CRN Interview: Mike Zafirovski, Nortel Networks CEO

CRN: What are Nortel's channel plans for 2007?

ZAFIROVSKI: As a company, we're really excited about the future. We've looked at our capabilities, looked at where we can add value to our customers and emerging market trends, and we've really identified three areas we see as most important for the year.

One is to lead in next-generation mobility and convergence. ... We're making a big commitment to WiMAX. The second area is a big commitment to services as an area of focus. We have been able to generate about 20 percent of our revenue in services, and we want to double that as a percentage of revenue over the next three to five years. ... And third, and most exciting, is what we refer to as 'enterprise transformation.' We have a very strong position in voice from our TDM [Time Division Multiplexing] and VoIP capabilities, accompanied by a greater level of SIP applications.

I articulated on our first earnings call that we have very good products but haven't done a good job selling and marketing those products, as well as working closely with our partners. This, I guess, is a long introduction to your question, but we're working pretty much all of this year to significantly enhance our capabilities in the enterprise space.

One of the things we're looking at specifically is increasing the velocity of new products -- that's No. 1. No. 2 would be working to go from playing defense to playing offense, which includes a very bold relationship with Microsoft, and working closely with our channel partners on programs like IPT 1-2-3, where we are accelerating and simplifying the process of going from PBXes to VoIP.

We're adding a significant amount of resources in indirect sales, so there are big plans and a commitment to growth. We want to be leading as opposed to playing defense, which we have to a large extent been doing over the last three or four years.

CRN: How do you balance Nortel's services push with the company's channel push, since many of your partners will be looking to provide services of their own?

ZAFIROVSKI: Most of the time, it's very complementary. We've been able to provide a significantly increased level of tools and applications that our channel partners will be able to deliver to the end customer. I'd say 70 percent to 80 percent of the time it's complementary. As part of our increasing focus in the enterprise space, we've identified 50 to 60 global accounts that we'll be going at directly, but most of the services business is still pulled through channel partners.

CRN: So what happens the other 20 percent to 30 percent of the time?

ZAFIROVSKI: Occasionally, you may have overlap, and I am very confident that in those cases that it is occasionally. You may have a situation where a customer asks us to provide something directly, but we do believe that's in a minority of cases.

In totality, our channel partners will do very well with our increased emphasis on increasing product velocity, much greater margins with Nortel than I believe with any of our competitors, and a commitment to be much simpler [to work with] and more flexible than our competition. So in totality, the overall experience for our channel partners will be significantly better than it ever has been before.

NEXT: Nortel's SMB channel strategy, financial issues and the Microsoft alliance