Is This Nortel's Year?

The product debuts follow the March 1 launch of an updated Partner Advantage channel program that puts more emphasis on the value its 600-plus contracted solution providers bring to the table, incorporates rewards for both breadth and depth of expertise instead of just breadth, removes caps on growth incentives and adds a deal-registration initiative.

With the changes, Nortel is rewarding both volume and value by offering one discount that's tied to partner level and a separate discount that's tied to volume, said Eric Schoch, vice president of North American enterprise marketing, channels and distribution, at Nortel, Toronto. The change will increase discounts for many Nortel solution providers. For example, approximately 40 percent of the company's 143 top-level Elite partners will earn higher margins as a result of the new structure, he said.

Nortel also plans in July to publish new criteria for its Advantage, Premier and Elite partner levels, which should open up Elite status by eliminating the requirement for partners in that category to represent Nortel's entire portfolio, he said.

The company has also uncapped back-end rebates of 2 percent to 5 percent given to partners that grow their Nortel revenue. Previously, the initiative had both a floor and a ceiling. "We're now paying for every dollar of growth," Schoch said.

In addition, a deal-registration initiative offers a 5 percent incremental discount across Nortel's enterprise portfolio for new business brought in through the program.

"I am budgeted to spend 15 percent to 20 percent more in discounts and rebates to my partner base in 2007, and that could go up based on their performance," he said.

This will help address one of Nortel's highest hurdles: the buildup of data/voice convergence skills in its partner base.

"Many of their partners are not stepping up to the new converged environment. TDM [Time Division Multiplexing] is the only way they know," said Kristian Guntzelman, chief innovation officer at G & G Interconnects, a former Nortel partner in Cincinnati that now works with Avaya.

Schoch concedes that many of Nortel's partners have struggled to make a full transformation to convergence but said the new incentives as well as free sales training are helping.

The company is in a good position to make a comeback, said Frank Kobuszewski, vice president of the technology solutions group at Syracuse, N.Y.-based CXtec, which sells convergence solutions based on 3Com, Cisco Systems and Nortel products.

"I'm more optimistic than I have been in a long time," said Kobuszewski. CXtec's Cisco solutions are its top convergence seller with Nortel at No. 2, he said. While Cisco outsells Nortel 2 to 1, the interest level in Nortel is on the rise, he said.

"Customers with traditional Nortel telephony in place are asking more now about sticking with Nortel and upgrading with Nortel rather than just ripping it all out and going with Cisco," Kobuszewski said. Cause for more optimism is the fact that 75 percent of CXtec's Nortel customers are still running legacy gear, leaving a huge opportunity for VoIP migration, he said.

Nortel's fourth-quarter U.S. IP telephony sales rose 34 percent year over year. The company maintained its No. 3 spot but outpaced No. 2 Avaya, which grew 22 percent, according to Synergy Research Group. "If Nortel can continue to build on its success, you will see them eat at the market share of the others and we'll see a fight at the top between three players instead of just Cisco and Avaya," said Ryan Olsen, Synergy senior analyst.

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