Cisco thinks it's a mistake. 3Com says it's understandable. And analysts endorse Nortel Networks' $3 billion grab for a share of the emerging CRM (customer relationship management) market.
Nortel, which had sales of $US17.6 billion last year, recently paid $3 billion ($US2.1 billion) to buy Clarify, a maker of help desk, sales and customer service software, with an annual revenue of $US130.5 million.
Nortel Networks users have expressed mixed feelings about the Clarify acquisition, with at least one user hoping the purchase will improve Nortel's own customer service.
A project manager at Corporate Express Australia said her company has had service and support issues with Nortel.
The project manager commented: "We haven't found [the company] particularly helpful when we've had to deal with networking problems, so maybe [buying Clarify] will give it some extra focus on how to do these things."
However, Nortel customer Advantra welcomed Nortel's decision, with a spokesperson saying it will be interested in any new products to emerge from the partnership.
Nortel claimed its acquisition of Clarify will strengthen its marketplace position as it moves into the "second wave" of electronic business.
Cisco Australia and New Zealand managing director Terry Walsh described the acquisition as an "unusual move" that will effectively deny Nortel customers a choice.
"Our view is a horizontal model always beats a vertical model," Walsh said.
"Clarify might be very good for one carrier but it may not be the right solution for a different carrier, particularly if they've got legacy systems and they need to integrate them."
Andrew Barkla, Asia-Pacific vice president for PeopleSoft -- which recently acquired Clarify's competitor, Vantive -- also questioned what impact the acquisition would have on the open technology focus maintained by Nortel to date.
But with market research firm IDC forecasting the worldwide CRM software market to grow from $US1.9 billion in 1998 to $US11 billion in 2001, Barkla said there's certainly space for extra players like Nortel.
Rolf Jester, principal analyst from Gartner Group sees Nortel's acquisition as a good move that is likely to be beneficial for both companies.
"Over the next 12 or 18 months or so I suspect some leaders will emerge but most of the leading candidate vendors have got a fair way to go to round out their whole product set.
"Clarify are a very good and successful company, but they do need to continue to invest in R&D to broaden their product.
"It may be this acquisition will give them added impetus and funding to continue to invest," he said.
3Com's Australian managing director, Archie Wilson also endorsed Nortel's acquisition of Clarify, adding networking companies are increasingly focusing on applications rather than hardware as they seek greater relevance in the marketplace.
"Some networking vendors have chosen to go out and purchase very specific software capabilities so they can walk the walk."
"We've taken a slightly different strategy in the sense that our partnering approach and the technology alliances we have are [concentrated] on giving everything we do an application focus."