Nortel has signed a four-year deal with Microsoft for the development and installation of integrated voice and data communications products running on Windows.

Under the Innovative Communications Alliance, Microsoft and Nortel will form joint teams to develop products due in 2007, cross-license intellectual property and participate in sales and marketing activities. Additionally, Nortel will become a strategic systems integrator of products and services developed through the union.

Agreement with Nortel is a major piece of the Microsoft's unified communications jigsaw. Microsoft unveiled its plan for unified voice, email, IM and video communications in Office 2007 and Windows last month, and immediately nailed down the mobile portion of the strategy by announcing backing from Motorola.

Motorola earlier this year ended a joint product development deal with Cisco Systems, which competes with Nortel.

Announcing the Nortel deal, Microsoft chief executive Steve Ballmer said Nortel's systems integration focus would provide customers with "excellent transition from the traditional phone system and corporate PBXs of today to unified communications based around software that spans phones, PCs and servers."

The goal of Nortel, meanwhile, is to move 20 per cent of its own existing install base to newer systems. Both companies believe they can add more capabilities such as voice, presence, contacts and video to Microsoft's' Office and Dynamics business applications, and embed more next-generation communications in networks and devices.

"This is a real inflection point," Ballmer said on the timing of the Nortel deal. "Within a very few years all of us will be have next generation devices for voice and video communications in our hands, desks and pockets. The combination of technology, service and support offerings will allow enterprise customers to deploy unified communications." ®