While Avaya's contact center and unified communications announcements last week signal the company wants a dominant position in those areas, it faces internal challenges and formidable competitors including Microsoft and Cisco.The company is in the midst of digesting and integrating Nortel's enterprise division, which it bought last year for $900 million and from which it expects to reap big returns by next spring. At the same time, it is dealing with the same generally soft economy that other vendors are -- though Cisco is registering surprisingly strong revenue gains.The Avaya FAQAvaya's CEO says the next six to nine months are critical as it tries to integrate the former Nortel Enterprise division -- including network infrastructure and business telephony -- into its fold. The purchase was finalized last December, so the company has just completed its second full quarter since the acquisition. "On most operational details we have the normal first quarter challenges from shipments and logistics. Second quarter things are feeling pretty good, and the litmus test is ahead of us," CEO Kevin Kennedy told Network World in an interview at Avaya's offices.That test is whether the company can nail down significant long-term commitments from Nortel telephony and contact center customers and lock them into a migration toward Avaya UC. At the heart of that challenge is convincing Nortel customers to buy Avaya Aura, the company's flagship communications server. With Aura customers can step into IP telephony, glue together disparate VoIP systems and -- most significantly for Avaya -- lay the foundation for adopting UC.Kennedy says Aura can support Session Initiation Protocol trunking immediately to bring cost savings to corporations and over time bring increased productivity that will save money long-term but might have a longer return on investment.He acknowledges that getting Nortel communications customers interested in sticking with Avaya as they make plans for transitions to UC is key. The company is trying to draw them in with a flurry of announcements about new products, product enhancements and integrations with Nortel products. "This period right now is about bringing a lot of innovation to market. Now the question will be, are our customers as excited about it as we are?" he asks.The stakes are high since just 17% of Avaya accounts overlap with Nortel's, and competitors are gunning for the rest with attractive deals. "These customers are a pretty loyal base," says Zeus Kerravala, an analyst with Yankee Group. "But they're loyal to Nortel, not Avaya." Historically, until Cisco entered the VoIP market, very few telephony customers shifted from one vendor to another, Kerravala says, and the recent turmoil of Nortel's bankruptcy and Avaya's purchase of its telephony business puts Nortel customers in play.Surprisingly, the purchase of Nortel by Avaya didn't result in Avaya catapulting to the top of the IP telephony market as some analysts expected. With Nortel and Avaya ranking solidly among the top five for years with very nearly equal shares of the market led people to think combining the two would result in a formidable lead for Avaya, says Matthius Machowinski, an analyst with Infonetics. "We expected them to be ahead of everyone else," he says.But after the purchase Nortel's business continued to suffer and purchases in general dropped because of the recession, he says. Vendors attempts to lure more sales by dropping prices further eroded revenues, he says. Overall, IP telephony sales dropped 20% to 30%, but Nortel's dropped 50% he says. Meanwhile, Cisco proved a tough competitor coming in with a strong first quarter this year and hanging close, Machowinski says."These Nortel customers are up for grabs right now," Kerravala says. "If Avaya is able to upgrade them right now, likely they will own them for a very long time."Kennedy says that his company represents stability to Nortel customers who were traumatized by the Nortel bankruptcy, waiting for months to find out whether the products they had installed would be supported, let alone upgraded as technology moves forward. Avaya's purchase of the assets gave them a financially stable company to deal with that promised product support and a migration path to new features and products that doesn't require ripping out old gear and starting over, he says."If my worst fear was that everything was going to go away and that I'm going to have a problem, that was instantaneously alleviated," Kennedy says. "We actually engendered a fair amount of good feeling from those decisions that we made of support and investment."While that upgrade starts with voice, the real goal is upgrading them over time to UC, which blends all forms of real-time communications such as voice, video, SMS, instant messaging and the like.These features are being melded into Avaya contact center features, enhancing what call agents can do and booting their productivity, but without being pushed as UC. For example, Avaya's platform enables individual agents to handle a voice call plus five other communications links at the same time either to multi task among many customers or to draw more parties into a particular customer session in order to resolve requests.This type of innovation is being led by Avaya Labs, an 800-person division of the company that acts "like a start-up that wants to be acquired by Avaya," says Brett Shockley, the vice president who heads up the labs. He wants to aggressively grab the most interesting software technology the labs is working on and herd it as quickly as possible into new products if it shows potential -- what he calls crossing the chasm from applications to products. "We've got to figure this innovation thing out. We try to innovate so the new stuff is transformational," he says.The model he uses includes a customer proof-of-concept stage where select customers receive software early on and try it out, an acid test to determine "whether it's relevant or if it's just geeks playing with technology," Shockely says. This gets these potential product ideas in customer hands a year or two earlier than previously, quickly weeding out the duds and accelerating the development of the winners that will go on to become actual products. Those ideas that have potential are brought to market-quality interface and deployed in customer networks soon thereafter before being officially launched and supported by the Avaya sales force.This is a departure from secrecy that formerly shrouded the lab's work, getting ideas out quickly to customers and getting feedback, Shockley says.Some of the things the labs has been working on include a virtual reality environment gleaned from the Nortel acquisition that can be used as a collaboration tool for training and as a Web sales tool, as is the case with the Lenovo Web site, he says.Kennedy is putting pressure on the company to deliver quickly, and based on his track record at Cisco overseeing mergers, he stands a good chance of success, Kerravala says. "Failure there wasn't an option," he says.Meanwhile, Kennedy says he is moving past breaking business communications into discrete products such as contact centers and PBXs and thinking about them as parts of a single communications system that manages all means of real-time communication. "I believe over time what is now thought of as unified communications and call centers and such really begins to become a company more focused on multimodal collaboration," he says. "That's quite a walk from a PBX company, but I think that's where we're headed."Read more about lans and routers in Network World's LANs & Routers section.