Eric Krapf
Eric Krapf is General Manager and Program Co-Chair for Enterprise Connect, the leading conference/exhibition and online events brand in the...
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Eric Krapf | June 24, 2009 |


NEC Unified Prez on Nortel Fallout

NEC Unified Prez on Nortel Fallout On "buying a base" and other assumptions that may (or may not) bear out.

On "buying a base" and other assumptions that may (or may not) bear out.

I heard today from Jeff Kane, who's president of NEC Unified, and who shared some thoughts about the discussion going on in the industry around the future of Nortel and potential acquisitions of the Enterprise Solutions unit. Jeff's one of the sharpest guys we know, and I found his commentary really interesting, and he agreed to let me share it with you:

I read Zeus' post on yesterday and appreciate the informed opinion. I've also been reading what Allan writes. We're clearly in an industry facing significant change and generating equally large opportunity. I thought sharing some of my thoughts might help "stir the pot" a bit. I'm not writing so much from the perspective of my current job, but rather as someone in the middle of a rapidly changing industry--clearly with an interest in the developing situation.

What's interesting is the future dynamic (post acquisition scenario) which is discussed. My personal opinion is that there are several assumptions throughout the posts which may hold, or may be challenged. Specifically:

* "Buying a base" of customers to sustain seems like a good idea. Without continued sales, to me, it also seems likely that the cost of support will rapidly consume the profit generated. The real question is where customer loyalty lies--with technology, vendor or dealer? In a "buy the base" model it seems like the bet is on technology--my experience is that personal relationships trump equipment and the key is really keeping the dealers happy, selling and aggressively representing the product.

* Similarly, buying a base to migrate may also work. I would speculate that the "acquirer" would either have to continue production of the acquired systems or have a very graceful (and economically beneficial) migration plan in place. What I can't figure out is the cost of this strategy, but I'm guessing there are some very good financial modelers working on that right now.

* If there is going to be a transition of technology, rather than a migration--should customers not look at the latest tools from multiple providers? What is there that "locks" customers into a vendor within current base?

* Like customers, dealer networks are enticing--but what can be done to ensure both the long term viability of dealers, as well as the profitability for manufacturers? One area where we all seem to differ is in the model for ongoing sustainment.

* How will dealers--already struggling with new systems sales--pay for their transition? Carrying inventory, training, etc. all have costs--many will emerge ready for the new markets, but there seems to be more risk than ever.

* How do companies successfully integrate disparate cultures? Zeus points out a couple of challenges within very sophisticated companies with strong customer bases--what happens to customers, service delivery models, product lines, etc?

* What choices (people, technology, dealers, customers) will these newly integrated companies have to make in order to pay their investors back? Everyone answers to the people who put their money in; in tomorrow's economy, with new entrants and changing delivery models, will it all work?

The current news about NT is disconcerting since they were a leader in the communications space. Whatever happens will generate both risk and opportunity and we're all going to be watching closely.

On "buying a base" and other assumptions that may (or may not) bear out.


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