally formed, it was Nortel that needed Microsoft more, but the relationship has since evolved over the years, said Thomas. Avaya really should give it a closer look “and realize that (it) won’t be the No. 1 player in that space, and the face off is really going to be between Cisco and Microsoft,” she said.

While Microsoft does work with Cisco, Thomas said that relationship is “Cisco-controlled, it’s very much add-on extensions to keep your enemy close to you sort of thing.”

According to Jon Arnold, principal of Toronto-based J. Arnold & Associates, if Avaya does buy Nortel enterprise assets and chooses to continue the alliance with Microsoft, there will be a shift in balance in that relationship. While Microsoft was bigger than Nortel, allowing it more leverage, post-acquisition, “Avaya (will be) in a stronger position to dictate the ground rules for how its technologies integrate with Microsoft,” said Arnold.

With a swing in the power balance, Arnold said he can’t yet predict if the alliance will continue to be successful.

But whatever happens, said Arnold, this will bring forth opportunities for Cisco and Microsoft, because long-time Nortel customers can be pushed into Cisco’s camp, though Arnold says he’s “sure Avaya is savvy enough to keep its best face in this relationship.”

Microsoft, too, must take a more balanced approach to this alliance, said Arnold, because Avaya’s own UC offering, Aura, won’t play well into Microsoft’s game plan.

As for customers of these Nortel-Microsoft UC offerings, Thomas said an acquisition by Avaya would be good news because it signals there will be support for their Nortel investments for a period of time, said Thomas.

While Avaya’s market coverage north of the border is nominal, Thomas said, “Canada is only a small market for Avaya, but a market just the same.”

According to Ronald Gruia, program leader for enterprise telecom at Frost & Sullivan, said regardless of who buys Nortel, the collaboration with Microsoft will likely end. “That’s going to come to some sort of conclusion,” said Gruia.

And that will be a tremendous loss for Microsoft. But on the other hand, said Gruia, the parties of such a relationship will have obviously gained a lot of insight over time, as has Microsoft, who can then apply that to its own offerings.

At any rate, Guia said a good product roadmap and transition plan, along with support from user groups, will be a necessity in the first 90 days post-acquisition.

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Jim Love, Chief Content Officer, IT World Canada

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