Execute and Deliver: Avaya's Plan to Gaining Loyal Nortel Customers
Author: Chriss Dellen, Communications Products, Inc.
March 2010
For the past twelve months Nortel customers, employees, and partners, have lived through a tremendous amount of (FUD) fear, uncertainty, and doubt. Fortunately, for clarity’s sake Avaya has completed the acquisition and even defined its high-level product roadmap. However, as a Nortel customer, what does it mean for you?
To answer that question, I believe that it’s important for us to reflect back on how it all happened…
On Jan 14, 2009, Nortel, the legendary crown jewel of Canadian technological innovation filed chapter 11 bankruptcy. They made that fateful decision in order to postpone a $107 million debt payment that was due the following morning. Nortel’s senior management did this with the intention of preserving cash necessary to weather the tumultuous recession that devastated the technology industry. Unfortunately, they didn’t account for plummeting consumer trust in an age of Fannie Mae and Bernie Madoff. Obviously, the rest is history. However, to put their fall from investor grace in perspective, at the pinnacle of Nortel’s success they accounted for more than 33% of the total valuation of all companies listed on the Toronto Stock Exchange. This tragic story has left all of Nortel’s stakeholders wondering what would happen next?
On December 21, 2009 Avaya completed their strategic acquisition of the Nortel Enterprise division. I used the word strategic because they purchased it for the bargain price of $900 million. To put that in perspective, even though the Nortel Enterprise business unit was operating under chapter 11 bankruptcy and all of us were in the middle of our generation’s worst recession, the unit was still able to eek out $860 million in revenue in the first six months of 2009 alone. Aside from a profitable business, Avaya also obtained something else—Nortel technology. That is the very same technology that helped usher in the hyperconnected communications that we have all become accustomed too, not to mention the pipeline of innovation and patents that will continue to redefine the way we communicate for generations to come. What Avaya still has to earn is commitment from the existing Nortel customer base.
After Avaya closed the deal in December 2009, the ever-present question on Nortel customer’s minds was, “What are they going to do with my Nortel technology?” On January 19, only thirty days post acquisition, Avaya announced to the world that they were going forward with an Avaya-Nortel integrated product roadmap. Avaya also announced, “All current Unified Communications products are available for sale today from Avaya and through our channel partners.” In addition, Avaya has committed to developing an evolutionary product roadmap so customers won’t have to rip and replace their existing infrastructure investments in Nortel. For example, a customer who has a Nortel Meridian PBX can upgrade their system to the latest 6.0 software today. They will be able to upgrade to 7.0 when it arrives in July of 2010. Even if the 7.0 were to be end of sale one year later, they will still be able to receive support for that product for at least six years. Effectively that gives them support until June of 2017. The term Avaya has coined for this is “Wrap and Embrace not Rip and Replace”.
So, the question remains, is Avaya going to execute and deliver on their promises? All of us with a vested interest in Nortel are going to have to make a decision for our companies and ourselves. However, there is one reason that presents a powerful case that Avaya is going to deliver on their commitments.
Just over two years ago in 2007, two equity firms, Silver Lake and TPG Capital, purchased and privatized Avaya. They saw the opportunity to take Avaya private so the business could focus on long-term success without the short-term earnings pressures of a public company. That was an $8.2 billion dollar investment. Why is that important? The answer is simply that the owners have a vested interest in making money from their investment in Avaya. How are they going to maximize that investment? By ensuring that the Nortel customer base stays loyal. That motivation will compel them to pay extraordinary attention to existing Nortel customer’s needs.
The jury is still out. Avaya’s success or failure hasn’t been etched in future telecommunication’s history books, yet.
As for our company (Communications Products, Inc.), we have decided to preserve our twenty-six year Nortel heritage by partnering with Avaya and committing our resources behind them. As a matter of fact, since January, we have begun implementing one of the single largest pure IP deployments for the United States Department of Defense. You guessed it, powered by Nortel, or should I say, the new Avaya.
Join the conversation (blog.commprod.com/author/cdellen/) 