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.
“It would be nice to eliminate a lot of that overlap and use the best features of each platform,” Meyer says.
Analysts say the companies will have to learn quickly to package an offering that reflects the best of each company’s skills.
“It’s really important that Microsoft rolls something out the door that’s high-quality,” as a result of the Innovative Communications Alliance, says Zeus Kerravala, analyst with Yankee Group. “Microsoft has certainly made things difficult for customers with past versions of new products, and they can’t afford to do that with voice.”
Although the partnership may seem dominated by Microsoft – as Nortel’s voice technology becomes software modules on Windows servers – Kerravala says Nortel won’t just be along for the ride. The vendor’s history of building stable, survivable voice systems lends credibility to Microsoft’s VoIP ambitions.
“Nortel is a much better company when it comes to quality engineering, building fault-tolerant systems and obviously voice in general,” he says.
The move to transform Nortel voice-technology software modules in a larger, Microsoft-based infrastructure is a deviation from Nortel’s 2005 VoIP road map, in which it identified Linux as the operating system of choice for the future.
ProMedica’s Meyer says he will wait to see how this plays out but is skeptical about using Windows as a main call-processing platform. “Nortel has been moving its IP PBX platforms to a hardened Linux core, where they only run absolutely what they have to,” he says. “I’d probably prefer the Nortel hardware for day-to-day communications control over some kind of Microsoft SIP server. I’d like to see Microsoft handle more of the application side.”
As Nortel’s CEO Zafirovski said, the deal could boost Nortel’s enterprise LAN and WAN and wireless LAN businesses greatly. Those account for around 5% of the market, behind Cisco’s 70%-plus market share in these categories. Zafirovski said in a past interview he wants to increase Nortel’s data market share to 20%.
“A lot of companies still do general router and switch upgrades,” says Robert Whiteley, an analyst with Forrester Research. “But few do it without the context of a larger IT initiative,” such as network convergence, security or virtualization projects.
“Nortel has tied itself to a much larger pull-through [partner],” he says. “I think as long as Microsoft and Nortel can deliver in a timely manner, this will shake things up.”
