After 20 years with Nortel, Enterprise Solutions President Steve Slattery is leaving the company Oct. 1. Taking over immediately, however, is Joel Hackney, Nortel's former senior vice president of Global Operations and Quality, and another of CEO Mike Zafirovski's colleagues from General Electric. Hackney, credited with driving many of Nortel's recent operational, supply chain, customer and business improvements, shared some thoughts with Network World Managing Editor Jim Duffy on the sudden switch, which comes while Enterprise Solutions is enjoying some solid momentum -- although apparently, things aren't moving fast enough.
Enterprise Solutions grew 23% in Q2, its fourth consecutive quarter of year-over-year growth. Why the switch?
We just finished our strategy session, and we're pleased with the progress, but we think there's a lot more we can do. What we're focused on is accelerating the progress. It's all about accelerating the momentum that's in place.
What do you want to do differently?
Customers are looking for a real choice. Every time we become more visible in the marketplace - either through investments in go-to-market, on product innovations, or in partnerships and key alliances -- the paybacks are coming back in a meaningful way. So what I want to do is really double down on the investments, focused on go-to-market and to continue the alliances that we've done in meaningful way with Microsoft, IBM and LG. And really focus on getting our message to the market much more broadly and aggressively.
Do you plan to rely more on partnerships and M&A, rather than internal development?
Partnerships are absolutely a critical piece of what we're doing. When we look at business process intersecting with communications in the enterprise space, it's clear to us one person can't solve it or bring all the solutions. So that's why we have made the major alliances like we have. We feel we can continue to grow this business and actually accelerate the growth organically. So we are continuing to make those investments. But we are also very open in looking at opportunities inorganically. So it is a combination of both.
There's been a lot of speculation recently on Nortel's M&A strategy, and Steve Slattery even mentioned last week that Nortel has spent the last 18 months sizing up potential acquisition targets. Are you ready to pull the trigger?
I wish I could answer that question directly. On that one, I obviously can't speak to any specifics other than to say that the inorganic element of our growth plan is something that is important, and we're focused on that element as much as we are the organic, but we need both.
Any specific product areas where you're looking for the inorganic contribution?
Customers need a real choice in data. Our strength in voice is well known and well documented. We're always looking at opportunities to build our capability for a direct relationship with key end-users while still partnering with channel partners. Anything specifically that does either or both of those is obviously attractive to us.
Top-line growth is accelerating, but what about the bottom line? Is Enterprise meeting profitability expectations?
It is improving. We really believe we can make this an anchor business, and for us an anchor business is a business that's growing faster than market and has double-digit operating margins. We think the opportunity exists for this business, and that's where we're focused.
Was that a major impetus for this switch?
That was one element of it, but not the only element. The big element around it is, hey, we're just really excited about what's possible here and what we've done, and we want to accelerate it. But not just on the earnings line -- all the way down the P&L.
So you plan to increase investment while at the same time driving double-digit margins. That implies not only top-line growth but cost-cutting as well. Are you looking at a product rationalization?
This is definitely not a restructuring story; this is a growth story. We'll always on a day-to-day basis as a normal part of business look at how we continue to tighten up our focus. But I would say that is the lesser part of the equation.
From a product perspective, what are your priorities?
Unified communications for us is a big push. Gartner recently positioned us in the leadership quadrant for unified communications, and Cisco as the challenger. We believe we have an advantage there. We're going to continue to invest heavily in that. The other area I would say is in multimedia applications in general. If you look at our call center/contact center/interactive-voice-response products and just put them side-by-side with all the competitors, it is a very compelling value proposition that we want to continue. Lastly, the transition to [service-oriented architecture] is one that we're committed to and will continue to push.
How do you plan to accelerate your go-to-market strategy?
We've made significant investments on that in terms of increasing the number of feet on the street, or sales resources globally. What we'd like to do is see how we can even do more of that. So that's one element in terms of just how we expand our reach. Another element is, we'd like to increase our relationships with key global accounts - multibillion-dollar Fortune 100, 200 companies where we can even strengthen the relationships we have today. So we've put in place a global account team focused on doing that while at the same time leveraging our channel partners.
We just have an opportunity to expand our reach both in investments on feet on the street, but also getting the Nortel story out in the marketplace. We can do a much better job in terms of investments in our brand and our marketing with analysts, with conferences to really get the story out. When we do that, we're always pleased with the result. People like The New York Times, the Social Security Administration, who's done the largest VoIP install and chosen us vs. the obvious competitors. In the U.K., similar - the Department of Works and Pensions, 40,000 users. The Vancouver Olympics. These are just really market-shifting customers that are very, very sophisticated in their needs; and when we get a chance to get in front of them, they take you through the wringer. The fact we're winning these big ones tells us we need more swings -- more chances at the plate, if you will.