There's a lot to this question! One primary difference is that with Collaboration Environment, the application is actually deployed into the Collaboration Environment platform in the form of a "snap-in", thereby gaining the benefits of scalability, security, availability, etc. With ACE, on the other hand, the application must run on its own highly available, scalable platform and access ACE capabilities remotely via web services.
Here is more differentiating information:
Collaboration Environment builds on the Avaya Aura platform to deliver a new, improved approach to enterprise communications. It transforms traditional, single-purpose solutions for voice, video, email and text messaging into a genuine multimedia, multimodal architecture. Some of the key characteristics of Collaboration Environment are that it:
• Supports a snap-in model, allowing the platform to be extended with capabilities from a variety of solution providers, and thus enabling rapid, cost-effective solution development.
• Provides built-in scalability, reliability and security for every solution that lets developers concentrate on value creation instead of logistics and interoperability.
• Abstracts the communications layer from the applications layer, enabling developers to concentrate on business needs rather than on becoming experts on the underlying communications infrastructure and protocols.
Avaya ACE is primarily a platform for building and implementing communications-enabled business solutions. The platform provides two distinct sets of APIs: Avaya ACE Web services and the Foundation Toolkit APIs.
Using Avaya ACE Web services, business solutions can easily access and integrate communications capabilities via SOAP- and REST-based Web services that comply with Parlay-X standards. The Web clients are able to interact with the multiple underlying communication networks via SIP, TR/87, JTAPI or an appropriate proprietary protocol.
Foundation Toolkit enables the creation of sequenced and endpoint applications. The APIs allow developers fine-tuned control of call flows and custom call treatments, leveraging Avaya Aura within a SIP-based environment. Note that Foundation Toolkit APIs have been deprecated in favor of the Collaboration Environment Call Intercept APIs: see Section 3 for more information.