MY TAKE: I HAVE BEEN IN THIS BUSINESS FOR 25 YRS AND THIS IS A DIFFICULT BUSINESS TO BE IN AND PROSPER. Trying to guess where the industry is going next, competition from other manufacturers and from other vendors selling the same product as you but trying to get former competitors to sell under the same umbrella, FORGET IT. This will continue to be a struggle for the forseable future and I have no idea how you can fix it.

By Douglas Carolus | Apr 18, 2010

A couple of months following their roadmap announcement, I’m still not sure which way Avaya is headed…

Allan’s No Jitter Blog
I read Allan Sulkin’s No Jitter piece “Avaya Product Roadmap for Nortel Offers Has Few Surprises” on January 18, 2010 (one day before Avaya’s official announcement “Avaya/Nortel Enterprise Solutions Integrated Portfolio Roadmap“). Allan’s a smart, savvy analyst who works closely with Avaya, so I figured he had the analysis nailed.

In Allan’s blog, I focused on a few key phrases such as “the current list of product cancellations is quite short” with the MCS 5100 and Nortel Multimedia Conferencing biting the dust and replaced by Avaya’s Presence Server and Meeting Exchange, respectively. His comments that the CS1000 and BCM products “will continue to be sold indefinitely” seemed straightforward, implying that these Nortel systems would be viable technology for the next few years.

My takeaway: if a customer had wanted to buy Nortel in the past but put their decision on hold because of Nortel’s bankruptcy, they could now buy that CS1K with confidence, knowing the system would be a supported for the next several years with new major software releases, patches/fixes, as well as full manufacturer maintenance services going into the next decade.

Certainly Avaya’s winnowing of its desktop portfolio down to SIP compliant devices made sense. Frankly, there are just too many devices for Avaya to support and for customers to choose from anyway.

Allan’s insights into Avaya’s “Applications Sequencing” and plan to abstract call setup/routing onto Session Manager with telephony features/functionality residing on a separate server (using the best features of Avaya and Nortel) looked quite interesting.

As always, good information from Allan.

Avaya’s Roadmap
Still, I thought it best to validate Allan’s post by attending Avaya’s roadmap announcement webinar on the 19th. I tried to attend the webcast 5-6 times but successfully failed to access it until the last 5 minutes, as the event was oversubscribed. Not a good start for the “new” Avaya-Nortel. I ended up having to watch the announcement via instant replay.

A few comments about the broadcast:

* Make sure everyone who was invited can access it.

* Stop trumpeting EBITA as a measure of your financial health. To quote Charlie Munger (Vice-Chairman of Berkshire Hathaway Corporation and Warren Buffet’s cohort): “I think that, every time you see the word EBITDA [earnings], you should substitute the word ‘bull****’ earnings.”

Or to put it more gently, “EBITDA hides reality by concealing normal expenses a company will encounter, and gives a false sense of the profit potential of the business.” These normal expenses include interest and taxes.

I believe it’s safe to assume that Avaya has significant interest expenses from financing the Nortel deal (and to take them private) which may explain the rumors of Avaya going public again. You have to take these costs (and taxes) into account to really understand how well they’re doing. So instead of talking about EBITA, let’s see income statements for the past few years to better evaluate their financial well-being today.

* Lastly, Avaya will absolutely sell Nortel’s CS1000 and BCM products now. To paraphrase Dr. Allan Baratz’s comments during the broadcast: if you have or want an Avaya or Nortel environment and are looking to buy a system…no problem, we’ll sell you an Avaya or Nortel system (to hear his actual comments go to minutes 22-24 of the Avaya roadmap re-broadcast).

OK, while not thrilled about not being able to access the broadcast and with the lack of specifics on the roadmap timelines, the message seemed consistent with Allan’s blog. That is, if you want to buy a Nortel CS1000 or BCM, you can buy it from Avaya now. My conclusion was that Avaya will continue to enhance, sell, and support the product “indefinitely” just as Allan wrote.

I also attended one of Avaya’s “live” roadshow conferences in February. Sorry to say but this was not Avaya’s best work with no new or meaningful information provided. Though the Olympics video was pretty funny with Avaya touting its role at the games while showing their logo slapped on Nortel 1100 series phones. Suggest they “pilot” these roadshows with real customers/consultants next time before doing it again.

Fast forward to March with Stephen’s article posted on the 10th. Thought the piece was great by offering specific information and good advice about doing your due diligence (that regrettably few customers will follow). If you’re a Nortel customer and haven’t read it, I strongly recommend you do.

So why am I confused? Stephen’s analysis of Avaya’s Nortel roadmap seriously conflicts with Sulkin and Avaya’s information, especially about the CS1000 and BCM products.

Instead of presenting a short product cancellation list and talking about products being sold indefinitely, Stephen describes a long list of product cancellations and specific information about systems that will be designated “End of Sale” in the next 12-18 months such as CS1000, BCM, CallPilot, and Contact Center.

So who’s right? Until I hear otherwise, I’m inclined to go with Leaden’s more detailed analysis. I spoke with him at the last VoiceCon conference and his article is based on his discussions with Avaya and his own estimates/opinions of what will take place based on historical trends, years of experience, and the financial commitments of any organization having to support two distinct product lines.

That said, I’ll try to confirm Avaya’s direction next week when I’m at their consultants’ conference in Denver.

I’m not sure why Allan’s blog wasn’t more specific but guess he “got what he got” from Avaya and depended on them for the accuracy of information. That said, I am disappointed that Avaya hasn’t been more forthcoming and frequent with product roadmap specifics to guide customer and consultant thinking about critical buying decisions. It feels like we’re responsible for doing the research and sorting the roadmap out ourselves. I can also tell you that the Avaya and Nortel clients I’ve talked with over the past few months aren’t being told much if anything by Avaya or their channel partners.

What about Avaya End of Sale and Extended Support?
To better understand what Avaya (and Stephen Leaden) mean by End of Sale, the Avaya website states:

End of Sale is the last date of commercial availability for a particular hardware product or software release. This designation tells you that the product will no longer be manufactured and sold as “new”, nor will additions, spares, or upgrades be provided.

What does this mean? End of sale = dead end product. So why would you buy a product announced as End of Sale?

I also understand that if you want your existing Nortel system’s software to be supported (aka Partner Assurance Support Services or PASS), Avaya will provide maintenance support until 2017 under an extended maintenance plan but you need to be no more than two releases behind the current system version by July 1, 2010. If you’re >2 releases behind, you need to upgrade your Nortel system. In some cases, you also need to upgrade your adjunct systems such as voice mail and contact center platforms to address integration issues between new and older systems.

Also be aware that extended support has its limitations. According to an Avaya document (same link as in the discussion on End of Sale above) entitled “Avaya Global Services Introduces Extended Support”, this service:

…continues the existing benefits of your maintenance coverage with some exceptions. The following is no longer available during periods of Extended Support:

* Current engineering support (Tier IV)

* Further hardware/software maintenance enhancements (e.g., PCNs, “bug fixes,” interaction/usability solutions)

* Since new replacement parts are no longer manufactured for End of Sale products, parts shortages on some products or components may require replacement with substitutes, which may cause delays in repair and response times or require upgrades to other components at customer expense

* Per Incident (formerly Time & Materials) Support will end simultaneously with the end of Manufacturer Support.

Not what I would call reassuring….

I’ll limit the conclusion to a few observations with an open invitation for comments (which you can post here) from Avaya, Avaya’s channel, customers, analysts, consultants, or anyone else who can bring clarity to the discussion:

1.) If I’m a Nortel-only channel partner, I’m not feeling too good about the future. What can the Avaya Connect program offer to get these partners certified, competitive, and competent quickly against established players like NACR, Cross Telecom, Verizon, and Shared Technologies–not to mention Avaya’s competitors? (Avaya Connect is the new channel partner program announced in February 2010)

Just because they’ve signed up 264 partners (62 percent of the total Nortel Enterprise Solutions partner base, according to Channel Insider, April 7, 2010) doesn’t mean that they’re ready to go to market. There is some serious heavy lifting (not to mention costs) needed to get these channel partners on par with the Avaya certified partners and the competition. Does Avaya really have enough capital and organizational resources to fully support this effort?

2.) If you’re a Nortel customer looking to replace or expand your infrastructure, are you really going to make a major investment in new Nortel technology now? Doubt it. I can’t see why you’d bet your critical communications infrastructure on their quickly fading technology. In fact, Avaya is recommending you buy their maintenance and then “layer” Avaya Aura Session Manager on top of upgraded Nortel systems and then start replacing the legacy Nortel systems with Avaya.

3.) Why hasn’t Avaya been more forthcoming with specific roadmap details and timelines instead of us having to rely on 3rd party experts like Sulkin and Leaden?

4.) Why the July 1 deadline for Nortel system upgrades for software support? Forcing many customers to make this capital investment mid-year when their IT budgets are fixed (and limited) is a lousy way to build customer goodwill (and a good way to open the door to the competition).

The Avaya channel partners I’ve talked with aren’t keen about this tactic or the conversations they’re having with their customer base about this “upgrade and support program” even if Avaya is offering deep discounts. From my experience, customers who are strong-armed by vendors into procurements will remember how this was handled and it WILL impact their next major buying decision.

That’s enough for this post. Again, I’ll provide an update from the Avaya conference next week. I also invite your comments (which you can leave here) and look forward to hearing from you.

Douglas Carolus is Director, Communication Solutions at N’compass Solutions, an independent IT technology consulting firm located in Minneapolis, MN and focused on communication and data center solutions. If you want to comment on or respond to this article, you can do so here.

 This whole buyout never made any sense to me. These systems are completely different, trying to make them work together is going to be extremely dificult if not impossible. Check out the concerns at the end of the article. If I had a Nortel I would be really nervous.

Current customers have been eagerly awaiting a new version of Response Point, something they’ve been promised for well over a year now. You see, Response Point is like a lot of Microsoft 1.0 products. It had a lot of bugs but the promise of a bright future. Now, unfortunately, that future will never be realized. And current customers will be stuck with a poorly supported, buggy VoIP platform. The VAR Guy compares it to IBM’s OS/2.

Most SMBs choose “simple” products because they don’t have dedicated IT resources nor the time to build expert-level knowledge on their own. Companies like Evangelyze built their reputation on being able to make Response Point work well and keep it working for a number of SMB customers. Unfortunately RP never was much of a do-it-yourself type platform.

So, where does this leave current Response Point customers? Well, it’s not like Microsoft doesn’t have a credible VoIP platform. Microsoft has been ramping up OCS, Office Communications Server, over the last 2 years and it’s now a common name in most companies. Right now it’s targeted at the mid-market and small enterprise, 500-2500 users with hopes to jump into many larger accounts soon. However I’ve done plenty of small OCS implementations as well. It’s outstanding as a pbx-replacement for 25-100 users (and larger). It can be done in just a few servers and be basically zero-touch day-to-day.

With the death of Response Point Microsoft will need to start directing customers to OCS. And, it will need a lot of help from SI’s and VARs. SMBs will also need to get over the intimidation of deploying a true enterprise platform with little to no in-house support.

Thanks to Dave Michels for breaking this news on Twitter.

 I AM EMBARASED TO ADMIT I JUST HEARD OF RESPONSE POINT A FEW WEEKS AGO. A POTENTIAL CLIENT BROUGHT IT TO MY ATTENTION AND WHEN WE DID A LITTLE RESEARCH WE WERE NOT THAT IMPRESSED. I GUESS WE WERE RIGHT ABOUT IT ANYWAY.

The pair forged a relationship in 2006 that resulted in what they called the Innovative Communications Alliance (ICA), a plan to jointly develop, sell and roll out UC and VoIP technology to corporate customers over a four-year period.

The Compelling Case for Video Telephony in UC: Download nowNortel was bringing to the table its telecom background, middleware product set and install base while Microsoft was taking a software approach to voice anchored by its Office Communications Server (OCS).

The partnership, which has already delivered some tangible product integrations, is slated to end in 2010 and current developments may signal its permanent demise.

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View more related contentGet Daily News by Email”Bankruptcy does not mean going out of business, but Nortel is fighting for its life,” Zeus Kerravala, an analyst with the Yankee Group, told Network World in January.

Nortel’s asset liquidation could eliminate from the partnership Nortel’s telecom products, including its IP-PBX platform, the Nortel engineers working with Microsoft on jointly developed products, and Nortel Global Services, the consulting arm that provides glue for ICA.

The consequences of such a collapse can be summed up in comments by Nortel CEO Mike Zafirovski at the 2006 partnership unveiling when he called the deal an opportunity to create $1 billion in revenue.

That prediction has not come to fruition, and by 2008 Nortel was reporting a $3.4 million loss and company officials were unwilling to discuss the Microsoft partnership in terms of earnings.

By January 2009, Microsoft would only say it was waiting for more information before it could evaluate the fallout from Nortel’s bankruptcy filing. On Tuesday, as Nortel was working to liquidate its assets, Craig Schuman, director of business development and strategy for the unified communications group at Microsoft, said: “Both Microsoft and Nortel remain fully committed to delivering customers the best unified communications solutions available. We are not in the position to assess the impact to the ICA until we understand Nortel.s plans for its enterprise division.”

But Nortel’s plans are clear now with the company liquidating and hoping to restructure under Chapter 11.
Gone could be its enterprise business, which Zafirovski has said is on the block. Canada’s Globe and Mail is reporting that

Nortel is close to selling the division to Avaya for $500 million. That deal would include the UC equipment that is critical to ICA.

Want to compare convergence and VoIP products? Visit the IT Product Guides now.Given the overlap in product sets between the two competitors and the fact that Microsoft has an existing UC partnership with Avaya, such a deal could spell the end of integration work or joint development under ICA. Those efforts might shift to Avaya products depending on what, if any, Nortel products survive the acquisition.

Another blow could come as competitors, including Microsoft, jump at the chance to steal Nortel’s VoIP customers, its largest install base.

The final straw could be the sale of Nortel’s Global Services. While it has not been mentioned specifically by Zafirovski, observers say it appears Nortel has everything on the table.

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THIS IS GETTING JUICY, SINCE MICROSOFT NEEDS A UNDERLYING SYSTEM TO DELIVER THEIR UC IT WILL BE INTERESTING TO WATCH WHAT HAPPENS.

According to an article in Canada’s Globe and Mail this week, Avaya has emerged as the “favored bidder” for Nortel’s Enterprise Solutions group, which develops and markets the company’s switches, routers and telephony gear to businesses. Nortel is looking to sell off most or all of its assets, having apparently failed in a bid to emerge from bankruptcy as a viable competitor in data networking and telecom.

How Rich Internet Application Technologies Enable Business Banking Client Relationships: Download nowRead about Nortel’s relationship with Microsoft. 

Nokia Siemens just acquired Nortel’s CDMA and LTE wireless businesses for $650 million. Nortel has said it is in advanced negotiations to sell other company assets.

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View more related contentGet Daily News by EmailNortel’s enterprise business has been declining rapidly. The unit generated about $395 million in sales in the first quarter of 2009, down 41% from a year ago, 34% from Q4, 2008, and less than half of the $806 million recorded for the fourth quarter of 2006.

“If executed, Avaya will become a larger player in the enterprise market – a top 4 player in Layer 2-3 Ethernet switching and the largest VoIP player with roughly 25% market share,” states Oppenheimer & Co. analyst Ittai Kidron in a bulletin on the reported Avaya bid. “This could either push privately held Avaya to continue to acquire smaller players to round out its enterprise portfolio and further consolidate market share or position itself as a more attractive acquisition target.”
Cisco and Juniper are likely to aggressively poach Nortel’s switching customers, Kidron states, and Avaya’s partnerships with Juniper and Extreme Networks may be impacted as well.

If Avaya pulls out, Siemens Enterprise Communications could emerge as a buyer for Nortel’s enterprise group, the Globe and Mail report states. Nortel has also drawn the interest of nine companies for its Metro Ethernet business, according to the report.

Nortel filed for bankruptcy early this year as its attempt to recover from a 2004 accounting scandal and a shortfall in demand took an enormous financial toll on the company. That, coupled with the overall global economic downturn, forced the company to ultimately break it self up, analysts say.

 HERE WE GO THE LAST GASP FOR NORTEL. I DONT THINK IT WILL MATTER WHAT AVAYA AND/OR SIEMENS DOES THEY ARE NO DIFFERENT THAN NORTEL, HYBRID PBX’S IN A VOIP WORLD. FUN TO WATCH THOUGH.

Watch a slideshow of Nortel over the years.

Nortel this week said it will sell its CDMA and LTE wireless business to Nokia Siemens Networks for $650 million. Nortel also said it is seeking buyers for the rest of the company’s operations – enterprise, optical and Metro Ethernet among them.
Nortel is also delisting its shares from the Toronto Stock Exchange. In essence, the company, after 100-plus years as Canada’s foremost telecommunications equipment manufacturer and at one time valued at over $200 billion, is exiting the arena.

“The global financial crisis and recession compounded our challenges and impacted our ability to complete our transformation,” Nortel CEO Mike Zafirovski told the Canadian parliamentary finance commission last week, according to the Wall Street Journal.

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View more related contentGet Daily News by EmailAnalysts say Nortel had no choice but to follow this course.

“Nortel’s plan to sell all of its divisions, including enterprise, is the right one,” says Steve Schuchart of Current Analysis. “It’s been proven to this point that Nortel, as it is, cannot continue. The overall economy and Nortel’s performance over the last several years” forced them to liquidate assets.

“A declining economy, coupled with the fact that put a couple of business units up for sale that didn’t get bought … the company’s in a situation now where its viability is in question,” says Zeus Kerravala of the Yankee Group. “I’m not sure they had other choices.”

Enterprise users are waiting for that shoe to drop, says Victor Bohnert, executive director of the International Nortel Network User Association (INNUA).

“We are glad to see Nortel formalizing some of the plans for its business units,” Bohnert said. “Earlier this month at INNUA’s Global Connect 2009, Zafirovski told our members that Nortel was seeking potential buyers for its business units, this move clearly indicates the implementation of that strategy.

“We continue to wait for news on the enterprise business specifically- and we expect that that news will be coming soon,” Bohnert said. “Our 4,000-plus members rely on Nortel solutions daily to drive their businesses forward – the important thing for them is that the technology survives. This recent move may signal the beginning of the end for Nortel as it exists today. Once a direction is specified for enterprise, we will work with all parties to help guide our members through the transition.”

Schuchart advises customers who had planned to purchase Nortel gear in the current budget year to go ahead with those purchases.

“If you’ve got a Nortel network and you’ve got budget on the books to buy Nortel equipment over the next couple of months, go ahead and do that,” Schuchart says. “Any plans beyond the immediate budget year need to be reviewed.”

But others might want to wait to see which company, if any, buys the Nortel enterprise business, Kerravala says.

“Whether it’s good or not for the customers depends on who acquires them,” Kerravala says. A company with little overlap might invest in the product line and keep it viable, he says; a company with a significant amount of overlap might just be acquiring the customer base and planning to migrate it to its own products.

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View more related contentGet Daily News by Email“Any investment you made over the last couple of years is gone,” Kerravala says. “It is a crapshoot as to what remains and what doesn’t, post-acquisition.”

Avaya and Siemens Enterprise Communications have reportedly shown interest in Nortel’s enterprise assets.

Schuchart advises customers who had planned to purchase Nortel gear in the current budget year to go ahead with those purchases.

“If you’ve got a Nortel network and you’ve got budget on the books to buy Nortel equipment over the next couple of months, go ahead and do that,” Schuchart says. “Any plans beyond the immediate budget year need to be reviewed.”

But others might want to wait to see which company, if any, buys the Nortel enterprise business, Kerravala says.

“Whether it’s good or not for the customers depends on who acquires them,” Kerravala says. A company with little overlap might invest in the product line and keep it viable, he says; a company with a significant amount of overlap might just be acquiring the customer base and planning to migrate it to its own products.

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View more related contentGet Daily News by Email“Any investment you made over the last couple of years is gone,” Kerravala says. “It is a crapshoot as to what remains and what doesn’t, post-acquisition.”

Avaya and Siemens Enterprise Communications have reportedly shown interest in Nortel’s enterprise assets.

 Schuchart advises customers who had planned to purchase Nortel gear in the current budget year to go ahead with those purchases.

“If you’ve got a Nortel network and you’ve got budget on the books to buy Nortel equipment over the next couple of months, go ahead and do that,” Schuchart says. “Any plans beyond the immediate budget year need to be reviewed.”

But others might want to wait to see which company, if any, buys the Nortel enterprise business, Kerravala says.

“Whether it’s good or not for the customers depends on who acquires them,” Kerravala says. A company with little overlap might invest in the product line and keep it viable, he says; a company with a significant amount of overlap might just be acquiring the customer base and planning to migrate it to its own products.

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View more related contentGet Daily News by Email“Any investment you made over the last couple of years is gone,” Kerravala says. “It is a crapshoot as to what remains and what doesn’t, post-acquisition.”

Avaya and Siemens Enterprise Communications have reportedly shown interest in Nortel’s enterprise assets.

 THIS WAS INEVITABLE. I have been very vocal for the last 8 yrs that their were going to be big name companies that would not survive the changeover to VOIP. When I mentioned companies like Nortel and Avaya I was laughed at. I hate to say I told you so but I TOLD YOU SO. But I am not gloating I was just predicting what takes place everytime there is a revolutionary change in an industry. Remember Digital and Wang. Same thing!

My observation of Cisco’s foray into VOIP is that it is a loss leader. A way for them to hang on to their existing Network gear which is under increasing attack from numerous competitors.

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