Avaya won the auction for the assets of Nortel’s Enterprise Solutions division on Sept. 13, bringing the unit one step closer to resolving the uncertainty that has surrounded it since Nortel (News - Alert) filed for bankruptcy on a corporate level this past January. Pending regulatory approval, Avaya (News - Alert) is expected to assume ownership in December.

 

Given the high potential impact on the business communications competitive landscape that would be caused by the merger of two leading providers in this space, TMC was were interested in determining what initial thoughts current and potential customers had on the matter. A recent survey conducted with research partner IntelliCom Analytics examined how businesses are reacting to these developments.

 

As part of this survey, TMC (News - Alert) asked the 1,414 global decision-makers that responded to identify whether they currently considered Nortel, Avaya, or someone else to be their primary Business Communications provider. This produced a range of both expected and unexpected perspectives on the potential overall prospects of the merger and the most valued solutions expected to survive in the combined organization.

 

One survey question asked, “How does your organization view Avaya’s planned acquisition of Nortel Enterprise Solutions?”

 

Some 56 percent of global businesses that identified Nortel as their current primary business communications provider indicated that they anticipate the merger will result in new capabilities that leverage the best of what both Nortel and Avaya currently offer. See chart below. Another 46 percent of businesses utilizing Avaya as their primary provider also shared this sentiment. This would have to be considered good news for the management of both organizations which will continue to operate as separate businesses until the projected close of the transaction in December. Roughly a third of those businesses that currently utilize neither manufacturer as their primary provider also expected this outcome.

 

About 27 percent of businesses now utilizing Nortel as their primary provider struck a more cautious note in that while they expressed relief that Nortel had found a way forward for the Enterprise Solutions business, they want to hear more details on Avaya’s specific integration plans before they pass judgment on what the merger likely means to them. Similarly, 26 percent of global businesses currently utilizing Avaya as their primary voice provider also felt this way. Only 8 percent of businesses utilizing other manufacturers as their primary provider also planned to reserve judgment until more detailed plans are announced.

 

Interestingly, global businesses currently utilizing Avaya as their primary provider were more concerned than their counterparts utilizing Nortel about the possibility of product overlap in the respective portfolios of the two organizations leading to consolidation of these offerings in the short term. Some 19 percent of respondents primarily aligned with Avaya and 11 percent of those with Nortel expressed this view, while only 5 percent of businesses utilizing someone else as their primary provider saw this as a major concern.

 

Somewhat surprisingly, businesses responding to the survey did not appear to be overly concerned that the combined company might decide to cut off future development of updates and support for some of their legacy products after the merger closes. Only 7 percent of businesses utilizing Nortel as their primary providers expressed this as a leading concern, while 9 percent of their counterpart Avaya customers responded this way. Just 3 percent of those indicating that neither is their primary provider selected this response as well. It is important to note that these customers include mixed-vendor environments that may feature some locations with existing installed Avaya and/or Nortel solutions.

 

Additionally, more than half of this group that does not consider either Avaya or Nortel to be their primary business communications provider indicated that they are not currently conducting any business with either of these two companies, and that they are unlikely to reconsider doing so with the combined company in the future based on what they know now.

 

Although current Avaya and Nortel customers responding to this survey did not appear to be overly concerned that consolidation of the combined product portfolio would occur following a merger, the combined organization will likely eventually have to make some tough choices, as both company’s current portfolios play across nearly all business size segments. For this reason, we also asked businesses responding to the survey whether they would find the most value in continued development of Nortel’s or Avaya’s current portfolio or some combination of both post merger.

 

Another survey question asked. “Do you see more value in the further development of Nortel’s or Avaya’s existing product portfolio?” See chart below.

 

Some  43 percent of customers indicating that they currently utilize Avaya as their primary provider found that continued development of Avaya’s existing products would produce the most value in their minds – the highest single response in this group. Surprisingly, 41 percent of customers using Nortel primarily also saw the most future value in the evolution of Avaya’s current portfolio. Finally, 21 percent of businesses directly aligned with neither company responded that ongoing development of Avaya’s existing portfolio would produce the most value to them.

 

About 34 percent of global businesses indicating that Nortel is their primary provider felt that continued development of Nortel’s existing product portfolio would produce the highest value to them. In addition, 25 percent of businesses primarily aligned with Avaya presently also indicated that they would see the most value from further evolution of the Nortel portfolio. And 9 percent of those primarily aligned with neither manufacturer felt that ongoing development of the Nortel portfolio would produce the most value in a combined organization, as well.

 

Another 31 percent of businesses that utilize Avaya as their primary business communications provider indicated that they would expect new solutions that build upon both Nortel’s and Avaya’s existing technologies to produce the most value from their perspective. About 23 percent of global businesses primarily aligned with Nortel also expressed this sentiment. This was also true of 18 percent of the respondents primarily aligned with neither manufacturer today.

 

While these diverse sentiments coupled with the overlap between Avaya’s and Nortel’s product portfolios will create obvious integration challenges for the combined company, perhaps an even larger issue is the significant portion of customers currently aligned with neither vendor that have no plans to change that status based on what they know now. Indeed, 52 percent of those responding that were not utilizing either Avaya or Nortel as their primary provider today also indicated that they are unlikely to consider solutions derived from either provider’s product portfolios in the future.