Pingtel, which specializes in open source SIP-based software,
Nortel hopes to show that despite its history as a 100-year-old provider of legacy telecom equipment and, more recently, next-generation networks, it is becoming software-centric.
"We have a real belief that the communications world is increasingly driven by software and services," said Paul Templeton, Nortel's vice president of business development.
Until the acquisition, Nortel had an original equipment manufacturer (OEM) agreement to use Pingtel's SIP-based software, which is now built into Nortel's Software Communications System 500 (SCS 500) unified communications package.
Nortel used the SCS 500 in partnerships with Dell and IBM, which have released servers preloaded with the VoIP and UC software.
"It just made sense to get [Pingtel] in-house," Templeton said.
As part of the deal, Pingtel engineers will be integrated into the Nortel team. Initially, Templeton said, they will continue to support current technology, but over time engineers will develop more products using Pingtel software. Those products will be geared toward easy-to-implement, interoperable systems for the SMB market.
Nortel partners are already familiar with the Pingtel technology, since it is part of the SCS 500, and the Dell and IBM products were sold through channels from all three companies. Any technology developed using Pingtel will be sold through channels as well, Templeton said.
"One of the short-term goals is to reach out to the Pingtel partners," he said. Those partners have experience with selling the software to companies for deployment on PCs.
Pingtel is Nortel's second acquisition in a week after three years of no M&A activity. Nortel's other acquisition, Novera Optics, was in the fiber-optic carrier market. That Nortel made its enterprise play on an open source and SIP-based technology company is not surprising. UC applications and systems have been held back due to a lack of interoperability, and having a SIP-based foundation enables VoIP and UC applications to interact with traditional telephony networks.
Open source VoIP and UC software that can easily be deployed on a PC is also fitting in the SMB environment.
"It's simple to deploy and manage with no comprehensive IT staff," Templeton said.
And as products are developed, the price will be right for SMBs.
"Nortel has been able to successfully find a product that fits the niche they want to address. Look at how much money they would have spent on the R&D phase of developing this stuff," said Stuart Chandler, president and CEO of Nortel partner Optivor Technologies in Jessup, Md. "This allows Nortel to be more aggressive on pricing."
Having a major networking company invest in open source legitimizes the technology and is "cutting-edge" on Nortel's part, IDC analyst Justin Jaffe said. But being cutting-edge isn't necessarily what SMBs are looking for yet.
"SMBs are less aware of technology in terms of open source versus proprietary. They just want a solution that is going to work," Jaffe said.
In its push to go open source, Nortel has become involved in the SIPfoundry community as a member of the sipXecs open source project, which is led by Pingtel. Nortel has contributed over 300 applications.
Meanwhile, Nortel continues its partnership with Microsoft in UC.
"Our work with Microsoft is targeted at larger enterprises," Templeton said.
Bluesocket president and CEO Mads Lillelund said the company decided to sell Pingtel so it could focus on its growing wireless LAN business.
"We pursued open source and developed the software applications for voice IP PBX, so all the customers we built up are transitioning into Nortel," Lillelund said.
Bluesocket had not made Pingtel profitable.