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Sneak Preview: Avaya/Nortel Panel at VoiceCon
It will be up to Avaya/Nortel to convince customers that traditional telephony requirements should not be comprised and must be evaluated on its own as a best in class basis, not as a single element of many.
I will be participating in a panel discussion at next week's VoiceCon San Francisco on the tentative Avaya acquisition of Nortel Enterprise Solutions (ES). The deal, if it goes through as expected, will be the largest and most significant joining together of two competitive enterprise communications system suppliers. It will also be one that promises to have major ramifications on the current and future dynamics of the marketplace.Though Nortel's shipment numbers have been in decline the past two or three years, they still retain a very sizable installed customer base comparable to that of Avaya. The resulting entity will have more than double the global installed base of the runner-up (be it Siemens Enterprise Communications or Alcatel-Lucent, based on whose data is used). Based on current shipments, the annual shipment market share of the new entity is comfortably ahead of runner-up Cisco Systems for enterprise telephony systems and far ahead of the field for contact center solutions.
There are both positives and negatives associated with the market size of the new entity. Among the positives are a very large customer base to sell high margin system upgrades, application solutions, and professional services, and potential business benefits derived from economies of scale for manufacturing, R&D, and marketing processes. The negatives, though, may on the surface outweigh the positives, because this is what management will be faced with off the bat:
* A too-large collective product portfolio that will have to be pruned to a more manageable number of offers while performing the tricky job of assuring a very sizable number of existing Avaya and Nortel customers that their existing solution(s) will not have a shorter life than originally anticipated
* A distribution network with too many cross-competitive dealers in a large number of geographic territories; maintaining and supporting a too-large distribution network is expensive and a waste of valuable resources
* The ugly need to continue trimming employee head count, especially those with similar or overlapping job responsibilities, and shutting down office facilities (where possible)
* Addressing the many negative feelings and perceptions generated the past few years by Nortel's financial difficulties that resulted in R&D cutbacks, diminished customer/channel support services, and employee layoffs (severance and pension issues, included)
* Protecting the installed base from continued attacks by Cisco, new attacks by Microsoft, and the ongoing growth of open source and hosted solutions in the SMB market segment (and threat of extension into the larger line size enterprise segment): Everyone else and their brother will also be targeting Avaya and Nortel customers the next year by deploying the FUD (fear, uncertainty and doubt) factor
The most important issue facing the new entity (which will go forward by the Avaya name) will be whether a system supplier that mostly relies on its enterprise voice communications heritage, i.e. market knowledge/expertise and product/service offerings, can compete in the future against the likes of a Cisco or Microsoft who leverage dominating strength in other IT market segments, such as hardware network infrastructure or desktop software, respectively, to drive sales of their telephony offerings. Cisco's overall IT product portfolio makes that of Avaya/Nortel appear lacking in scope and depth; Microsoft's presence (pardon the pun) at virtually all station user PC desktops is hard, if not impossible, to ignore. For Cisco, voice communications is positioned as just another application on its network, and for Microsoft, real time voice is just another communications process to add to its Exchange email messaging and OCS 2007 IM solutions. It will be up to Avaya/Nortel to convince customers that traditional telephony requirements should not be comprised and must be perceived as an "application" that must be evaluated on its own as a best in class basis, not as a single element of many.It will be up to Avaya/Nortel to convince customers that traditional telephony requirements should not be comprised and must be evaluated on its own as a best in class basis, not as a single element of many.