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Despite Avaya deal, Nortel partners must sell themselves to customers

With Avaya's agreement to buy Nortel's enterprise business for $475 million, Nortel partners finally have some certainty about the future of the products and services they are trying to sell. But they are still worried about how the deal will play out, and they are looking for ways to protect themselves, whether that means diversifying their offerings or marketing their own expertise rather than the products they sell.

After months of uncertainty and speculation, channel partners welcome the promise of stability offered by the $475 million agreement Avaya struck to buy Nortel's enterprise division. But Nortel channel partners have been battered and bruised by a bad economy and an uncertain future for Nortel. Many have been forced to diversify, and they should continue to emphasize to their customers that they can deliver value no matter whose products they sell.

"I think most of them [partners] are going to come to the conclusion that this is a good thing because it solidifies the supply chain and support model," said Todd Abbott, Avaya's senior vice president of global field operations.

"And it gives them time to digest what this means for their business," Abbott said. "I expect further clarity on roadmaps and architecture is probably the missing piece here to assess really where they want to go, but now at least there's not a gun to their head saying that they need to make a decision. This is a viable business. It's more than viable. It's got a good revenue stream and a great installed base and now its access to technology and support has been stabilized."

Avaya's acquisition of Nortel's enterprise business will ensure investment protection and continued technical support for partners' end customers, according to Stuart Chandler, president and CEO of Optivor Technologies, a Maryland-based Nortel partner. But he said Nortel channel partners should be selling more than Nortel's or Avaya's name.

"This whole thing comes down to: It's not the better mousetrap; it's the ability to execute," Chandler said. "And we at Optivor have had the ability to execute, and we can make money selling Nortel or Avaya."

At Houston-based Nortel partner Enterprise Systems Corp, president Rodney Hyde has responded to Nortel's collapse by diversifying his offerings. A year ago, his company worked almost 100% with Nortel, but now it has been "developing relationships with ShoreTel and Avaya," Hyde said. The company is also starting to work with HP ProCurve and Enterasys on the data networking side. Siemens, Enterasys's voice and unified communications corporate cousin, has approached him about becoming a partner, too, and he said those discussions are in the early stages.

Hyde said his decision to diversify was a strategic move that he had no choice but to make.

"Up until a year ago, we were only Nortel, but Nortel is just making it impossible to stay with them. We've been hearing [from customers], 'I'm holding my P.O. until I hear an announcement from Nortel,'" he said. "We've had so much business, a million dollars' worth of business, just held up for the last six months … things in the pipeline that we were ready to close. And either they say, 'OK, I'm ready to cut my P.O. as soon as Nortel announces something,' or 'Sorry guys, I'm going with Cisco or someone else because I can't take this anymore.'"

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Chandler said he has talked to Avaya about becoming a partner, too.

I would say every Nortel partner has talked to Avaya or signed with them," he said. "But you've got to see who else throws their hat in the ring. We've heard everything we need from Avaya. We respect Avaya, but we resisted signing on with Avaya because we weren't certain of the outcome. We're staying with Nortel for now, and we're doing just fine. This doesn't conclude the bidding. It initiates the bidding, so it's not a done deal. When and if Avaya acquires Nortel, we will continue that dialog to the next level."

Concerns about what the Avaya-Nortel deal will do to the Nortel data business

It's true that the $475 million deal Avaya has with Nortel is subject to a bidding process, but the likelihood of someone else stepping in and outspending Avaya is low. With the Avaya deal looking likely, Hyde said he has several new concerns.

"Some loyal customers simply do not like Avaya," he said. "That's why they're Nortel customers. If they find that Avaya buys Nortel, then they're going to reach the conclusion that they'll just have to take bids from Cisco and whoever else."

Hyde also said he is worried about what Avaya will do with Nortel's networking business, since Avaya is purely a voice and unified communications vendor. Avaya itself has declined to talk about its plans for Nortel's switches and routers, which are a significant portion of Hyde's business. He expects many Nortel networking customers to balk at the idea of buying Nortel switches and routers when Avaya could end up getting rid of the products.

"The third thing is the support infrastructure within Nortel. There is so much duplication within Avaya. You've got separate sales personnel, operations personnel, technical centers. What is Avaya going to do? Get rid of all the Nortel people we're used to dealing with? It's a big concern," Hyde said.

"With Avaya or whoever the eventual suitor is, we're just going to have to do a lot of bearing up on our business model. We're already an Avaya partner, albeit we're just starting that relationship. But at least we're engaged with Avaya. It just sucks from an installed base perspective that people are holding onto their checks."

Nortel channel partners rage against the management machine

Hyde said things could have gone a lot better with Nortel's bankruptcy, but he said the company's leadership has "bungled" things from the start.

"The management team has been just inept, and they don't seem to have a clear understanding or direction in what they're doing," he said. "[Nortel CEO] Mike Zafirovski goes before the Canadian parliament one day and they ask him what he's doing with the company. He tells them that he should have a restructuring plan out in just a few weeks. Then the very next day he comes out and says everything is for sale and we're throwing in the towel. It almost seems like he did it for spite. So it's very frustrating as a Nortel partner to see them just destroying this company."

Optivor's Chandler, a long-time supporter of Nortel executives, agrees that a long line of poor management and board strategies caused Nortel's sinking ship.

"It's a shame when you look back and see that Nortel's board hired a guy [Zafirovski] to come in," he said. "He made $30 million over three years and took the company from $10 billion in revenue to perhaps selling it for less than $1 billion. That happened on Mike Zafirovski's watch, and he is accountable."

"But I think Nortel's board bears some responsibility for what's going on, too. It has to lie firmly in their hands, because if the ship isn't running properly, they are the ones who have to take corrective action," Chandler said. "Mike Zafirovski didn't walk into an easy scenario, and the few predecessors before him didn't do much to help. At the same time, he came in to make that company profitable, and he failed. The problem is there's no leadership. Why Zafirovski and his henchmen are still there, I'd like to know that."

Let us know what you think about the story; email: Shamus McGillicuddy, News Editor

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