What’s left to say that hasn’t already been said about Nortel filing for bankruptcy? It’s a big disappointment and I hope that something good comes out of it – perhaps a leaner, meaner Enterprise group?

The writing has been on the wall for years, ever since the financial wrong-doing that had Nortel restating its earnings over and over again. Customers no longer had the full trust in Nortel, and its reputation was badly injured. Now it’s filing for Chapter 11 after missing a $107 million interest payment. Ouch!

What’s really sad is that the company has some great technology (not all of it, but much of it) and many loyal, happy customers. I’ve been speaking with some Nortel customers recently, and they are very happy campers who love their Nortel products and relationships.

Nortel tried its best when it entered into the Innovative Communication Alliance (ICA) with Microsoft, hoping that this relationship would help provide a competitive differentiation. While some people saw this as a last ditch effort to stay relevant, others saw it as Nortel selling its soul to Microsoft. While Nortel did attain some net new unified communications customers, it wasn’t enough to make a dent in its lagging business.

Most industry pundits are debating about what will happen to Nortel – most people expect the company to be split up in parts, and sold piecemeal to competitors. The question will become, which parts will they sell, who will they sell them to, and what parts will they keep. One report had them looking to focus on WiMax, while other people believe it will sell off its Enterprise division to Microsoft (I highly doubt this will happen and would be really surprised if Microsoft gave this option much thought). Personally, I’d like to see Nortel focus on its enterprise business. To me, this is their best bet. But maybe that’s because that’s the part of Nortel that I focus on and would like most to see succeed.

The company notes that it will continue daily operations as usual and will continue to support its products while investing in research and development. As of now not much is supposed to change for existing customers. According to Mike Zafirovski, CEO, “These actions are imperative so that Nortel can build on its core strengths and become the highly focused and financially sound leader in the communications industry that its people, technology and customer relationships show it ought to be.” He went on to say “I want to reaffirm Nortel’s dedication to delivering world-class solutions and services to customers.” What he didn’t say is how they will achieve this.

While I have no insights into what Nortel will do, my personal hope is that the company sells off its Metro Ethernet and Carrier Business, and focuses on its Enterprise Business – mainly unified communications and contact center. The company has done a good job of moving forward to a software-based architecture, although not too many of its customers have moved in that direction yet. The company recognized the shift away from hardware toward software and has introduced ACE and other offerings, but has primarily been living off of its installed base of customers and products rather than selling much of the latest and greatest stuff.

This is a sad day, but there are lessons to be learned.

Tags: Unified Communications Information by Blair Pleasant
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The news, of course, is the Nortel announcement today of Bankruptcy proceedings.  But, as others have already commented, this is not a surprise — the rumors and preliminary actions have been visible.

What are the implications for UC?  It’s not bad news, that’s for sure.  Here’s a quick list of ideas:

• Motivation to Change to Software Format:  This is just one more signal that there is not much profit in the traditional telecom industry — both enterprise and carrier.  There are still too many players, little differentiation, and minimal or no growth.  Thus, both the suppliers (Nortel, et al.) and the customers should be motivated to look to the future and move to the new, layered software model, which just happens to be the format of all the new UC innovations, from Nortel and others in telephony as well as from those in the desktop, application, mobility and web categories.  This will produce a leaner, but more profitable and flexible set of solutions and options, with an emphasis on UC. 
• Customer Investment in the Software Layers vs. Hardware Options: Perhaps it will make sense for customers to focus on a software-based UC overlay to the traditional telephony systems as a safety play for telecom as well as a smart investment based on the UC applications value.  These software overlays could come in a variety of formats, such as the Nortel Innovative Communications Alliance with Microsoft, or Nortel’s partner solutions with IBM.  Siemens Openscape, NEC UniVerge 360, Mitel Unified IP Client for SunRay, Cisco WebEx Connect are other software layer options from the telecom community.
• Increased Focus on Service Sources and Agreements:  Existing customers will want to look carefully at their service agreements and providers to assure they have a reasonable source of parts (for the hardware components), a solid source of expertise from the smartest VARs, and with a good contract for on-going support from the vendor.  (This is good advice for any of the telecom providers, not just Nortel, and including Cisco.)  Since the pace of innovation in traditional telecom is fairly low, a good services program can deliver a long useful life for the existing products, even without new product releases.  One possible implication for UC is that the pace of hardware investment slows, opening up more budgetary room for UC investments.
• New Solutions and Approaches Look More Interesting:  With the traditional telephony base in question, customers may want to hedge their bets even further by exploring the alternative approaches, such as the desktop, mobility, or applications options for UC as described at VoiceCon and here on the UCStrategies.com site.  Of course Microsoft Office Communications Server 2007 or IBM Lotus Sametime are the leading examples of this approach.  Other options include the RIM Mobile Voice System which makes the BlackBerry phone into a corporate extension, and the embedded or integrated communcations functions of software providers such as Salesforce.com, Siebel, or Oracle.

Major events, such as this bankruptcy filing, tend to catalyze shifts in thinking and in resulting actions.  This sort of evolution has happened in many other industries in past decades — transportation, automobiles, steel, newspapers, cash registers, and steam shovels, just to name a few.  The cause and the effect have been innovations that, in the end, produced more efficient and economical solutions.  My perspective is that this is happening in communications and the software-based world we are calling Unified Communications will be the long-term winner.

Comments?

Tags: Unified Communications, Unified Communications Information by Marty Parker
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