Analyzing Microsoft-Nortel VoIP deal

Microsoft and Nortel can learn much from each other, users and analyst say, as the companies ally themselves to develop unified communications technology. And they'd better learn fast.

The companies last week announced a four-year partnership, called the Innovative Communications Alliance, with the goal of turning Nortel VoIP technology into software modules. The companies will share intellectual property and co-develop voice and messaging applications designed to run on top of Microsoft servers. Microsoft and Nortel sales and services organizations will be cross-trained and offer integrated Microsoft-Nortel messaging applications packaged with Nortel network infrastructure gear.

The companies' CEOs stressed that the Innovative Communications Alliance goes further than past marketing or interoperability arrangements between the two vendors, or between Microsoft and other VoIP companies.

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Microsoft and Nortel can learn much from each other, users and analyst say, as the companies ally themselves to develop unified communications technology. And they'd better learn fast.

The companies last week announced a four-year partnership, called the Innovative Communications Alliance, with the goal of turning Nortel VoIP technology into software modules. The companies will share intellectual property and co-develop voice and messaging applications designed to run on top of Microsoft servers. Microsoft and Nortel sales and services organizations will be cross-trained and offer integrated Microsoft-Nortel messaging applications packaged with Nortel network infrastructure gear.

The companies' CEOs stressed that the Innovative Communications Alliance goes further than past marketing or interoperability arrangements between the two vendors, or between Microsoft and other VoIP companies.

"You can squarely say that Microsoft, with Nortel, is in the business not just of unified communications, but of voice, quite clearly," said Microsoft CEO Steve Ballmer.

For Microsoft, the tight partnership with Nortel could be seen as one of the most decisive steps it has taken into the corporate voice-technology market. Last month, Microsoft announced its strategy to develop further its unified communications and VoIP technologies, using its Office Communications Server 2007 platform (formerly known as Live Communication Server, or LCS) as the centerpiece for Session Initiation Protocol (SIP)-based instant messaging, VoIP teleconferencing, video, presence, and unified voice and e-mail messaging.

Microsoft is not new to VoIP partnerships: It has interoperability deals with Alcatel, Avaya, Cisco, Mitel, NEC and Siemens that were announced in February, when the IP PBX vendors' gear was certified to interoperate with Microsoft LCS and the Office Communicator 2005 desktop client.

"This announcement is not about interoperability," Ballmer said. "Of course we'll have that. But this is about having an aligned offering in the market, beyond interoperability." Ballmer likened the alliance to one Microsoft had in the 1990s with Digital Equipment Corp., in which the two companies jointly developed hardware-software packages for large-scale e-mail networks.

For Nortel, the partnership comes just in time, as it looks to reinvent itself in the enterprise data market, where it sits among a handful of competitors far behind market leader Cisco.

"We wanted to change the trajectory of [Nortel's] enterprise business," said Nortel CEO Mike Zafirovski. "Our new relationship with Microsoft represents an opportunity to create well over $1 billion in revenue for Nortel in the next [several] years with the combination of [Nortel] professional services, voice products and data pull-through [sales] from our customers."

Meanwhile, industry analysts and users of Microsoft and Nortel products are sorting out the pieces and waiting to see what will be delivered.

The Microsoft-Nortel partnership comes at a pivotal time for Bruce Meyer, senior network engineer at ProMedica Health System in Toledo, Ohio. His organization recently began beta-testing Nortel's MCS5100 Unified Messaging Server and Microsoft's LCS. These platforms offer different versions of IM and presence: The Nortel product handles voice conferencing, and LCS provides tighter Microsoft Exchange and Office integration.