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So Steve Jobs had to go before a big press conference and defend the iPhone 4 against accusations that its antenna design uniquely runs the risk of blocking reception. Ha! Apple's problem is quite the relief for enterprise telecom managers! I should explain what I mean. After all, it's the general consensus of my TC2 colleagues that the iPhone antenna story is something of a mild tempest. Enterprises that were previously hooked on the BlackBerry may be diving into the Apple world, but it's not like they're out buying the latest model for employees. Other companies' smartphones may or may not be subject to the same issue (though none of us has experienced it). And user behavior that can be unlearned may be the real culprit. Meanwhile, media coverage of the controversy is fading, and Apple's latest earnings, announced yesterday, are soaring anyway. But from a procurement and ongoing management standpoint, it's heartening -- and potentially constructive -- to see a key vendor taken down a peg or two. End-user pressure for certain supplier choices has dramatically increased in recent times. And the (expensive) iPhone has been nearing iconic status. Vendor worship is not a good place for corporate telecom management to be! All of this also serves as a reminder that there's still a difference between wired and wireless networks. Actually, nothing would be better for telecom and networking's position and prestige within large enterprises than to have a quantum leap in the reliability and flexibility of employees' access to applications. And that means pervasive, unwired, full-speed availability. But we're not about to see SLAs for wireless in the "five nines" category of traditional wired voice networks, or even the robust network metrics of generations of enterprise data networks like frame relay and MPLS. It's good to have a reminder of that every once in a while, and if it makes end-users stop and think about their attachment to given vendors, so much the better for long-term leverage. In particular, the increasingly grabby AT&T -- still today the only network source for the iPhone -- is trying all kinds of gambits with customers to attach every offering under their corporate roof to new, all-encompassing contract commitments. Enterprises hardly need their own employees' help in letting AT&T's attempts at excessively broad, long-term lock-ups succeed. As it happens, we are at a moment when the carrier-network side of wireless really is set to try to make a quantum leap toward the seamless, always-connected feeling of robust wireline data networks. Next quarter Verizon Wireless is supposed to make the first metro area introductions of its 4G LTE networks, and it's supposed to do them in a bunch, as opposed to the relatively quiet introductions of the Clearwire/Sprint "WiMax" 4G services. But in preparation, enterprises should be building more, not less, flexibility into their contracts, with such best practices as the ability to upgrade plans and devices without restarting individual line terms. In this light, it's not a bad thing to have a timeout on the headlong rush by one device or network supplier toward dominance in the public's mind. Even if the respite is brief, the recent demonstration that no vendor is perfect is a welcome window for corporate telecom professionals to organize themselves, and their entire organizations, for the procurement challenges going forward.
Until recently, companies buying wireless devices and plans for employees based purchasing decisions on price, coverage and (maybe) key contract terms. In contrast, corporations procuring wireline services have historically paid a lot of attention to differences in capability and features. We've never gone as far as those who've called wireless service a commodity. But apart from coverage issues, and niche services like Sprint Nextel's iDen-based push-to-talk, the technical capabilities of the wireless carriers have sometimes felt pretty hard to distinguish. Or at least telecom buyers have not felt pushed hard enough by their user base to make those distinctions in awarding business to wireless suppliers. But that's all changing -- rapidly. Last fall on my blog, TC2's Joe Schmidt teed up the key issue of Do devices matter when buying enterprise wireless services? Joe noted that responding to needs for devices and applications changes the leverage equation with regard to your negotiations with prospective carriers, if you make device demands the end-all of your project. Since then, this question has become even more crucial as the dominance of Research in Motion's BlackBerry in corporate smartphone deployments has been cracking, and soaring iPhone sales and pre-orders have been stretching AT&T to the limit. Last week, TC2's Mark Sheard colorfully commented on his own preference for the iPhone in service of several larger points -- that smartphone makers are actively trying to leapfrog one another in capabilities, that end-user populations are increasingly pressuring their companies over their personal preferences, and that all this pressures telecom managers to accurately and usefully build wireless cost models as the stakes grow higher and supplier choices carry more risk and reward. Now TC2's Ben Fox and LB3's Kevin DiLallo have an article in one of our favorite publications, The Voice Report, further delving into this issue. Their piece, Hunger for Devices and Apps Complicates Wireless Procurements, brings you up to date on the implications of cost modeling not only for devices and minutes, but also for app downloads, VoIP over 3G to avoid cell phone charges, how far you should go in accommodating BlackBerry vs. iPhone vs. Android-based devices, and other factors that could drive wireless expenses and management challenges through the roof. Check out Ben and Kevin's analysis, and let any of us know your thoughts and experiences on what's rapidly becoming one of the most complex challenges for telecom managers today.
The following is a guest post by TC2 Senior Consultant Mark Sheard, who is based in London. When one of the world's largest banks gives corporate users the option of switching from the BlackBerry to the iPhone, you know that the world of corporate wireless procurements is going to have to make adjustments. Last month London-based Standard Chartered Bank gave its bankers, including thousands in Asia, the ability to switch away from the previously standard BlackBerry. And if you're feeling the pressure to do the same thing in your own organization, you certainly have good company! The iPhone has been on a massive land grab, quickly winning the loyalty of huge numbers of domestic consumers and increasingly promising to threaten BlackBerry's dominance in the corporate arena. Under the weight of the excellent Apple user interface experience backed up by host of cheap (really cool and often pretty useful) iPhone Apps, the iPhone has generated a momentum that is compelling to many. In fact, I myself must admit to being a convert from my BB, which I loved, to my iPhone, which I love more. And some of our clients have already crossed the Rubicon to allow iPhones, often starting with family packages for example. Of course, I come across others who swear by their BBs and recite advantages relating to better handling of email, higher security etc. In a piece last year that got a lot of circulation, former tech stock analyst Anton Wahlman wrote an against-the-trend article for the popular investment website Seeking Alpha entitled '26 Advantages BlackBerry has over iPhone'. But I could argue several of his points as follows -- just as you may now be hearing such end-user arguments as part of their lobbying for the devices they want: -- BlackBerry can be used on almost every carrier in the world (over 475 of them). In the US, the iPhone is available on AT&T only. My response: Erm ... not for long. -- BlackBerry is available in five form factors -- small keyboard, large keyboard, no keyboard, flip phone, and candy-bar. OK if you have very big fingers! iPhone can be a little tricky, but you'll learn. -- BlackBerry has removable and expandable memory. iPhone is fixed. Yep and it's massive for most users -- 32Gb on a phone! -- BlackBerry allows programs to multitask. iPhone has limited multitasking. Got me here, but can't say it has bothered me and I bounce around like a rubber ball ... but I can play my iPod while using other Apps! -- BlackBerry can be synchronized to multiple computers simultaneously, if you have multiple computers. Arguably, this is more about problems with iPhone App synchronisation and iTunes, but it can be done, although when you have to start writing code you're missing the point, right? Regardless, enterprise synchronisation isn't a problem. I have to acknowledge that the BlackBerry isn't lying down. Hence, we now have touch screen BBs and better handling of all the stuff like photos, MP3 and Wi-Fi networking that is becoming de rigueur for users -- and, of course, there is BB App World. And just when you thought you knew where the battle lines were, the Google-backed Android is rapidly moving from the 'clunky beloved of geeks' into another real competitor in the smartphone space, as its open source operating system is used by a variety of smartphone providers. But can you model such costs across vendors and devices? Today's smartphones are hugely feature-rich and will continue to gobble up data bandwidth like there's no tomorrow; 50% year-on-year growth is a common rule of thumb. And provider packages will be designed to extract revenue from you. Think about: costly add-ons that may be hidden; traditional 'oh my gosh is that how much it costs for data when roaming' tariffs; differences in inclusive data download volumes; overage charges; handset acquisition costs; equipment subsidies; device commitments; annual commitments; term commitments; and, of course, plain old telephone calls and SMS. Previously, which BlackBerry or mobile handset a particular supplier offered was not much of a differentiator between suppliers, it was mostly about pricing and technology funds. But now the availability of applications like Skype, and the ability to easily use WiFi instead of roaming internationally, has a material impact on costs, and thus becomes a differentiator between suppliers. Exact matches between bids or your current position will be rare -- more complexity makes it harder to spot the right deal, something suppliers like so that they can seek to win your business through factors other than hard dollar savings. To get the best of your increasing inventory of ever more capable smartphones -- 'that users just can't live without' -- make sure you know how to intelligently estimate relative total costs and to holistically assess the impact of restrictions on use a particular vendor's offering might have. Typically, this will involve: understanding the value stakeholders place on certain features or services; identifying and factoring in the impact of corporate constraints on use; and modeling key cost components to generate as much of a 'like for like' comparison between suppliers' offerings as is possible. At the same time it is important to capture any less easily quantified (in cost terms) differences in a way that aids decision making. For example, the difference between a 5Gb versus a 2Gb 'fair use' data download limits might not generally be seen as material for the vast majority of users. But will this be the same with application-rich smartphones? Particularly when recent announcements by AT&T in the U.S. and O2 in the UK signal the advent of more complex data pricing for data plans. Both a quantitative and qualitative assessment and an appreciation of the use environment apply to smartphone procurement. The changing capabilities/features of smartphones and the emerging competitive dynamic mean that more attention than ever before is required to manage the risk of making the wrong choices -- and to gain the benefit of making the right ones!
The following is a guest post by TC2 Senior Consultant Theresa Knutson, who is based in Sioux City, Iowa. U.S.-based wireless suppliers offer an interesting side benefit in their corporate contracts -- employee purchase discounts that deliver savings on your employees' personal use devices while adding to the total line count and contributory spend in your overall contract. This translates into higher discounts on your corporate liable devices, saving your company money. Sounds like a win-win scenario, right? It can be, if managed correctly. Each supplier has a different way of referring to these employee purchase programs. Some call them individual liable (IL) or employee accounts (EA), and others refer to them as individual responsible units (IRU). Whatever the reference, the definition is simple -- these are wireless devices that your employees and their families have for personal use that are paid entirely by the employee but that are also eligible for discounts under your corporate contract. For most companies, the number of individual liable lines can greatly outnumber the corporate liable line count. All of the wireless suppliers are in a "race to win the market share" game, so leveraging their corporate relationships to build their consumer base of users is a smart move. And on the surface their interest in promoting these programs is similar to yours. Suppliers typically have tiered discount tables that provide increased discounts as the total number of corporate liable and employee liable line counts grows. If you have a company with a significant number of employees, you can leverage the employee purchase programs to increase your total line count/spend under the contracts, increasing the discount your company receives on the corporate liable lines. Some wireless suppliers will also offer annual rebates to the company of a nominal percentage of the employee purchase spend. Another windfall. Employees love these programs as they can save them and their families 15+% each month on their wireless bills. And with the rapid expansion of wireless devices to all aspects of our life, every family budget needs some savings. If a family spends $75/month on their personal wireless phone bills and saves 15%, that translates into $11.25/month or $135/year. But remember: If you have significant employee liable lines under your corporate contract, you are further bound to this supplier, making it more difficult to move corporate business to another supplier, which diminishes your negotiating leverage. Make sure you understand the double-edged sword here. No one is going to be able to force employees to change their personal wireless supplier. But if you do manage to convince them to sign up, and then for your own corporate reasons you decide to change carriers, those employees will definitely voice outrage if they lose a discount that they were previously enjoying. And that will leave you in a cumbersome situation with any of your suppliers that have any sizable employee spend. They'll know that it will be difficult for you to ever completely get rid of them, regardless of how poorly they treat you in terms of providing competitive pricing, services and terms. So how do you make this employee benefit a net winner rather than a net loser for your competitive procurement position? The answer is to leverage the ratio of large volumes of employee lines/spend to smaller volumes of corporate lines/spend and, where possible and practical, select discount tiers than can largely be met purely by the employee volume, regardless of what the corporate volume is. That way, your negotiations on the corporate pricing and terms -- and remember, carrier account teams do care more about the corporate volumes than the employee volumes -- don't need to be distracted by worrying about the implications on the employee discount. Employee volumes don't tend to undergo significant change over the course of a contract -- individual users are relatively stable and don't tend to change carriers very often. So you shouldn't lose sleep over your discounts being predicated on maintaining an employee volume that you can't directly control. Instead, take advantage of that employee volume stability (and more often continual growth), and use it to minimize your lock-in on the corporate volume. Being able to move your corporate volume around between carriers will maximize your negotiating leverage. It will keep all your wireless suppliers on their toes for both the corporate and individual-liable lines, and keep them always working towards winning more business by providing better pricing and terms for you.
The following is a guest post by TC2 Senior Consultant Julie Gardner, TC2's senior Contract Compliance and Optimization practice expert. If there's one thing that users universally complain about, it's the prevalence of billing errors. Telecom managers around the country routinely tear their hair out from the frustration of trying to wade through the pile of impenetrable bills and spreadsheets delivered each month by their telecom suppliers. Just trying to match the bills to the underlying contracts can be a nightmare all by itself. Even when a Telecom Expense Management (TEM) company is supporting a customer in processing its telecom bills, or when a thorough internal invoice review and approval process is in place, the task of processing bills for payment typically takes priority over validation of the charges on the invoice. Most companies understand this tendency and will periodically engage a third party billing review specialist to check whether supplier invoices comply with their contracts. But even putting aside the horror stories of clumsy auditors who inadvertently alert suppliers to significant under-billings (it happens -- really), the success of a billing review project depends on more than just selecting experts skilled at finding the errors. First, you have to make sure from the start that everyone is on the same team. The internal customer resources responsible for reviewing and approving telecom invoices often regard a third party billing review as a threat -- any billing errors that the third party identifies are ones that were overlooked by the internal team. Thus, there can be an inherent conflict of interest whereby the internal team is not necessarily strongly motivated to cooperate and support the outside experts. Obviously such conflicts do not maximize the results from a billing review project, so it's crucial to ensure that the project begins with all internal stakeholders positioned appropriately. The internal team needs to be an integral part of the process and to be assured that the project complements their role. Its success will be seen as their success too. Second, claims for billing errors are not always black and white. Errors are rarely as simple as "the carrier is billing $0.03 per minute even though the contract says $0.02 per minute." The root cause of errors is almost always more complex -- for instance, whether certain waivers apply; whether custom pricing is being correctly applied; or whether a particular discount applies in conjunction with another discount. If there's room for doubt, or the contract is less than crystal clear (and let's face it, supplier-drafted telecom contracts are rarely crystal clear), suppliers will push back on your recovery claim. So it's important to be ready to present billing recovery claims with as much supporting information as possible and to be prepared for the counter-arguments that will inevitably be made. Ultimately, and especially when claims reach the six and seven figure range, the billing recovery process becomes as much a negotiation as a billing review. Being prepared for that and what it entails, including having the right resources on your team (i.e., negotiators, not just billing analysts), is key to the success of the project. Of course once the process becomes a negotiation, as is frequently discussed on this blog, it becomes as much about your leverage as about the merits of your claim. Suppliers routinely leverage all kinds of issues against your billing claims. That unrelated contract extension you are negotiating? Suddenly, the pricing concessions that had been offered "include" release of your billing claims, perhaps for pennies on the dollar. Those accounts receivable issues you've been working through with the supplier? Suddenly, the supplier will only address your billing errors if you pay up on all open amounts. It may seem unreasonable for a supplier to tie the resolution of billing errors to unrelated issues. But that's often what happens. You need to anticipate that and be ready for it. A final piece of advice: Don't make the mistake of bringing counsel into the negotiations either too early or too late. Bringing the lawyers in too early will just lead the supplier to bring its lawyers to the table, slowing down the claims recovery process. Bringing them in too late or not bringing them in at all, even when the supplier is dragging its feet unconscionably or hiding behind obviously inapplicable contract language, risks compromising or waiving your claims. We'll be sharing further experiences and best practices from our Contract Compliance and Optimization (CCO) work in future posts. Topics we've been asked about include what terms your contract should include to facilitate a successful CCO project, and combining audit and optimization efforts to save time and effort. If there are other subjects in the area you would like us to address, please ask.
How often has a carrier account manager conditioned a particular response to you around what he or she "can do" or "has to do" in light of corporate directives? Pretty often, I bet. Carriers find it convenient to tie the hands of their people in the field around various sourcing and operational requirements -- or at least let account teams give the impression that their hands are tied. Keep that in mind the next time you're dealing with the mixed blessing of a corporate directive from your company. Obviously many telecom buyers are hearing demands from senior management for specific and immediate cost savings -- a double-edged sword that can lead to manipulation by carriers when these demands come out into the open. But you may also be dealing with a new set of additional mandates rooted in the pressure that companies feel to standardize the procurement function in today's economically stressed environment. These mandates come under many names and cross the boundaries between sourcing and ongoing operations. You may have a "Supplier Governance" process that you have to instruct your carriers and equipment vendors to follow. There may be a set of "Procurement Compliance" procedures that you receive from higher-ups and must be satisfied. You may now even have a "Chief Procurement Officer" to deal with, to go along with the demands of CFOs and other top executives. Even if you don't hear these terms in your company, you may be part of an over-arching IT organization with a steadily increasing diet of standard demands that alternately assist and hinder you in your job. Some companies even try to force standardized IT agreements onto the telecom process -- misunderstanding the unique structure of telecom agreements and making it more difficult to include critical, telecom-oriented terms and conditions. Of course, IT organizations are also very concerned about data security, both in a generic sense and in terms of industry-specific mandates that derive from legislation in the healthcare, banking and other fields. But sometimes, generic IT requirements just impose an additional layer of bureaucracy and makework in the supplier-user relationship. These extra requirements can present a mixed message about priorities to your key suppliers when they overwhelm the process. The key here is to harness these "facts of life" in today's environment to your advantage, instead of letting them control you. One way to harness them is to let suppliers know that both sides of the negotiation are operating under mandates, so their mandate isn't the only one that counts. Take the issue of billing. Companies love to standardize terms for their accounts payable, and they often pressure their managers (such as you) to enforce them with all their vendors. Up to a point, that's a great help. Carriers need to be told not to require silly terms, such as 30 days to pay a bill after a "bill date" that they arbitrarily assign and may not represent actual delivery of the bill. But telecom billing platforms do have notorious built-in legacies, and some enterprise-wide billing mandates can have the counterproductive effect of forcing a demand into RFPs that none of the bidding carriers will accept. That leaves you without an effective stick to meet your company's mandate. It's an example of what can happen when a mandate controls you rather than you utilizing it to your advantage (such as putting yourself in a position to negotiate the carrier rep away from his or her company's mandate). The bottom line is that you can't wait until everyone's gathered around the negotiating table to start whining about what bureaucratic checkpoints you need to fulfill. Determining requirements up front in a competitive RFP (or other initial sourcing communication) helps settle what sort of mandates you will need to get from carriers even if they aren't core to the telecom process, and where you are willing and able to go to the mat for a particular requirement. Do this work up front, and you'll be better prepared to "trade points" with carriers and their actual or perceived corporate requirements. In the end, it'll make it far easier for you to put the energy of the procurement on the core pricing, service levels, and key terms that you know you need for your network rather than let the process get overwhelmed and sidelined by other issues.
Posted At: February 15, 2010 5:07 PM
| Posted By: David Rohde
Related Categories:
Management, Leverage
You might have thought that the IP convergerce era would have brought in easier networks and simpler contracts. You know, buy one service from one carrier, have it do everything, sign a single document where all the conditions for buying that service are lumped together, and plan to work 9-5 during the term of the deal. Of course, things haven't worked out that way. Complexity is built into the very act of installing new technologies that render faster and more flexible results for end-users. That's true for the network engineering side, the provisioning and service levels, and the contract deal itself. One way in which we see this is in the carriers' reaction to innovative mechanisms in terms and conditions. Carriers like to set up a game of whack-a-mole whereby they try to offset apparent new flexibility in one contract idea with a straitjacket somewhere else. The reason they usually get away with this relates to a simple truth in telecom and networking: Nobody rips out an entire network at once and immediately replaces it with another. New services are usually additive. That gives carriers a self-replenishing supply of rate elements on which to sneak in restrictive conditions that prevent you from riding down the market price. We often see this in both explicit and implicit terms that apply to individual circuits. A per-circuit term plan that applies to a newly installed circuit (often a very high-cap metro or national circuit, and/or a new WAN technology such as Ethernet or an MPLS-like add-on to an Internet connection) has the effect of canceling out a "no-commitment" overall deal. Controlling the procurement process within your company is key here. Carriers know that new or naive CIOs who want to "make their mark" by forcing telecom vendors into what are superficially no-commitment, top-level contracts are fodder for this kind of misdirection. A stealth variant of this is an innocuous-sounding "minimum payment term" slipped into a separate pricing schedule for a new data and/or VoIP service being rolled out to many locations. If the term is expressed as applying to a certain percentage of the affected circuits, and the service involved is your growth platform, then you've bought yourself a treadmill: A fixed percentage of the installed circuits subject to a minimum payment term will become a continuously increasing number of circuits installed at later and later dates. By the time you've finished rolling out your network, the minimum payment term of this one element will exceed the expiration date of your overall contract. Try re-negotiating lower rates in the middle of this kind of deal, and you may see that what seemed like a good price at the beginning of the contract can no longer be matched to the market. What you want instead is an airtight deal that flows to your benefit from start to finish on both prices and terms, where each quantitative and qualitative element complements all the others. These are the kinds of critical considerations you must know about at the beginning of your procurement process rather than the end when it's too late. They're what my TC2 colleagues Jack Deal and Larry York, along with LB3's Andrew Brown, will be addressing in a session called "Blueprint for a Successful Procurement: 7 First Steps to Maximize Leverage" at the 2010 Telecom Negotiation Conference in Washington, D.C. on March 11-12. Past attendees of Telecom Negotiation, chaired as always by LB3's Hank Levine, will tell you the conference is about as chock-full of meaty detail as anything they've ever gone to. I'll also be speaking along with a number of other TC2 consultants and LB3 attorneys about the latest in the art and science of negotiating fully coherent telecom deals that actually deliver market-based benefits both now and going forward. Check out the full agenda and other conference information. I look forward to the opportunity to see you next month here in Washington!
The following is a guest post by LB3 partner Kevin DiLallo, whose practice includes a specialty in the negotiation of enterprise wireless service contracts. Putting mobile devices with far more independent intelligence than the regular desk phone into the hands of thousands of employees has always carried the risk of unintended consequences. Society as a whole now practically considers cell phones and smartphones as traveling personal transaction machines, leading to increasing public discussion about using mobile devices for personal and civic purposes. All of that is highlighted by the wireless industry's successful campaign to raise money for Haitian relief by allowing subscribers to send contribution pledges via text message. This phenomenon has raised over $22 million to date for the American Red Cross. But it's also put telecom managers who issue corporate-liable devices in a tough spot, as large numbers of holders of those devices have effectively pledged funds on the company's dime. Yet this dilemma simply reflects two recurring issues in enterprise procurement of wireless devices: (1) whether to hold employees accountable for personal use of wireless devices; and (2) how best to employ technical solutions to curb unauthorized uses of those devices. There are actually many reasons for a company to require employees to account for their personal use of company-subsidized wireless service and devices. One is the arcane, but still in force, IRS recordkeeping and reporting rules for company-issued cell phones. Another is to discourage personal use of company assets that could cut into the employee's normal work routine. And of course, your company has a purely economic interest in preventing the diversion of corporate funds to unauthorized, personal uses while not appearing as uncaring to your employee base. Going forward, it's probably easier to simply use technical measures to prevent such personal uses of company-issued mobile devices from the get-go, rather than leaving the door open for such use and then trying to recoup the cost of employees' personal use after the fact. For this reason, we often advise clients that an internal company policy regarding "acceptable use" of company-issued cell phones, while a good idea, is not self-enforcing, and needs to be backed up by technical safeguards. For programs that allow subscribers to bill fees or donations through their monthly wireless bill -- i.e., using their cell phone like a credit card -- enterprise customers can prevent such costs from showing up on their bills in the future simply by asking their national account reps to block all texting to short codes from corporate-liable devices. Ordinary SMS messaging should be unaffected, but promotions accessed via short codes -- which often entail fees -- will be out of reach of corporate-liable subscribers, at least from the devices their employers subsidize. But for right now, in the wake of the Haitian crisis, it might be helpful to coordinate with your human relations, public relations and/or corporate giving departments to craft a comprehensive message to employees about why messages are being blocked, and to state any position about both corporate and employee participation in humanitarian relief and alternative ways to contribute. Short code SMS messages are just one example of the many uses of wireless technology that could increase enterprise subscribers' costs and distract employees from their day-to-day responsibilities. Other examples, all of which can be blocked upon request, are video and music downloads, voice calls to 900 numbers and directory assistance, ringtones, and wallpaper. And for security purposes, enterprises might also consider disabling the camera functions on devices equipped with cameras. One thing's for sure: Your employees will be asked to reach for their cell phones many times in the future by forces outside your company's control. So this is an ideal time to be coordinating your wireless policies with technical safeguards and good, positive employee communications that acknowledge both their corporate obligations and desire to be good citizens. It's another example of the growing general management challenges of the corporate telecommunications function, and it's something we're continuing to follow closely.
Most corporate telecom managers have a pretty big to-do list for 2010. For many of you, that list includes deciding what to do about your Nortel voice equipment, and when to do it. Last Friday, Avaya closed its $900 million deal (including debt) to buy Nortel Enterprise Solutions out of Nortel's bankruptcy. Avaya then scheduled a January 19 video webinar to explain its roadmap for the combined product set. But prudent managers are already laying the groundwork for communicating throughout their telecom and IT organizations the directions the combined Avaya/Nortel may well take. Obviously Avaya is in the driver's seat, and it's helpful to know their corporate thinking as well as their product leanings. Avaya, which is an enterprise equipment/software pure play that was formed out of successive spinoffs from legacy "Ma Bell" type organizations, is currently privately held. But almost everyone believes that Avaya's private-equity owners, Silver Lake Partners and TPG Capital, want to bring the company public again as an exit strategy for themselves. With Cisco gaining rapidly in voice market share, the Nortel buy was necessary for Avaya to ensure that it comes to the financial markets as the No. 1 vendor for corporate voice gear and unified communications. In particular, as PBX market share guru Al Sulkin has explained at recent VoiceCon events, Avaya/Nortel can still lay claim to dominating the contact center market, where enterprises have been less eager to move to new vendors. Avaya and Nortel still add up to half the market for call center premises switches/software, with Cisco and Genesys taking about 15% each and others battling for the rest. So Avaya is hardly likely to thumb its nose at the big Nortel base during the period it presents its case to the financial markets (and it is hiring 6,000 Nortel employees). But promises to maintain duplicative product sets for a long time won't earn Silver Lake/TPG a big stock market payday either. Many if not most observers draw a distinction between users of Nortel's venerable PBX product, the Meridian 1, and its next-generation IP PBX platform, the CS (Communication Server) 1000. Some observers are advising Meridian 1 users to order crash kits and all the spare parts they can find, although the Meridian installed base is believed to be big enough in enough important places for Avaya not to do anything hasty. As far as the CS 1000, Nortel made a show earlier this year, even after its bankruptcy filing, of introducing a comprehensive Release 6 with notable features such as, for big financial institutions in the capital markets, a SIP-based turret system. Some PBX industry watchers are speculating that Avaya will likely provide full-scale support for CS 1000 for 2-3 years, although that presumes being current on the releases. All this is taking place at a time when Avaya is rolling out its own distinct architecture called "Aura." It's a sort of bridging technology where Avaya uses SIP as a session manager to interoperate with its own and other (including Cisco) gear across multiple sites and a wide range of applications, including many that are critical to call center managers. But how far this goes in pulling Nortel platforms into the fold permanently -- or, alternatively, drawing Nortel users to core Avaya platforms -- is something Avaya officials will have to explain in their January 19 show. You could say that in the Nortel situation we have a "consequential bankruptcy," one that isn't simply a reorganization of the company but a wholesale reordering of the market. In Internet discussions, many users have actually lauded parts of Nortel for engineering prowess that they view as superior to Cisco's (for some things) and Avaya's (for others), and ex-Nortel and Bay Networks employees can be found saying the same thing. But the center didn't hold, and here's a hat tip for an old colleague of mine at the trade publication Network World, Jim Duffy, who earlier this month wrote a very informative (and morosely entertaining) article documenting the systematic dismantling of Nortel in bankruptcy. In short, there was something about the organization as a whole that just didn't work once the new IP era came along. As we say good-bye, apparently for good, to the venerable old "Northern Telecom," outside players will be writing the script for the users of its products, starting very soon.
The next time you go out to bid for anything, I hope you can stir up a fight between AT&T and Verizon that's as good as the one they're having on television and in federal court right now. Verizon is sticking it to AT&T in U.S. TV ads for lacking 3G wireless coverage. Here's Verizon's ad technique: Show big, white spaces around the USA on what Verizon says is an AT&T network map. A putatively outraged AT&T has gone to court to stop the ads, claiming that of course it has good wireless coverage throughout most of the country, and the average viewer doesn't realize Verizon means a more-advanced network exclusively relying on 3G technology. Verizon says that AT&T just can't handle the truth, and the ads do clearly use the label 3G. But some analysts say that Verizon is pushing the edge of how it presents its claims because it still can't match the momentum of the iPhone. So far the court has declined to stop the ads, but the judge is continuing to hear the case, and meanwhile AT&T and Apple are putting up their own ads touting both coverage and unique capabilities as much as they can. Finding telecom carriers in court is hardly a new phenomenon, but I think this contretemps has a much different feel than the old days when the "RBOCs" and the "long distance carriers" would slug it out before the judge. In my view, the war of the maps has the potential to benefit both Verizon and AT&T at the expense of everyone else, no matter how it turns out. That's because the highly publicized incident furthers the Coke-and-Pepsi-fication of the telecom industry, something that the budding duopolists have to realize beneath it all. In marketing, choosing to attack another vendor by name without being prompted to do so is, in part, a subtle way of paying respect to them. Besides, both carriers are continuing to build their networks, and the long-term potential for leapfrogging each other in capabilities is in place. On a customer-by-customer basis, obviously AT&T and Verizon are playing for keeps, and they mean it when they battle for each customer contract. But as considerations of end-user preference on both carriers and devices seep further into the realm of corporate telecom procurement, image and status threaten to create a two-tier system where corporate executives may be forced to consider only a diminishing slate of brand-name vendors for large group purchases. If those brand names cite only each other -- everywhere from the point of sale to Super Bowl ads -- it could create a self-fulfilling prophecy whereby they split the lion's share of the business. And the fact that in large parts of the country, either AT&T or Verizon can bundle end-user telecom and media needs in a way that Sprint and T-Mobile (or anyone else) can't helps keep these brand names on end-users' lips. Thankfully, we're not at the point yet where wireless competition has been reduced to an either-or. But in the broad strokes of the telecom industry's future, I'm willing to bet that Verizon has finely calculated what attacking AT&T in this way means, and AT&T understands the publicity it's gaining from a legal war with Verizon, no matter how plainly it seems to many people that Verizon's ads are technically clean. Keep an ear out for how your user base talks about telecom vendors, for surely they're talking about them more than ever before. Ultimately, that's part of what all this is all about.
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