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Nortel voice customers are the vendor's only enterprise asset

Shamus McGillicuddy, News Editor
Now that Nortel Networks has put all its businesses up for sale, customers of its voice and unified communications business are Nortel's hottest commodity.

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If a rival does buy Nortel's enterprise division, the buyer will be interested in Nortel's customers, not its technology.

"I think the value Nortel has is its customer base," said Zeus Kerravala, senior vice president of the Yankee Group. "[For] a company like Avaya or Siemens, that's what's appealing."

Avaya, Siemens Enterprise Networks and potential dark-horse buyer Alcatel-Lucent would all love to grow their market share by buying Nortel Enterprise Solutions, which would give the buyer direct access to loyal Nortel voice customers, Kerravala said.

"Avaya has done a good job of flipping its old customer base onto IP, but they haven't done a good job of acquiring new customers," he said. "[Buying Nortel] would give them by far the No. 1 position overall in voice. It would give them Nortel's customer base to go flip them to VoIP. For a company like Siemens, which doesn't have much North American presence, it gets them into some U.S. government business, which Nortel has, and it gets them the U.S. footprint which they don't have."

Kerravala said that any buyer of Nortel's voice and unified communications business would support Nortel's products for a reasonable number of years, but eventually those products would be discontinued. The buyer's prime motivation would be to provide those customers an opportunity for a smooth transition to its own products.

Victor Bohnert, executive director of the International Nortel Networks Users Association (INNUA), said Nortel's technology is strong enough that many of its products will live on.

"Certainly, the installed base is going to be one of Nortel's most prized assets," Bohnert said. "But the bottom line is [that] the strength of the Nortel product has never been in question in this whole situation. I think the technology will survive no matter what company's name is on it."

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Given the sheer size of the company's installed base, any buyer will at least support Nortel's products for a number of years, Bohnert said. "As you do that, you'll start to see an integration that takes the strongest points of the products. I'm not saying it's going to be easy, but I don't think they're just going to sunset the products."

Some Nortel telephony customers might feel slighted by the notion that they can be bought and sold like this -- that the fate of their telephony and unified communications strategy is tied to whichever company puts up the cash to buy the business. Nortel customers will still have freedom of choice to go with any vendor they want, Bohnert said, regardless of who makes a deal with Nortel.

"I would certainly encourage everyone to make decisions moving forward the same way they did before, and that's on the merits of the solution," he said. "Will you be forced to [invest in the buyer's products]? I don't know. In this day and age, with interoperability and multi-site operations, I don't think anyone will be forced into doing anything."

Bohnert said a deal for Nortel's enterprise division is probably "imminent." INNUA is working with Nortel on a transition plan for the company's customers. This includes a webinar with Nortel executives in the days following the deal. INNUA will facilitate ongoing communication between its membership and Nortel as the transaction moves forward.

In the meantime, Nortel's unified communications and telephony business continues to lose value. Every day, customers are losing confidence in the company.

"Both [partners and customers] are under heavy pressure," Kerravala said. "The competitors of Nortel, since it went into bankruptcy, have really put a full-court press on the customer base and the channel. So if someone is going to [buy the enterprise division], they need to do it very quickly or the customer base isn't going to be around much longer."

Let us know what you think about the story; email: Shamus McGillicuddy, News Editor


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