Nortel, Bay face big integration challenge

Developing a coherent product sales, service and distribution strategy a chief concern.

By David Rohde
Network World, 6/29/98

Megamerger partners Nortel and Bay Networks, Inc. are trumpeting the lack of overlap in their product lines to help justify the deal's hefty $9.1 billion price tag.

But in one crucial area the lack of overlap could prove to be a handicap: sales and support channels.

While Bay's indirect sales channel consists of distributors and local value-added computer and network gear resellers, Nortel's agents are overwhelmingly resellers of PBXs and key systems from telephone companies and other traditional sources.

Analysts said the notorious, long-standing difficulty of cross-training sales and support personnel on voice and data products could slow the integration of the two companies. And that has some channel sources worried as Nortel and Bay prepare to do battle with market leader Cisco Systems, Inc.

"I'm picturing a Bay rep going on a sales call with a Nortel rep to a guy who's already got a Cisco infrastructure, and I'm wondering how that's going to fly," said Joel Embry, executive vice president of Choice Solutions, Inc., a regional network integrator based in Colleyville, Texas. "I don't see them walking into our Cisco accounts and winning their business."

Choice Solutions is a largely Cisco shop that also happens to offer multiplexing and packetized-voice equipment from Nortel subsidiary Micom Communications Corp.

Embry said the Nortel/Bay deal offers the promise of incorporating Micom technology into Bay routers so Bay can make as heavy a play as Cisco in packetized voice and toll avoidance.

But even integrating Micom into the Nortel family proved slow going after Nortel acquired the company in 1996, Embry said. For example, until recently Nortel still required Choice Solutions to maintain a separate reseller relationship with Micom.

Nortel officials acknowledged that based on experience, the integration process with Bay could take a while. Last year, when Nortel finally began offering its Magellan Passport multiservice enterprise switch via indirect sales channels, it chose only a handful of data gear resellers.

Among the few new data resellers is Williams Communications Solutions, a division of Williams Companies, Inc. that last year took over most of Nortel's direct telephony-oriented sales and has been looking to move aggressively into data networks.

"There aren't a tremendous number of voice people selling data today," said Winston Estridge, vice president of sales, marketing and operations for Nortel's Enterprise Data Networks unit. "Our channel strategy is going to be very deliberate. We're not trying to do it all at the same time."

Nortel won't be alone among the potential new internetwork powerhouses in its sales channel dilemmas. Much the same issues face Lucent Technologies, Inc. with its numerous recent acquisitions of ATM, Gigabit Ethernet and remote access companies.

As opposed to takeover veterans such as Cisco and Microsoft Corp., Lucent is expected to maintain separate channels for these acquisitions for a while, said Frank Dzubeck, president of Communications Network Architects, Inc., a consulting firm in Washington, D.C.

"Lucent still has not wiped out the identity of [its acquisitions]," Dzubeck said. "They are still walking, where Cisco and Microsoft are at the running stage because they've done it so many times."