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What Nortel's Demise Means for Microsoft  

Posted on 07 Jul 2009 by Joe Staples
Interactive Intelligence
Joe Staples
We've all read A LOT about the disintegration, implosion, demise, or whatever else you want to call it, of the once great and mighty Nortel. Most of the articles and posts deal with either a) how this could happen, or b) who was going to now buy up all the piece parts. One question that I haven't seen addressed, is what Nortel's demise means for Microsoft.

Rewind to July 2006, just three years ago. Microsoft CEO, Steve Balmer, and Nortel CEO, Mike Zafirovski, stand together grinning from ear to ear about the partnership they had just forged. And Zafirovski is quoted as saying that the deal will generate $1 billion in new revenue through 2009. Clearly the results were a whole lot of zeros short of that prediction.

Let's start with why they inked the deal in the first place. Nortel was in trouble and looked to Microsoft to help save them. Microsoft wanted into the burgeoning market of unified communications and needed a big name communications company to help it make a splash. Microsoft also needed some technical talent that knew something about IP telephony. With those objectives, Microsoft got just what it needed and Nortel got squat.

Seriously, I think the folks in Redmond think this all worked out okay for them. Nortel gave Microsoft the credibility and knowledge they needed to enter the IP communications game. So what happens next?

The main benefits of the relationship to Microsoft are in the past. Microsoft will easily move on. They successfully made their entrance into the UC game (thanks at least in part to Nortel). They will most likely hire several of the talented engineers that Nortel had developed over the years. And then the next chapter's results will be determined based on who buys Nortel's enterprise business. If it is Avaya, I predict a quick end to the Microsoft partnership and an up-the-ante feud between the two companies. If it turns out to be Siemens, maybe the dance continues. What does the disintegrated alliance mean for customers? Not much. At the end of the day Microsoft will keep enhancing OCS, release new IP phone devices, tout their UC wins, and keep that mighty marketing machine running.

What do you think? Any other insight into the Microsoft-Nortel relationship and what happens next?

Joe Staples -- blogging and winning business while the giants bicker.

 
 
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Tags: Enterprise IP Telephony, Market Trends and News
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Comments


Tim Passios commented on Tuesday, 7-Jul-2009
 
Nice points, Joe. Just as interesting to follow is the Microsoft/Aspect relationship.

Microsoft seems to be able to leverage the Aspect customer base to help install its OCS product while Aspect seems more than willing to help them. Over the past several months, Aspect has been spreading the word about how their entire company has been running OCS as their corporate communications platform.

To me, that makes for an odd relationship where there appears to be only one winner.



Sandra Eisenberg commented on Wednesday, 8-Jul-2009
 
As the former Director of CRM Global Alliances at Avaya I know far too well that alliances are always created for selfish reasons. While Microsoft "partnered" with Nortel around much hoopla of using Nortel UC, they had already done the same with Siemens a few years before (Openscape) and when the Microsoft technology caught up sufficiently they "cut bait" with Siemens and partnered with Nortel -- primarily for the customer base they wanted to scavenge. Nortel, on the other hand, was looking for credibility in the "yeah we're still relevant" space. Both Nortel and Microsoft got what they needed from the deal at the time.


Irwin commented on Wednesday, 8-Jul-2009
 
Hi Joe and Tim,

Indeed it may have looked like a plan looking backwards. But I don't believe Microsoft had foreseen that Nortel was going to go chapter 11.
Microsoft did have some help from Nortel entering the voice market, but less of that in Europe.
What Microsoft does is positionnig the integrated partner solution where their own offering is weak. Back then it was telephony so MS teamed with the phone vendors.

But the phone vendors love that just as much as they surf the Microsoft marketing wave as well. And they do know how to surf that wave super well.

Today same goes for other points where MS has a less good offering like call centers (Aspect), high end video conferencing and niche solutions for business process integration.

MS does this for years and teams with partners that are willing to do that because they benefit as well.

Unfortunately it didn't work out for Nortel as good as they wanted to. But not sure how that came around. My experience that the Nortel team locally (in Europe) wasn't so eager to collaborate and win customers. That might have happened in other countries as well.

It a pitty that Nortel is falling out. They have great technology and could easily compete with Microsoft towards other big names in this space.


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