RealTime IT News

Microsoft, Nortel Play Nice For Big Stakes

Like Hollywood marriages, most high-profile partnerships seem to go the way of AOL and Time Warner. But Microsoft  and Nortel  have announced a strategic alliance that might actually live up to its billing.

And quite a billing it is.

The software giant and the Toronto-based networking giant have committed to delivering a communications solution that takes advantage of their respective strengths through joint product development, as well as common sales and marketing approaches.

The companies intend to transform communications from a hardware-driven to a software-driven solution that works with any type of hardware, using a unified communications software platform developed by Microsoft and software products developed by Nortel to provide further advanced telephony functionality.

According to the terms of their agreement, Nortel and Microsoft will:

  • collaborate on product development;
  • cross-license intellectual property;
  • engage in early-stage integration and testing;
  • sell the advanced unified communications solution and integration services; and
  • build a joint channel ecosystem using both companies' systems integrator, reseller, and service provider relationships.

Both companies also plan to develop a training and incentive program for the companies' sales teams.

Nortel also agreed to deliver solutions that complement Microsoft's unified communications platform, including enterprise contact center applications, mission-critical telephony functions, advanced mobility capabilities and data-networking infrastructure.

The companies will begin to roll out the products in 2007.

Microsoft CEO Steve Ballmer predicted that all business communications will be IP-based within 10 years, with hundreds of millions of users getting new communications equipment.

"Change is imminent," he said during a press conference held today to announce the alliance.

Ballmer refused to put a dollar figure on this market but said, "if we can't make this into a gigantic revenue opportunity, then shame on us."

Nortel president and CEO Mike Zafirovski told internetnews.com that he expects his company to realize incremental revenue gains of upwards of $1 billion within three years.

"This is an opportunity to not play defense, but to play offense," he said.

What neither Ballmer nor Zafirovski admitted, however, is that their relationship is driven as much by necessity as by strategic vision, and that neither may have been able to take this kind of step alone.

Zeus Kerravala, an analyst who follows the networking sector for the Yankee Group, noted that while Microsoft enjoys an unassailable position on the desktop, it doesn't have the sterling reputation for quality that would endear it to enterprise network professionals.

Nortel, on the other hand, doesn't have nearly as much understanding of the enterprise user experience and is looking for ways to get more traction from its core offerings.

"It's an entry point for Nortel they didn't have before," he told internetnews.com.

Laura DiDio, a Yankee Group analyst, said the alliance is in line with Microsoft's strategy.

"This is how they keep their hold on the desktop -- by running it over someone else's pipe," she told internetnews.com.

DiDio noted that Microsoft has entered into almost two thousand strategic alliances with various telecom companies throughout the world, including Siemens, Vodafone, Cable & Wireless and British Telecom.