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

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 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

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

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.

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