Well, it's official -- Avaya has won the auction to buy Nortel Enterprise Networks for $900 million as announced on Avaya.com and in the Wall Street Journal this morning. This is roughly double the $425 million initial bid, which is not unusual in these "stalking horse" cases. The WSJ article notes there will be various court approvals. Also, there will certainly be a US Department of Justice review for any anti-trust implications. However, since this is a bona fide bid and the combined Avaya-Nortel company will comprise barely one-quarter of the market (see Allan Sulkin's post on year-to-date IP PBX market share on NoJitter.com), and since this just restores Avaya's lead vs. Cisco, it sure seems likely to pass that review.
The bigger issues are likely to be whether Avaya can and will act swiftly to rationalize (1) the product lines to keep the customers and (2) the channel relationships to keep the VARs. Product lines can be managed internally, but the real risk and opportunity is in the channels.
As to Unified Communications, this could be a big breakthrough for Avaya. First, they have the opportunity to select the best of the each of the two product lines. This was covered in the UCStrategies.com UC eWeekly article at the time of the announcement, suggesting which parts of each company's UC product lines would best serve customers and the market. Rather than follow the conventional wisdom that it was Nortel Enterprise's Innovative Communications Alliance with Microsoft that did them in, (but that would be far from the truth of the matter) Avaya has the opportunity to preserve the best of the ICA, and thereby strengthen Avaya's often tenuous relationships with the world's leader of desktop, office and communications (certainly including e-mail and IM) software.
Avaya can also gain from adaptation of the Nortel Agile Communications Environment (ACE) to boost their CEBP (Communications-Enabled Business Processes) capabilities in combination with the Avaya Aura SIP and multi-switch capabilities. Nortel's conferencing products are also a possible valuable product line component.
As to the Channels, this is a much bigger issue, since it requires two things. First, Avaya will need to convince Nortel's dealers that Avaya will be more channel-centric than in the past. Being too channel-centric in the share of maintenance revenues and profits may have been one of Nortel's weaknesses, but Avaya has always been far to the other extreme, only recently beginning to certify channel partners to deliver (let alone resell) Avaya maintenance programs. Hopefully, for the benefit of customers, channels and investors alike, Avaya can find the happy medium on this one.
Second, Avaya will need to convince Nortel's channels that they are better off learning the Avaya product line elements to enhance their current investments and skills than to shift to other vendors' product lines. This will require a very active program immediately after the deal is completed, and continuing for a year or two thereafter to assure Avaya's success.
One place we expect to see Avaya's presentation in full force is the UCStrategies.com UC Summit 2010, in La Jolla, California on April 25-28, 2010. The Summit is designed for interaction between Vendors and Channels, so this will be one perfect venue for Avaya.
As suggested in the UC eWeekly article, the opportunity for Avaya is to use this major transaction to advance their cause in the area of Unified Communications, even more than in VoIP. Since Avaya already has a solid UC Professional Services program, perhaps they can enroll Nortel channels as an extension of that practice, showing the channels how to grow and thrive through UC while increasing Avaya's opportunity to participate in the growth sectors of the communications technology and solutions industry at this important and crucial time of transition.
We'll continue to watch and will continue to keep you informed here at UCStrategies.com.