For those who follow the news feeds, there's been big news about a partnership or join effort between Nortel and Microsoft. Since almost everyone it talking about it, I can't begin to cite every story. But trying to read through them all to understand what this really means leads to some interesting points ad observations. Let me begin with a tour through some of the recent news stories and blog commentary on the subject.

Let's start with the CNET News story Microsoft, Nortel form alliance

update Microsoft announced on Tuesday that it has formed a strategic partnership with Nortel Networks to develop and market unified-communications products.

Together, the companies plan to transition traditional business phone systems into software that integrates Microsoft communications software with Nortel Internet telephony hardware and software.

As part of the deal, the companies will enter a four-year alliance. Nortel will be Microsoft's strategic partner as its pushes its unified-communications products. Nortel will also become the systems integration partner for the advanced unified-communications solution.

Other news stories include
Nortel deal cements Microsoft links to VoIP Seattle Times
Microsoft joins with Nortel to sell businesses on VoIP phone ... USA Today
Nortel, Microsoft in deal to promote VoIP Earthtimes.org
Microsoft, Nortel hook up for VoIP and more Silicon.com
Microsoft links with Nortel to promote VoIP One Stop Click

There's a collection of news stories that all say much the same thing. Microsoft and Nortel are doign something together. A strategic partnership.

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VoIP News brings us Microsoft-Nortel Deal A Great Move For Customers? Or A Way To Prop Up Slumping Stock Prices?

The Microsoft - Nortel deal just announced is, on the face of it, a really smart move and a real sign that Microsoft really wants to successfully drive unified communications all the way inside its Office products (key word successfully). But it could also be a last grasp at some straws for Nortel and a too-little-too-late reaction to everyone else, from Cisco down to Yahoo! and Google. (To be fair, the VoIP Now article referenced is actually arguing that this could be a billion dollar windfall for Nortel and Microsoft).

The last paragraph offers an insight with a not widely spoken thought

We can’t help but think that this is a sweeter deal for Nortel in some ways than for Microsoft. Office is already dominant. Nortel gets an automatic entree into host of new businesses, etc. But Microsoft has a lot to do to fend off rivals, from Google and Yahoo! on the desktop to all kinds of players, even Oracle, in the enterprise.

This is an important thread. I'll say more in my summary at the end, but Nortel has been in serious need of a shot in the arm from somewhere. Being able to tout a strategic alliance with Microsoft is a significant psychological boost. Think of that as a huge morale booster for a company that has some great solutions, but has been very troubled for the last year or two.

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Following that thought on Nortel's financial status we read on About VoIP

Microsoft + Nortel Teamup Expected To Generate $1 Billion In Revenue

Microsoft's and Nortel's announced teamup for unified communications (e-mail, instant messaging, telephony, and multimedia conferencing), which includes VoIP, is expected to be a financial boon.

Mike Zafirovski, president and CEO of Nortel, says that they feel that moving their voice technology into software, and teaming up with Microsoft, is going to bring Nortel an extra billion in new revenue.

Eariler we saw a morale boost. Now we hit the revenue stream. A billion dollars in revenue is significant. It's real significant. And just being able to say they see a billion dollars in revenue is a huge motivator for a company that's been suffering the financial woes Nortel has had to face.

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Alec Saunders writes The Nortel / Microsoft Alliance: A Savvy Move

The more interesting component in this agreement, in my opinion, is the commitment to do joint product development. The companies will form joint teams to collaborate on product development that spans enterprise, mobile and wireline carrier solutions. They will cross-license patents, and Nortel will 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. Nortel becomes a very important software development partner in Microsoft’s ecosystem, accelerating the development of that ecosystem and its value to their joint customers. At the same time, Microsoft intends to continue the development of its Dynamics product line, which, with the addition of voice, may become very compelling components of these joint solutions.

Alec, as usual, dives into a key element nested quietly inside an announcement. Product development. That's future. That's evolution. That's new product names. And as Alec notes, Nortel becomes a development partner with Microsoft. For Nortel's stockholders, that's a huge plus because it deomnstrates a plan to a futre that can be articulated. For Microsoft it represents, well, who knows. Given history, maybe it represents ftuure acquisition plans. Maybe it present a new Microsoft creating a partnership of equals. Maybe.

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Over on TMCNet Tom Keating writes

Microsoft and Nortel to co-develop IP-PBX
Their goal is to combine Nortel's network quality and reliability with Microsoft software's ease of use and to accelerate the availability of unified communications. "Nortel and Microsoft have each led fundamental transformations in their own market - Nortel's digital innovation and Microsoft's software on every desktop," said Mike Zafirovski, president and CEO of Nortel. "By combining our unique strengths, Microsoft and Nortel will accelerate the delivery of unified communications - delivering to our customers a higher-quality user experience, with greater reliability and lower total cost of ownership. That's where we can make a real difference."

I think Tom's real key point comes at the end. I've mentioned previously a time or two how the war between the 800 pound gorillas of Microsoft and Cisco was shaping up as they line up to collide. Here's what Tom said

Microsoft has been looking for a hardware partner to go up against Cisco and their unified communications platform. Certainly Microsoft has chosen a strong hardware partner to offer a comprehensive unified communications suite that includes VoIP, presence, mobile, and other functionality. It's worth mentioning however that Nortel has suffered from an accounting scandal in 2004 and the telecom downturn that started in 2001. It remains to be seen if Nortel's Zafirovski can turn around one of the largest telecom equipment manufacturers in the world when cheaper, open-source solutions such as Asterisk are nipping at the heels of all the IP-PBX manufacturers.

Tom sees what I mentioned here and here. The gorillas have sized each other up and one of them has telegraphed its first move.

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Andy Abramson said I Tell yOu, I Saw This Coming

On Sunday I alluded to the fact that as Microsoft begins to roll out relationships with companies like Nortel the startup companies playing in the same space of business federation just got pushed farther behind the eightball.

I feel sorry for any Series B or C investors who may have recently put money into a company trying to play the federation game thinking they were onto something big, only to see that the Goliaths of the world have already beaten them to the punch.

Andy brings up a great opint about the Series B and C investors. Many of us knew this was coming. It's been talked about in roundabout ways. The question here is scale. We know the monoliths can deliver huge solutions. Now the question is how much time there is for quick innovators to build solid business in the niches where they excel for long-term success in spite of the big players. Many of the small innovative companies will continue to be very successful, but investors are now going to be very thoughtful about where their financial back goes.

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Iriwn Lazar always offers some great insights. In Microsoft & Nortel Unite

As has been widely reported today, Microsoft & Nortel announced a wide-ranging strategic partnership to deliver unified communications services and solutions.  The biggest components of today's announcement were that Nortel will deliver service and support for Microsoft's unified communications solutions, and that Nortel & Microsoft will team to jointly develop future offerings.  Nortel had previously announced support for integration of its CS1000 line into Microsoft's Live Communications Server line, which they reaffirmed today.

Note that the link inside Irwin's post is to yet another news story. but here is where he shares his keen insights:

I thought the announcement was missing a key component - federation between Nortel's Multimedia Communications Server (MCS) platform and LCS 2005/OCS 2007.  I'd expect we'll see this at a future point in time but for now it seems that Nortel still intends to position MCS as a competing product, outside the scope of this agreement

I also think that this announcement shows that the IP communications/telephony vendors are continuing to pick sides in what is looming as a growing battle between Cisco and Microsoft for the enterprise communications application space.  Nortel appears to be realizing that embracing Microsoft is a preferable strategy rather than trying to compete with both Microsoft and Cisco. 

Iriwn is the only person I saw reference Live Communications Server directly. LCS has some big proponents, but there are plenty of detractors too. How are Microsoft and Nortel going to balance strategic partnership with friendly co-opetition between competing product lines? Will that lea to troubles in the alliance? Both platforms are keystones in the partners unified communications strategies.

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In VoIP Now we find two articles from ewriter. First in Microsoft's Showing Strong Interest In VoIP we read

Microsoft and Nortel are working on a new project focusing on unified communications, which the MS press release says includes e-mail, IM (Instant Messaging), telephony, and multimedia conferencing. Take the latter to mean WoIP - Video as well as Voice over IP.

Interesting because much of the buzz hasn't been about video, but this article goes on to mention SightSpeed. ewriter clearly sees video as part of the MS/Nortel vision.

Microsoft + Nortel Teamup Expected To Generate $1 Billion In Revenue
Unified communications can be expected to include both video and voice over IP. This move into the VoIP market for both Nortel and Microsoft might mark a postive step for share prices, as well as for customers who would rather put trust in these two companies than some upstart unknown VoIP provider.

Clearly we see a new option on the horizon for business who want an alternative to Cisco, or might already be Nortel customers. Here's a boon to both Microsoft and Nortel. Each now has an ally in the fight against Cisco. And each needed an ally. Neither would be able to fight of the Cisco machine on their own.

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Over at GigaOM Katie Fehrenbacher's headline, Nortel, Microsoft IM Each Other, seems to be looking more towards IM federation, but here's the real meat -

Beleaguered Nortel has far more troubles than even Microsoft and its EU fine–I spoke with Mike Zafirovski earlier this year and he described his mental state as “forceful optimism.”

Perhaps this alliance allows forceful optimism some relief and a little breathing room.

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Colleague Bruce Stewart on the O'Reily Emerging Telephony blog writes Microsoft and Nortel Team Up.pointing to both Tom Keating and Katie Fehrenbacher. Bruce's last sentence may be the unspoken summary for many of us -


Bruce cuts to the heart of things with a razor sharp slash. Show me the money. Where's the beef? The whole world will be watching for that answer.

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Ken's Summary Take on the Whole Thing
Here's my two cents worth.

First, both Microsoft and Nortel needed a strong partner.

In sheer volume, Cisco hammers Nortel time and again in the market. We can look back to Nortel's acquisition of Bay Networks and track how every time Nortel makes an advance, Cisco pummels back. Nortel has needed an ally for some time. Nortel didn't have favorable odds in the fight.

Microsoft, powerful though they are, is an application company. Every solution they provide is an appication running on a network. In many cases, a Cisco-powered network. Given all the telephony talent Cisco hired away from Lucent, Nortel and the like in their efforts to compete with the traditional telecom industry, frankly, Cisco has become a powerhouse.

To put the battle in another context, consider Microsoft in the mobile world. Even though Blackberry has great penetration into the business world, Microsoft may well be able to leverage OMA and Enterprise Active Synch to push Windows Mobile devices in overwhelming numbers and crush RIMs hopes. Unified communications menas taking on the existing telecom providers. Microsoft is big, but they aren't that big. Not alone.

Microsoft didn't stand a fighting chance without a strategic partner who really knows telecommunications. It would have been a long, bloody fight between the 800 pound gorillas, but in the end, Microsoft would have had a very rough go of it. In that regard, this alliance is a huge plus to both Nortel and Microsoft.

So both partners gain. For Nortel, this might have been driven by a greater need. The fight for survival. Now the question is raised, will they really survive. Could Microsoft be venturing out into a new world of partnerships that become acquisitions as they search for a new identity. This will be a telling partnership. In some small way, Microsoft just stepped onto a path that enables a reinventino of Microsoft as something more than an application develpment company. The can become a true unified communications solution provider. Whether that's the whole of Microsoft in the future, or a division of Microsoft remains to be seen. And I believe it could all turn out to be smoe grand experiment that yields some incremental improvements in communications technologies without fundamentally changing anything.

I'm sure the industry will be watching closely. I know I will. And we'll be reading and writing about it a lot in the months ahead.



Technorati Tags: Microsoft, Nortel, Cisco, unified communications, VoIP