The companies yesterday announced a partnership, shamelessly named the Innovative Communications Alliance, which will see the two companies share R&D and sales and marketing efforts around ‘software-centric’ communications systems.
For Microsoft, it gives the company a partner with a track record selling to the voice and data network buyers in enterprises, strengthening its hand against the likes of Cisco Systems.
For troubled Nortel, the deal gives it a strong partner to push its network integration services, and new revenue that chief executive Mike Zafirovski estimated at over $1 billion by 2009.
The aim of the partnership is to jointly develop and market systems that bring together voice, presence, email, instant messaging and web and video conferencing, a market at the early stages of the hype curve known as ‘unified communications.’
Microsoft made a big deal of the fact that the commitment is to build ‘software-centric’ communications platforms, dispensing with proprietary kit in favor of off-the-shelf hardware.
The key integration point at first, according to executives, is a SIP-based software interface between Microsoft’s Live Communications Server and Nortel’s CS-1000 IP PBX appliance. This kind of integration, announced in February, let Nortel provide PSTN break-out functionality required for users of Microsoft’s Office Communicator to communicate with regular telephones, not just other Communicator users.
In future, Microsoft expects to have its business applications all compatible with this unified communications platform.
The deal is slated to last for at least four years. Most of the financial commitment will come in the form of joint investment, though Microsoft has also shelled out an unspecified amount upfront to license Nortel’s intellectual property.
There is a temptation here to see this as an anti-Cisco alliance, although the deal will certainly affect the likes of Avaya too.
While Microsoft and Cisco cooperate on some fronts, there is no denying Cisco’s unified communications offerings are muscling in on Microsoft territory — email, IM and conferencing, for instance.
Microsoft, meanwhile, with the fixed and mobile enablement of LCS and its planned successor, Office Communications Server 2007, is encroaching onto Cisco’s territory in VoIP, and the Nortel deal demonstrates that it is taking voice very seriously.
If Microsoft is now recommending Nortel’s CS-1000 as its IP PBX of choice for integration with OCS, that will present a significant alternative to Cisco’s CallManager, despite its protestations of collaboration rather than competition with Microsoft.
For Nortel, the deal represents an interesting shift towards the software side of the market. Indeed, company executives indicated during the press conference that much of the expected new revenue would come from implementation services.
The partnership may be interpreted as a further indication that Nortel is back behind the ball, after languishing so long in the doldrums of financial scandal, the hangover from sybaritic empire building and what looked like a revolving door for its CEOs.
Under Zafirovski, Nortel appears to be back on track, exiting underperforming businesses and launching some new technologies, such as provider backbone transport (PBT) in the carrier space, that suggest it may become a heavy hitter again.
