Christmas came early for Avaya, which closed its deal for Nortel Enterprise Solutions shortly before the holidays. But the enterprise communications vendor has raised some eyebrows by not re-gifting the Nortel data networking business that came with the package.
"I think it's a mistake for them," said Zeus Kerravala, senior vice president at Yankee Group. "Nortel is about 5% of the data market now. That puts [Avaya] in the No. 3 position, but it's a very distant No. 3 to HP and Cisco. I don't think there's enough there to warrant owning that to differentiate themselves."
Nortel Networks, the bankrupt Canadian telecom giant, accepted Avaya's $900 million bid for its enterprise business in September. Courts finalized and closed the Nortel-Avaya deal Dec. 18. On Jan. 19, Avaya will announce which Nortel-Avaya products will stay and which will go.
Most industry observers assumed Avaya coveted the voice and unified communications business that dominates Nortel's enterprise division. The data networking division would be spun out, they assumed.
Avaya's senior vice president of global sales and marketing, Todd Abbott , who had little to say about the vendor's plans for the Nortel data networking business last summer, trumpeted the decision to hold onto Nortel's data business as a step toward becoming "thought leaders and innovation leaders" in unified communications (UC) and contact center solutions.
"Avaya overall is a company that has been rewiring itself to be a fit-for-purpose company," Abbott said. "It was a strategic part of the acquisition. There are elements of the [UC and contact center] architecture that require a tight integration with data … so it will fill a nice void for us."
But tight integration between Avaya's unified communications products and Nortel's network gear could scare off some customers, Kerravala cautioned.
"About 75% of Avaya [UC] implementations are on Cisco equipment, anyway," he said. "It's a much tougher sell to try to convince the customer to change the data portfolio out [than just selling Nortel UC products]. I think the combined sell, unless you're Cisco … is much more difficult."
After the Nortel-Avaya deal had gone public in September, Gartner Inc. analysts warned Avaya customers that the vendor "has a poor history" with data networking and cautioned the company to proceed carefully.
"The portfolio requires updating and rationalization," wrote analysts Bob Hafner, Jay Lassman and Akshay Sharma. "Avaya may not be able to spare resources for this task while it focuses on integrating and supporting the combined voice portfolios. We believe the 'new' Avaya will have as much difficulty as Nortel had in growing its data market share."
Avaya isn't setting its sights on being a major player in the overall networking infrastructure market, Abbott said. Instead, the New Jersey-based vendor is aiming to compete in the UC and contact center network infrastructure space.
"You're not going to find us in the carrier backbone networks. We don't need to be there, and it's not a core element of [UC and contact center] architecture," Abbott said. "You're not going to see us expand the investment to be all things. It is an enabler for UC, and we will continue to invest in the product line."
Meanwhile, members of the International Nortel Networks Users Association (INNUA) were encouraged by Avaya's pledge to maintain the same level of investment in research and development to product line as Nortel did, according to INNUA executive director Victor Bohnert.
Avaya's decision to hire Joel Hackney -- the former Nortel exec who headed the product line -- as steward of the division sends "indications that Avaya's taking it very seriously," Bohnert said.
"Definitely, Nortel was known as a telecom company for a long time," he acknowledged. "But more and more as people adopt voice over IP and SIP technology, and they're starting to see convergence really happening … the data portfolio is really important, and people have come to see Nortel as synonymous with reliability."
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