CRN Interview: Mike Zafirovski, Nortel Networks CEO

CRN: There's been a concerted effort on Nortel's part since June to focus on the SMB segment. Can you talk about the success you're seeing there, and what have been the most important channel initiatives undertaken there?

ZAFIROVSKI: Absolutely. We have just started our new approach to the enterprise, our so-called business transformation initiative within Nortel. The nature of that initially was to increase our profitability, so most of the business transformation effort was to improve our processes to be improving our cost-effectiveness in R&D. ...

One significant [piece] of the business transformation process is to really look at our go-to-market [strategy], starting with North America and our enterprise business, our go-to-market activities, and look to make appropriate changes. One of those is a lot of emphasis on the SMB market, including the development of products like the BCM 50, which you can refer to as an office in a box. There are also a number of other solutions we have for that segment.

Our IPT 1-2-3 program has been a very effective way to migrate our legacy customer base to VoIP. In my opinion, it is the most important enterprise initiative we've had in the last six years. We've also created an indirect sales organization that [pushes] leads directly to our channel partners. They've been able to achieve 120 percent of their lead generation goal.

There's also been an increase in partner training. I'll give you some statistics here. We have almost 1,500 sales reps and sales executives trained, which is a more than 70 percent increase on average month-over-month from July to December, just in that six-month period. And we averaged an 87 percent increase in sales quotes for the third quarter.

CRN: Many of your competitors talk to solution providers about Nortel's financial status and the long-term viability of the company -- questions I'm sure you've been asked many times. So what is your response to channel partners when they ask those questions?

ZAFIROVSKI: Concerns are substantially less because we have a pretty sophisticated customer base. Our restatements were completed in the second quarter. [Editor's Note: Nortel said last week that it would need to issue additional restatements.] We refinanced in July, so we have well over $2 billion in cash, and we are a $10 billion market-cap company, which is pretty significant ... and we have management team that I believe is as good as any in the industry, with a lot of passion and commitment behind it.

CRN: What impact do you expect Nortel's partnership with Microsoft to have on your channel partners?

ZAFIROVSKI: The immediate impact on Nortel and our channel partners is a significant increase in interest in Nortel and our [products]. ... In terms of the eventual impact, we think it's going to be good news in driving service revenue for both of us.

CRN: What are your main goals for 2007?

ZAFIROVSKI: To really demonstrate traction in the growth areas that we've identified. Enterprise is at the top of the list, [with] services very important to us.