TheInfoPro

Written by Daniel Kennedy, Research Director for Information Security

When we review our technology roadmaps, with their dark-blue in use and dark-orange not in plan bars, we often look most closely at those technologies that show a robust planning band in the middle, with the preference of course going to those technologies in the short-term implementation plans of network engineering managers. When it comes to the voice and video category in our Wave 9 Networking Study preview data, Unified Communications (UC) solutions is showing the best ongoing integration year-over-year as well as a robust planning band in the next year and a half. Twenty-five percent (25%) of respondents have UC solutions in their short-term plans, and 14% mark it as on the horizon for implementation.

This robust planning band shows 39% of respondents moving toward solutions primarily provided by Cisco and Microsoft, with Avaya a distant third in our preview data.

A sampling of narratives around project initiatives supports this projected growth:

• “We decided to move unified communications to Microsoft.”
• “We are putting a huge amount of bandwidth to cover unified communications.”
• “People comment, it’s like, they access their files much faster, being driven by the unified communications, when we go in and put in unified communications you have to put in new switches, gig switches, everyone gets a gig port, everyone notices. It’s many times better accessing their files.”
• “Unified communications may result in the need for more bandwidth at satellite offices.”
• “HP just has a better vision than Cisco does. The downside, they are late to the game with unified communications.”
• “Avaya has some cool stuff around unified communications.”

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03 December 2009 – Bill Trussell, Managing Director of Security and Networking Research and Advisory – It would appear that the Nortel Enterprise business unit acquisition by Avaya is headed for closing this month, though questions remain as to the impact that this will have on the the enterprise customer. Most industry observers are recommending that enterprise customers wait out the acquisition and subsequent integration period before making any rash decisions on product adoption or abandonment. Data suggests, however, that this recommendation is not being observed by many enterprises as both Cisco and Microsoft are gaining consideration to supply IP voice infrastructure to both large and small enterprises.

The biggest question for the industry to consider is whether this acquisition was being made as one to spur growth or merely as an exit strategy for the private equity investors of Avaya. While a successful exit can seldom be accomplished without some indication of profitability ,the acquisition of Nortel by Avaya offers the opportunity to cut costs dramatically – and with a short focal length – in order to secure a pathway out for the equity owners. Such a strategy may very well lead current and newly acquired customers of the Nortel products down a dark path of not knowing whether the product just acquired will continue to be supported in good faith. If the acquisition is truly intended to spawn growth for Avaya, then they can ill afford to lose any customers for any reason. But our data indicates that this does not appear to be the case thus far as Nortel customers tell us they are looking to leave in favor of competing products from other providers. For that matter, Avaya does not have a good track record recently other than for their largest legacy systems which are not easily replaced.

As a result of this uncertainty, caution is likely the best enterprise strategy at this point.

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14 September 2009 – This past week we heard that Avaya solidified its bid to acquire the enterprise business from Nortel by winning the bidding process at $900M, having started the process at somewhere north of $400M.  Their intent is to  try to solidify an otherwise weak position as a provider of Unified Communications solutions among other emerging enterprise solutions.  This marks the end of a strong innovation story for Nortel as they have been a key player in the business telephony marketplace for many years.  Does it appear that this acquisition is a good idea?   From our Wave 5 Networking results we noted that Avaya trails Nortel, Microsoft and Cisco among both in use and in plan citations for UC.  Additionally, Nortel still leads Avaya among in plan mentions.  Ratings for Avaya among Wave 5 participants show above average results for product performance, features and functionality but weak results for expressions of value.  Users rating Avaya indicated that they are not easy to do business with and ranked lower among their peers for supporting their products and their strategic vision.  The combination looks no better in our Wave 6 results. Industry publications speculate that Avaya would own 25% market share for IP telephony but data from TIP interviews indicate that this position may be overstated and would not transfer to the UC solutions, which is the next step in the telephony product evolution.

With Avaya not being the highest rated provider among TIP interviewees it would seem to be an uphill struggle to make this acquisition work, especially at such a high price.  While the combined company would rank second among UC providers it would seem a high price to pay to not be number one in the highest ranked Telecom technology.  Realizing that there are other potential benefits to the acquisition perhaps we are being too harsh in our analysis.  Then again perhaps not.  It would seem that Verizon and others, the Canadian citizens among them, are concerned as well but for other reasons.  Add it all up and it is hard to see how this combination will work.

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