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Last week at Interop I chatted with Avaya (NYSE:AV) CEO Louis D’Ambrosio after his keynote. He talked about how a “true inflection point” had been reached that will have “business impact and societal advantage beyond immediate implementations.” He may have been secretly also referring to Avaya, or parts of the company, being in play, as reported by the New York Times, in terms of an inflection point.

Avaya, Cisco (NASDAQ:CSCO) and private equity firm Silver Lake Partners were mentioned as potential buyers. Avaya’s stock is up about 15 percent Tuesday morning.

D’Ambrosio told me that the emergence of VoIP is revolutionary, based on deployments going from 20 percent in 2003 to 75 percent today, and that voice and data and content are colliding in a positive way in what produces an explosion in productivity.

For Avaya, the future is in “embedding its software in core business processes to reduce cycle time from 2 hours to 2 minutes,” he said. “We want to change the way companies do business.” The idea is that communications services become easily built into workflow and business processes. If a machine or market movement triggers an alert, the embedded services can instantly locate the key people, assemble them for an e-meeting and deal with the situation. Clearly, he views Avaya as driven by software and what the company calls “communications-enabled business processes.” About 75 percent of engineering is on the software side and Avaya is a leader of the contact centers space.

Photo: Alex Dunne, CMP

D’Ambrosio is not alone in seeing the opportunity to wire communications deep into enterprise business processes. “Unified Communications” is one of Microsoft’s (NASDAQ:MSFT) favorite themes and Cisco also has a large stake in baking communications services into end-to-end networking and communications portfolio.

I also met with Nortel (NT) CEO Michael Zafirovski, who told me that 80 percent of his engineering effort is in software. Zafirovski came to Nortel from Motorola and GE (NYSE:GE) to turn around the company, which had suffered some hard times. Nortel is investing big in 4G, starting with WiMax, and working to improve its financials and governance. For example, he expects to save 17 percent in materials cost through improved sourcing, reducing R&D from 19 percent to 15 percent, and moving gross margins from 38 percent to 43 percent next year. Nortel’s services business will increase from about 20 percent today to as much as 40 percent in the next 3 or 4 years, he said.

Differentiation in product design is making solutions as close to plug and play as possible, he said. “We think of it as hardware but software is the name of the game,” Zafirovski said. For communications services, Nortel has some high profile partnerships with Microsoft.

“We have to attract the best and brightest. Competition will be enormous. We have to commercialize ahead of the competition,” Zafirovski said. “From everything I have learned, it’s part of the way I am wired from GE, the only competitive advantage is people.”

Since he took on the top job at Nortel, more than half of the 250 jobs in the company have been filled by newcomers. Maybe Avaya could give him his next set of newcomers to enable him to commercialize products and services ahead of the competition.

Source: Will Avaya Dance with Nortel, Cisco, or Silver Lake?