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Thu 23 Jul 2009 09:23 AM

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Nortel channel task won’t be easy for Avaya, warn analysts

Major gains in terms of channel expansion would more than compensate for a “confused” product portfolio

Nortel channel task won’t be easy for Avaya, warn analysts
Analysts say Avaya will benefit from an expanded channel base if it succeeds in acquiring Nortel\s enterprise solutions business

Major gains in terms of channel expansion would more than compensate for a “confused” product portfolio if Avaya succeeds in getting its hands on Nortel’s enterprise solutions business — but the vendor is still likely to face a difficult task in winning partners over, according to market experts.

Avaya took the lead in the race for Nortel’s enterprise unit this week by signing acquisition agreements that value the business at US$475m.

If the transaction goes through then the combined entity will account for 30% of the global contact centre market and boast a strong channel reach across regional theatres.

Although Avaya faces the prospect of having to rationalise its product portfolio due to an overlap in technology, the acquisition promises to massively boost its channel coverage, insist Daniel Jong and Ian Jacobs, analysts at consulting firm Ovum.

“Because Avaya will likely eventually replace much of the Nortel technology with its own in the product line-up, it will also have to win over most of those channel partners one by one,” said the pair. “This will take some doing since the resellers have stocks of inventory, existing processes and lots of Nortel-specific training. This is not to say that Avaya won’t ultimately succeed in converting at least most of Nortel’s channel to its cause; if the acquisition goes through, Avaya will eventually have bought its way into being a channel-friendly company and that will likely be worth the purchase price for Nortel.”

Ovum cites channel expansion and a renewed play for midmarket customers as the primary reasons for Avaya’s interest in the business.

However, the pair believes Avaya’s channel bosses will have their work cut restoring confidence to Nortel’s “bruised” partner base.

“Nortel once had a vibrant and active channel, and its dealers were some of the most loyal in the tech industry. However, the long downward spiral Nortel has suffered left the channel dispirited and depleted in number,” they said.

“Many of Nortel’s competitors have spent the last six months wooing channel partners. Admittedly, Avaya was one of those vendors attempting to poach the Nortel channel as a means to both hurt a flailing competitor and bolster its own indirect sales efforts. Clearly those efforts were not enough to obviate the need for a full buy-out of Nortel Enterprise.”

The transaction is still subject to a competitive bidding process that will happen within the next few weeks providing approvals are granted by the US Bankruptcy Court and Ontario Superior Court of Justice.

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