Avaya has ended a long period of speculation by signing agreements to purchase Nortel's enterprise solutions business for $475 million. According to John Chapman, industry analyst and Publishing Director of think-tank IT Europa (a Comms Dealer sister publication), there are three key aspects to the proposed deal that will determine its success across Europe. The first, he says, is the critical issue of channel reach.
"At a channel level both companies' primary pan-European distribution partners are the same in Azlan and Westcon. This simplifies the transition and should ensure that there is continuity for the channel. However, as these distributors are also the largest Cisco distributors across Europe, Avaya will need to ensure that it gets sufficient focus to capitalise on the opportunity," commented Chapman.
He also believes that Avaya should gain from the 'more mature' Nortel channels across Europe. "In the past they have relied too heavily on the UK and Germany and have struggled to sufficiently penetrate the rest of Europe," added Chapman. "The Nortel partner network should give Avaya the impetus and reach to start to challenge Cisco, Siemens and Alcatel-Lucent for the top spot in the European IP Telephony market."
At a technology level the takeover gives Avaya the opportunity to be a 'real alternative' to Cisco in the broader Unified Communications marketplace, noted Chapman. "For almost two decades Nortel was number two to Cisco in the enterprise networking arena, having only recently lost that place to HP ProCurve. It was also considered by many to be the technology leader in this space but lacked the global marketing punch to challenge Cisco.
"If Avaya can quickly align its product sets with Nortel to offer a cohesive solution set then it should be able to mount a real challenge to Cisco. The danger is in running product lines in parallel for too long a period. This is always an issue with a takeover of this size where there is substantial overlap of product. Avaya has been down this path before with the Index telephony products inherited from the takeover of SDX. Avaya spent years agonising over whether to keep Index going when it had alternative products of its own. Competitors were doing a better job of offering their customers upgrades, forcing Avaya to drop Index."
This leads to the third and vital issue, says Chapman - competition. "Nortel had been in 'limbo' for 12 months, with rivals recruiting its channel partners. If Avaya does not pick up the baton quickly and offer a clear way forward for Nortel's partners and its larger customers, the competition will use the delay to spread fear and doubt," warned Chapman.
The European market has a significant number of major manufacturers in the Unified Communications space with large incumbent suppliers such as Siemens and Alcatel-Lucent as well as fast growing specialists like Mitel, Shoretel and Aastra. "Avaya does not have the luxury to take its time merging the operations. Avaya needs to define its strategy quickly and execute its plans decisively. If anything is likely to go wrong with this takeover it will be indecision. Avaya has the combined product ranges to be number one. There is little channel conflict. However, it has huge and hungry competitors."