News

IBM and Nortel Establish Dev Center

• By John K. Waters
• May 26, 2005

IBM and Nortel Networks have signed a new agreement to collaborate on product development and marketing. As part of the agreement, the two companies are establishing a development center in Research Triangle Park, NC.

IBM and Nortel have worked together off and on for more than a decade, but this new “technology, research and services relationship” is taking their association to a new level, says Steve Monti, managing principle for IBM engineering and technology services.

“This relationship is much deeper and broader than a supplier relationship,” Monti says. “We’re pooling our technical capabilities to develop offerings for our joint customers, and even collaborating on the way we’ll take those offerings to the marketplace.”

One of the key elements of the agreement, the development center, will provide what Ken Pecot, Nortel’s VP of corporate strategy development, calls a “business framework” for the collaboration.

“It takes away a tactical element that can be cumbersome,” Pecot says. “And it puts in place some very focused business processes.”

The development center will open with an equal mix of IBM and Nortel staffers (between 25 and 30), who will shepherd project proposals through a jointly developed process, pulling the appropriate resources from each company.

“In the early stages, as we were working together to set up this joint development concept, one of the biggest challenges was that we had more project ideas than we knew what to do with,” Pecot says. “Ideas were coming from all over the place. But you can’t work on everything. You’ve got to get focused. This team is designed to sort out a small number of good projects—which can come from anywhere in either company—get them into the system, and then into the marketplace. We’re starting off with a small, highly focused, core team, but as we gain momentum, and when it makes practical business sense, we’ll bring on more [project] managers or whatever it takes to grow the business.”

The first project is a new class of blade servers. The project combines IBM’s Server Technology and Nortel’s carrier-grade communications expertise, and capitalizes on the data flow, reliability and security required by the network equipment marketplace embracing next-generation network solutions.

Nortel expects to utilize IBM engineering and technical services for a number of projects, all aimed at broadening Nortel’s end-to-end broadband, Voice over IP, multimedia services and applications, and wireless broadband offerings, Pecot says.

Nortel has been under pressure to cut costs since the telecom bubble burst (the company hit a revenue peak in 2000). Job cuts have diminished the company’s workforce by more than two-thirds, and it has outsourced much of its manufacturing. An accounting scandal that erupted last year and resulted in the firing of the company’s top three executives has caused delays and restatements of Nortel’s results, and embroiled the company in criminal and regulatory investigations.

“This agreement with IBM is a critical component of our strategy to partner for growth,” Nortel CEO Bill Owens said. “Working with IBM, as one of their key partners, is a bold step forward in our efforts to transform our business by reaching an entirely new level of R&D collaboration while reducing our R&D costs, introducing products at a faster pace and serving a broad range of customers more rapidly.”