Turning the ship at Nortel

  • Jim Duffy (Network World)
  • 28 June, 2006 13:25

Three months ago, Nortel tapped Juniper's strategy and business development chief, George Riedel, as its new chief strategy officer. His responsibility is to establish the partnerships and investments that will deliver on CEO Mike Zafirovski's stated goal to have a 20 per cent share or better in key markets such as IPTV, IMS, WiMax and Metro Ethernet.

How far into the home do you plan to go with IPTV?

George Riedel (GR): I think the question might be 'where can we be distinctive and add value?' Being the fourteenth set-top box player is probably not the answer. So we're looking to others in the ecosystem to provide that but not us. It could be a range of partnerships - we've got the LG joint venture, which would be the first place to look. There's a broad collection of players (for home digital entertainment). Can we work with those guys to invent technologies or to develop ways for end-to-end services to run better? Yes. Do I think we should be in those CPE businesses? No.

How do you plan to counter Lucent's recent momentum in IMS?

GR: We have 500 carrier VoIP installations around the world and a whole range of SIP businesses with it. That's a huge asset for us, to be able to go back in and say, can we migrate you from TDM to VoIP to IMS? So the principal focus is on getting that installed base to embrace an IMS vision that we're rolling out. Secondly, we have a set of partners that we're working with to enhance that. Not just in the transport and control plane layer; but actually in the application side. What is IMS about at the end of the day? My belief is it's much more about enabling new applications and services, yet you need the scalable transport and control plane to go do that. But the magic is in the applications and services in terms of new growth. So I think what you'll see is us focus more on the applications and services going forward while we migrate our existing base to an IMS architecture.

We are also trying to get to a standard platform. Getting to common components, getting to open systems so you can add value on applications would be a theme for us.

We are behind - I'm not so sure how much of that is product portfolio versus perception. It's a question that we wrestle with. I think the answer is probably both. We need to invest to close gaps on both the marketing and the perception angle, as well as on the product angle.

In addition to your edge router and the blade server business, which product areas did you cancel or sell?

GR: I'm a 90-day expert on all things at Nortel. Most of this happened last year or before my time so I just don't know all of the details. It creates a fair amount of uncertainty so having a one-on-one relationship with the customer about the transition plan is important.

How do you plan to get to 20 per cent Ethernet switching market share in the enterprise given you've been at less than 5 per cent for several years?

GR: The 20 per cent number isn't an overnight target. It's an aspiration, it's a goal. In terms of specifics of how we do that in Ethernet switching, I'm not going to be able to give you a whole lot of comfort and clarity just yet on that. We are working through a plan to assess how we do that. We're encouraged by some of the themes that are in that plan around security and wireless in the networking environment, and the need to have a simpler network to manage. If you think about other traditional networks, complexity of the operating system, architecture and feature release problem is a non-trivial challenge. So to the extent we can find a way to make security and manageability of the network through both an architecture and a network management approach simpler, we think that has some play.

But to me, it's not an Ethernet switching question; it's an enterprise success question. Cisco has a phenomenal business there in terms of its go-to-market capabilities and portfolio. So you've got to have a compelling product value proposition but frankly, you've got to have channel or go-to-market leverage. Unless you have some big partners working with you, I think it's a hard road. So what I think you'll see us do is not only work to fill the gaps on the product side but also on the partnership and go-to-market side. How do we get partners to help deliver a story, a value proposition? We do a lot of business with the traditional carriers today through resell. Can we do more? Yes. Partnership was one of five initiatives we talked about in reinvigorating our enterprise sales about two weeks ago. Inside sales, direct touch, channel programs and partnerships being important. I think you're going to see us do more there in terms of trying to get others to help support. And others have come to us. So it's not just a push, there is a real pull.

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Is Nortel committed to UMTS?

GR: The facts are obvious: We have great products but we don't have a leading share position. Can we make that great product into a leading share position or not? That's a discussion we are having. Because if you can't then what are you going to do about it? We're actually much more excited, frankly, about 4G as opposed to UMTS. I think if you look at the practical experience of the economics of 3G, one would have to say if we wound the clock back five years and this is what we got, would we be happy with all of the investments? I think by and large, no. We actually see an opportunity to continue to invest in a set of technologies around OFDM/MIMO enablement, which could get manifested in WiMax Rev C, or an LTE solution for the UMTS (market). And we think, both for the services and frankly for the backhaul benefits of some of those technologies, you're going to see a lot of value in those technologies. Our challenge is to get the time to market right in order to exploit that.

So as a recent addition to the executive team and as the chief strategy officer, what do you see as Nortel's biggest challenges?

GR: Our challenges - there's a long list of them - have been reasonably well known. We haven't been focused enough. We haven't been profitable. We haven't had alignment in terms of a vital few, a set of things we put more resources behind. We haven't gotten leverage out of technology investments and partners like we should have. And as a result, our position in certain segments is where it is. We are where we are. So those are the obvious challenges that are well known. I think the side we don't spend as much time talking about - I'm overwhelmed at the pull from both customers and partners. If you go have a conversation with a large carrier or a large enterprise customer, they're very anxious to see Nortel get back on its feet again. And our ability to deliver world class products and solutions in the past, and ability to continue to innovate in the future, gives them hope that we can return. And partners are saying that we actually have some real value to add. So we have plenty of challenges. The one I would add is the sense of urgency to act. We have said a lot of things and we are in the midst of trying to get as much change enabled as we can. It takes time to build the momentum and we're cognisant of that.

Can you start to see some decisions and some momentum build that will reassure customers, shareholders and employees that the ship is turning?

GR: There's a whole new team driving the ship going forward, a whole new set of processes that we have put in place, the business transformation. And those are starting to pay huge dividends. It'll take a little time for the full benefit but in terms of why do I feel confident that the ship is turning? It's because I can see the levers we're pulling and the impact of those levers - whether it's in people, processes or profitability improvement - it's on the horizon.

And as chief strategy officer, what are your priorities? What currently occupies your time?

GR: We have been going through a strategic review, which is largely about where are we going to place some of these bets for the long term? Where are we going to be a leader, and what is the alignment of those areas back into product and distribution and organisational implications. We've been at it for about a month and have made a lot of progress, but we've got some work still to do. In terms of where I spend my time, it's working with the cabinet, with the theatre heads, with the product group heads and with customers, the partners to figure out where can we focus to be distinctive. We have been all things to all people in many cases, and we know that can't be sustained. So a lot of my focus has been on figuring out the plan for going forward. The other half of my focus is on external dialogues, whether it's around talking to customers and what they see, partners, prospective partners - things that we could do together that would be valuable. The third is getting to know the organisation a bit better.

Nortel has had several engagements and disengagements in core routing. You're from Juniper. Any potential reengagement with Juniper for core routing?

GR: I'm not going to comment on specifics for any particular partner. To me, you've got to articulate to a customer why this would be better. So why would we add value to reselling core routers? It's not clear to me that we would. Juniper already has a set of strategic partners, as you know. If there are ways or segments where we can add distinctive value, then that's interesting. If it's just a reseller arrangement then that's not very interesting.

It's hard to imagine why or how, at this stage in the game - if you look at where Juniper or Cisco or Alcatel or Redback are - starting from another program today why we would be able to be distinct. There are other players that are going to participate in that space but that's not going to be us. On the flip side, this is why we're so excited about Metro Ethernet. We see a real opportunity, particularly on the edge and access side, to play a meaningful role as these next generation architectures get built out. Our customers are saying MPLS to the edge doesn't work. It doesn't scale, it's too costly, and it is too complex. For the last part of the access network, it's too expensive. So can we deliver a solution that has some distinctive value for that part of it that is complementary to MPLS at the core. And I think that we can.

Do you plan to acquire or partner for Ethernet access?

GR: I don't see a need for an acquisition. We have a healthy optical business, we have a healthy carrier data business, we have some pretty interesting technologies that we think can add value. In terms of the opportunity we see in front of us to do it organically, it's pretty robust.