Nortel Buys Pingtel

Years back — in the mid-late nineties in fact I came across Pingtel, a company who saw the oncoming VoIP revolution (we called it IP telephony back then) and decided to place their bets on this burgeoning market by making IP phones. Investors loved the idea and the company had to actually turn down funding. This was a genius idea as Polycom will tell you today but at the time, there were precious few VoIP installs so making money selling razor blades didn’t work since no one had razors.

Fast forward a few years and the telecom bubble burst and Pingtel decided to get into the IP PBX business. It made a good deal of sense as companies still were comfortable buying phones from the company that sold the phone system. Then something amazing happened… I was in Pingtel’s Massachusetts based office and they told me they were going to open-source the PBX. For me this was a huge leap as I had never heard any other vendor open-sourcing a phone system. In hindsight it was a stroke of genius as a free phone system would be the ultimate razor and the blades would be the phones.

Of course if you follow the open source communications space you know what happened… Asterisk became the runaway open source PBX leader and Pingtel became a distant second. Pingtel eventually sold to Bluesocket and today Nortel picked up Pingtel from Bluesocket.

What I find fascinating is that 2-3 years back at an ITEXPO we had an IP-PBX shoot out where we invited PBX vendors on a panel to discuss the benefits and drawbacks of their approach to the market compared to the competition. In one of these sessions there was an open-source question from the audience which sparked a semi-heated debate between Mark Spencer the founder of Digium and creator of Asterisk and Tony Rybczynski the Director of Strategic Enterprise Technologies at Nortel. The debate was over the merits of open-source vs. closed systems.

Fast-forward a few years and Nortel has now picked up Pingtel, an important open-source telephone system company. Ironically, Asterisk has spawned a new wave of competition that use Asterisk code and fork it off in various directions. So the biggest competition to Asterisk is currently other flavors of Asterisk.

For Nortel, the move is a stroke of genius because it broadens the company’s offerings and probably didn’t cost much. Let’s say the company has a customer looking for an open-source solution, they no longer have to compete against such a deal… They can actually win it.

In addition, this product line positions Nortel as a forward-thinking company and actually gives them the cool factor they need to gain mindshare in the open-source community. I have no illusions that Asterisk will lose market-share to Pingtel in the short term but the potential exists for Nortel to increase the Pingtel mindshare and market share as telephony has certainly not been the main focus at Bluesocket, a company whose main product lines are in the WiFi space.

The problem for Nortel is of course the company’s poor track record in making acquisitions turn into long-term success. With the exception of Cisco they are no worse at merging in companies than any of their competition but since the acquisition is small and Pingtel has nowhere to go but up, I think this deal will be fine and Pingtel can do well with a new corporate parent.

For the open-source market this is just more validation that open-source solutions are an important component of the future of telecom. For customers, they now have a strong parent to back yet another strong open-source choice. And as I have always said in the past… Choice is good.