Nortel and Microsoft said Tuesday that they would work together to improve business communications, creating a shared vision for unified communications to drive growth. While part of the effort would focus on electronic communications, the two companies plan to roll out phone-based services as well.

The companies said they would look to transition traditional business phone systems into a software based model based on the Microsoft communications software platform, and using Nortel's line of products. The software model will allow developers to more easily create new applications for business communications.

"By combining our unique strengths, Microsoft and Nortel will accelerate the delivery of unified communications - delivering to our customers a higher-quality user experience, with greater reliability and lower total cost of ownership," Nortel CEO Mike Zafirovski said. "That's where we can make a real difference."

Zafirovski called the move "gutsy," and said he expected the deal to generate more than $1 billion in additional revenue. Both companies said the alliance carried benefits for the consumer, as well as Microsoft's and Nortel's efforts in the business communications sector.

The agreement's term is four years, and includes a pact to cross-license intellectual property and jointly sell the companies unified communications solution. Additionally, each company would deploy the other's technology across their enterprise networks.