After months of standing firmly by their vendor, Nortel Networks' channel partners are bracing for the shakeout...
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now that Nortel has announced that it will sell off all of its divisions.
The bankrupt company has offered no details about service contracts or product commitments post-acquisition. At this point, with Nortel unable to make any promises, partners will have to calm nervous customers by emphasizing their own stability.
Others will hedge their bets by building relationships with Nortel's rivals, including those that might soon be buying Nortel's business units.
"Nortel is making executive calls to partners to assure them they still have access to product. They are trying to present this as business as usual, but the truth of the matter is that at some point Nortel's product line is going to become somebody else's," said Stuart Chandler, president and CEO of Optivor Technologies LLC in Jessup, Md.
"What Nortel partners have to do now is start preparing their customers for all of the scenarios," Chandler said. "Nortel partners should be focused on letting [customers] know that in the end, with or without Nortel, the reseller's value is in its ability to execute."
But calming customers may not be so easy. Nortel announced over the weekend that it would sell its carrier business to Nokia Siemens Networks. Then, on Monday morning, the company sent a letter to enterprise end users explaining that it would unload all of the other divisions if possible. In that letter, Nortel said it would honor all service contracts and product commitments for now but couldn't provide any information about what would happen after a sale.
With that said, most users and Nortel channel partners aren't concerned -- at least in the short term -- that they won't get service.
"Whoever buys Nortel, I am going to be grandfathered into the new company," Chandler said. "Do you know how many handsets people are going to break and need new ones? People have bought billions of dollars of Nortel stuff out there. That's not going to turn off."
As for what partners should do to prepare for change, Ovum analyst Mark Sapien said they should keep an eye out for another vendor deal just in case an acquisition doesn't play out in their favor.
Some Nortel partners are already hedging their bets. Avaya, which has been aggressively building out a channel ecosystem after years of being heavily reliant on direct sales, has been pursuing Nortel partners.
Carol Giles Neslund, Avaya's vice president for North American channel, said a large part of her company's strategy for building out its channel is the recruitment of Nortel partners. Prior to the most recent developments in Nortel's bankruptcy, Avaya had introduced a program offering Nortel partners an opportunity to earn an additional 5% on the back end, on deals in which they sell Avaya products. The program is in effect until May 2010.
"One part of that percentage goes to marketing funds," Neslund said, "and the other is a reward for selling Avaya into their existing installed base of Nortel customers."
Avaya has recruited 19 Nortel partners since last October, she said, including seven of Nortel's 10 largest partners. Among them are Shared Technologies, Pomeroy IT Solutions, Enterprise Systems, Logista Solutions and Intelli-Flex Communications.
Even those partners that start working with companies like Avaya will continue to have a Nortel practice. And they will be critical to whoever buys Nortel's business units. Part of Nortel's allure is its customer base, and an acquiring company won't want to trouble those waters. Keeping the channel happy is critical to making those customers feel secure. In addition, ongoing service contracts are a lucrative business, not to be tossed aside, said IDC research director Abner Germanow.
"Part of buying a company is buying its support organization and the people that go along with that," Germanow said. "If I am a manufacturer, I am going to continue to support those customers so they join me in my customer base. And then I am going to offer trade-up and trade-in programs that are going to be compelling."
But the scenario for channel partners and their end users will also be determined by the kind of company that acquires Nortel's enterprise business. That unit has two distinct portfolios – telephony/unified communications and data networking components, including routers and switches. Many believe that the data networking business will get swept into a deal that is mostly telephony focused.
Telephony will be the more coveted of the two, according to Zeus Kerravala, vice president of research firm Yankee Group. He said the enterprise networking product line is a little long in the tooth.
"They really have got kind of an older [switching and routing] product line," Kerravala said. "There are a couple of products which I think have some value – the new [VSP 9000] switch, if it ever actually gets launched -- but for the most part, they've got a pretty old product set."
The two companies rumored to be the leading bidders for Nortel Enterprise are Avaya – a pure telephony and unified communications vendor – and Siemens Enterprise Networks, which has its own data networking division in Enterasys.
"Step 2 after an Avaya purchase is a spin-out of the data business," Germanow predicted. Siemens, on the other hand, might find itself with an overlap in product.
Chandler said he's hoping for a Siemens acquisition, despite the fact that many in the industry have said that Siemens would be acquiring only for customer base and not to extend Nortel's technology. Siemens is working hard to increase its North American presence, so partners would not face severe competition in their existing markets.
Until an acquisition is settled, analysts like Kerravala warn customers to hold off on buying new equipment until an acquisition occurs. Partners like Chandler don't agree.
"The Nortel stuff is going to be around, but it might have a different name on it," Chandler said. "I am telling them to go ahead with buying."