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How Nortel Networks is getting its groove back

Nortel president and CEO Mike Zafirovski outlines the transformational roadmap ahead for the vendor that was once the darling of Canadian IT

Grapevine, Tex. — The past three to four years have been a struggle with respect to Nortel’s market share admits Mike Zafirovski, president and CEO of Nortel Networks (TSX: NT). Zafirovski said this year marks the second year of Nortel’s transformational effort to restore customer confidence levels, its market momentum and earnings, which he mentions were previously in decline for the company.

During this year’s annual Global Connect conference, sponsored by the International Nortel Networks Users Association (INNUA), in Grapevine, Tex, Zafirovski outlined Nortel’s present priorities, in addition to revealing a six-point plan for the company’s transformation moving forward.

Zafirovski openly reveals that a few years ago, Nortel had lost some of its market share in most segments, including the enterprise. To help get Nortel back on its feet the company launched its transformational plan two years ago. After putting this plan in place, Nortel’s strategy now is to maintain its customer focus and increase its marketing investments to maintain customers’ confidence levels and its momentum in the marketplace, which he said has been good to Nortel since it has seen seven consecutive quarters of growth up until now.

“Nortel has a strong R&D development team and we’re making investments in our software capability,” Zafirovski said. “We’ll also regain Nortel’s edge by continuing our partnerships to help drive innovation with key companies.”

One initiative that has helped customers regain trust and confidence in the Nortel brand is the vendor’s Innovative Communications Alliance (ICA) with Microsoft, which it announced in the summer of 2006.

Through the alliance, Nortel, which is a Microsoft Gold Certified Partner, is able to deliver joint unified communications (UC) solutions that are built around Microsoft’s Office Communications Server 2007 and Office Communicator 2007.

Irwin Lazar, principal research analyst and program director for collaboration and convergence at Nemertes Research, a research advisory firm based in Mokena, Ill, said since the ICA was formed almost two years ago, it has helped Nortel move past a lot of the challenges and uncertainties that customers had had with the company before.

“Nortel customers are more confident now,” he said. “Before, some customers were thinking about whether or not they wanted to stay with Nortel or move to another competitor such as Cisco. But when it developed the ICA, a lot of those customers came back because they were interested in the partnership.”

Lazar said the ICA was a strategic move for Nortel since it functions as the enabling arm for Microsoft.

“They’re providing the expertise that Microsoft doesn’t have when it comes to integration,” Lazar said. “They also bring conferencing services, telephony, security and management to Microsoft, which adds further value and an edge for them.”

Ruchi Prasad, vice-president and general manager of the ICA with Nortel, echoes this statement by saying, “We’re getting a lot of credibility even within Microsoft now. It’s all about making it easier for customers to use and deploy UC. UC is not a one-time sale, which means huge opportunities for channel partners because the relationships that are established can keep them going.”

Along with UC solutions, Zafirovski said the industry has since evolved from being concerned with connectivity, to building out the network, to intelligence and mobility, to the present, where he said a focus is now on on-demand pervasive broadband, which includes the area of hyperconnectivity. Hyperconnectivity, he explains, is a term used with workers who are hyperconnected, meaning they use a minimum of seven devices for either work or personal use along with multiple applications, which can include instant messaging, text messaging and Web conferencing.

“Hyperconnectivity is happening today,” Zafirovski said. “We’re in a new era where it’s all about achieving true broadband and communications enabled applications (CEA) for the network. Our focus areas are around true broadband and around CEA, which includes UC, Web services and SOA.”

For partners, Zafirovski said the channel should also look to be doing more work in specific industry verticals such as healthcare, finance, higher education and hospitality.

“If you’re not currently in these sectors,” Zafirovski said, “I urge you to go to them because it’s an opportunity to introduce UC to a new set of potential customers.”

On Nortel’s roadmap ahead, Zafirovski outlines six key steps that he said the company is taking to ensure it maintains its current vendor presence in the industry. They include, having a world-class management team and corporate culture, having an aggressive focus on balance sheets and on corporate governance, maintaining a world-class cost structure, targeting market share, continuing to invest for profitable growth, and maintaining an increased emphasis on its software and service solutions.