TC2's David Rohde on Telecom - Equipment

Practical issues come to the forefront in SIP Trunking

Fri, 03 Sep 2010 11:31:00 -0400

A few years ago one of my old colleagues at Network World got hold of an analyst report on MPLS, and we started discussing it by email. Contrary to almost every market research report up until then, the analyst's survey and analysis concluded that MPLS wasn't really going anywhere. Most enterprises would stick with frame relay, the analyst concluded. My reaction was: You gotta be kidding. There comes a time in every successful shift in enterprise networking when the industry discussion reverses itself. Think of a seesaw. For a good period of time, vendors, analysts and technology "evangelists" will promote a new technology, pushing down on one side of the seesaw. But the actual users won't adopt this technology, staying high above the ground on the other side of the seesaw. When the adoption finally starts happening, and the users start pushing down, some of the analysts lose heart. That very action by enterprises -- because it happens so gradually compared to changes in consumer technology -- causes the industry-watchers to say that the business technology shift is happening "more slowly than expected." But this is the very moment at which everyone should be focused on practical issues in implementing the technology, because that's exactly what the savviest enterprises are doing. We're at something like that moment in SIP Trunking. There's no "hockey stick" adoption of SIP Trunking because there's never a "hockey stick" in enterprise carrier services. There's also no "this is the year of ..." phenomenon in the corporate telecom arena, so watch out for that headline, too! The process is always a matter of 18-36 months -- at least. But if it's a real shift, major enterprises will be putting out RFIs, RFPs and other single-source and competitive offer solicitations for the new technology at the very moment when industry-watchers are questioning the pace of adoption. And the big issue internally will be how to issue these solicitations to make the process pay off. All that is exactly what's happening right now in SIP Trunking. That's why, at the upcoming CCMI Telecom Negotiation Conference in San Diego, several sessions will delve into the potential, and practical issues, of SIP Trunking. Here are some of the matters we're going to take up: -- A SIP "trunk" is really a virtual concept that replaces a physical POTS trunk. It'll be one of the concurrent call channels to which you have subscribed that are dynamically allocated to your locations over your enterprise data networking service. So a key question is: Does your enterprise networking service support SIP? Crucially, AT&T has not yet made this service generally supported over AVPN, although it will deliver it over MIS Internet circuits with the PNT, or Private Network Transport, feature. Will this situation last? Does it give Verizon -- or other, competing carriers -- an advantage? Or is it simply part of AT&T's entire strategy to manage a multiyear transition off the PSTN, which was probably the true import of its request to the FCC to "turn off" the PSTN? -- Do you have to spend money to save money? The big IP PBX vendors -- now notably Avaya and Cisco, but also Siemens and smaller players -- have wide-ranging new platforms and software-licensing plans that integrate SIP with unified communications architectures and other features. These are being heavily promoted, with the perception among many enterprises that SIP projects are to be paired with a full refresh of voice infrastructure. That leads to key capital budget questions, as discussed in an interesting article by Infonetics Research. How mature does your transition from TDM to IP telephony on the premises (which is not the same thing as full-featured IP voice in the WAN) need to be to make SIP trunking optimum? -- Which carrier SIP services really allow you to share concurrent calls across multiple sites, and how do the charges for these SIP rate elements really compare with existing telephony plant? -- Do you have to upgrade your MPLS or other existing data network to handle the call capacity? And is it time to haul out the old "busy hour" tables to make this determination? -- How could SIP Trunking shake up the traditionally lethargic world of "local telephone deals," where the old "Bell" sides of AT&T and Verizon will sometimes do bulk deals for their services, but in a notably different way than their legacy "long distance" houses? What if a carrier tries to combine your major national deal (and its annual dollar commitment) with your local services deal? Will that improve your terms, or will you wind up with the lowest common denominator of terms and conditions? The very fact that AT&T (at least) is clearly pacing the transition to full-fledged IP voice over several years is a classic example of why there is not simply a "moment" at which adoption of a new telecom technology soars, as is true in other parts of the IT ecosystem. But this also opens up the opportunities for you to bring different (and often very eager) carriers into the discussion, depending on how widely your SIP Trunking service will be deployed. That's something we'll also be discussing in a session about determining bidder lists for both broad and narrowly focused procurements. There's a lot going on. If you have any questions about the conference, drop me a note or give CCMI a call. In SIP Trunking as in most things, it's all in the details!

Avaya's plans for Nortel could force serious SIP proposals from carriers

Fri, 22 Jan 2010 08:06:00 -0400

Avaya came out with its product roadmap for the acquired Nortel base this week, and you could summarize it like this: We'll give you lots of space at the beginning of the year, provided you're playing ball with us by the end of the year. Avaya is cutting off nobody in the Nortel PBX base -- at least, nobody whose Nortel product hadn't already begun down the end-of-sale, end-of-support trail. And it's declaring its own end-of-sale only on some supplementary products like the Nortel MCS 5100, a multimedia communications server providing audio and videoconferencing, collaboration tools and the like. On the core question of what to do with Nortel's IP PBX flagship, the Communication Server 1000, Avaya's immediate plan is to follow on Nortel's post-bankruptcy Release 6 with more upgrades of its own over the next 12-18 months. But this looks like a time-delimited strategy. Some experts think there will be two more CS 1000 full releases over the 12-18 month period. Others, such as Stephen Leaden, who gave an excellent webinar yesterday on the Avaya-Nortel roadmap for our friends at The Voice Report, thinks there will be only one. After this initial year or year and a half, Avaya has made it clear that CS 1000 users will have to begin "layering on" Avaya's own Aura platform to stay current. Aura is Avaya's new unified communications architecture that incorporates a SIP Session Manager to handle supported applications, including SIP trunking carrier services. As we've discussed, those services can eliminate many traditional voice trunks in favor centralizing voice streams over a corporate MPLS network with an expedited-forwarding, or real-time, class of service, and then out to the public as necessary (or the reverse in the case of calls into contact centers, including those taken by remote agents logged onto the network). But as you can imagine, the common challenge in all of the Nortel users' roadmap options is enterprise capital availability. Leaden explained that during 2010, Nortel users theoretically have three choices -- wait and consider, begin investigating an investment in Aura (which was designed for interoperability with other vendors even before Nortel's downfall), or begin due diligence on a move to another vendor (such as Cisco, Siemens, etc.). But by 2011 that's really squeezed down to the last two options due to the timeline Avaya laid out. There's a lot more to the Avaya-Nortel roadmap, and I encourage you to check out the replay of the Voice Report webinar especially to learn about the other products in play. What I personally found fascinating were repeated references to exactly how Avaya will be presenting investments in the Aura platform to Nortel users. It's clear that Nortel users will be hit with ROI and payback analyses, and that Avaya will load in benefits that are dependent on other parts of an enterprise's telecom "ecosystem." Leaden listed not only items such as centralized voicemail and unified messaging but also the trunk consolidation benefits from SIP trunking as likely inputs into Avaya ROI models. No doubt Avaya will use rosy ROI assumptions to push Aura on the Nortel users, including theoretical savings from the maximum amount of eliminated or consolidated telephony infrastructure. Of course, it's ultimately up to AT&T, Verizon or others to propose such complete exchanges of traditional rate elements for dynamic VoIP call allocation in their own SIP trunking proposals. But think about the size of Nortel's base. Avaya's plan means that a huge number of telecom buyers will be getting proposals at a time of unusual urgency -- after their major equipment supplier has been bought out of bankruptcy -- in which the new vendor will be highlighting the maximum savings that a carrier should be offering them in service of the new equipment vendor's roadmap. An insta-poll taken during the webinar showed that 48% of the attendees with Nortel gear (and there were at least 230 live users on the conference) are initially inclined to go the "due diligence, find another vendor" route. So I'm sure Avaya won't be shy about its ROI claims for Aura, including what it thinks the carriers can do! Like the pressure-from-below that I recently highlighted in the smaller carriers' discovery of a potential gold mine in SIP trunking, this Avaya-Nortel transition will thus provide another pressure point on the big carriers to make solid VoIP/SIP trunking deals. At some point soon, a little roadmap discussion of your own with current and prospective carriers on this matter could prove quite rewarding.

Nortel support issues are front and center for Avaya

Tue, 22 Dec 2009 16:10:00 -0400

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.

How standard is standard? SIP Trunking and the interoperability question

Wed, 02 Dec 2009 08:32:00 -0400

When you go to install a new wide-area network technology that involves the interaction of carrier trunks with your premises equipment, do you: a) trust statements of compliance by all parties with the technology's open standards; b) look to the carriers and equipment vendors involved to certify that each other party's specific service or gear works with theirs, or c) do you own interoperability tests? This question is very much alive when enterprises go to buy "SIP Trunking" services from carriers. These services essentially make VoIP full-featured for corporate on-net and off-net calling, and reduce or eliminate dedicated local and long distance trunks in favor of dynamic allocation of packetized voice streams over data networks such as MPLS real-time classes of service. To do so, SIP Trunking relies on a set of IP standards that tell carrier networks, PBXs and other gear how to interpret call set-up instructions, signaling and other commands. But like many standards, the Session Initiation Protocol itself and the SIP Trunking methodology that derives from it can be subject to interpretation and options. That can make things dicey when you consider what it's replacing -- TDM voice trunks, often into mission-critical call centers with call-transfer feature functionality, PRIs, national enterprise dialing plans, and the like. If anything, SIP is particularly prone to this standards-extension challenge. At one of my VoiceCon sessions on SIP trunking earlier this year, one of the panelists said he had done a word search of IETF RFC 3261, the main (though not only) SIP standards document. He found that the word "may" showed up 378 times in the document. So much for a "standard" telling everybody in the industry exactly what to do! The decisions that each vendor makes around these SIP choices is critical to what the industry labels interoperability but really means the kind of feature transparency that enterprises must have. To bring it home to many corporate telecom managers, there are functions such as "SIP Refer" and "SIP Redirect" defined in the standard. If the implementation of these items doesn't emulate what call center managers have traditionally known as AT&T's Transfer Connect, Verizon's (previously MCI's) Take Back and Transfer, or Sprint's Agent Transfer, no amount of theoretical cost savings is going to be worth it for most enterprises. When you go to investigate SIP Trunking and ask about this kind of interoperability, you're bound to hear about the SIPconnect certification process established since 2005 by the SIP Forum's IP PBX and Service Provider Interoperability Task Force. Any vendor's compliance with SIPconnect 1.0 or the emerging SIPconnect 1.1 guarantees a certain degree of out-of-the-box interoperability. And certain specialized, CLEC-type carriers have built a business around SIPconnect. They go primarily to smaller businesses and tell them that their locations can probably go straight to SIP Trunking and full-featured (for them) VoIP even with a wide variety of telephone equipment, including many older TDM switches. But for larger customers, Verizon and AT&T make a point of doing their own SIP interworking tests on IP PBXs and then publicly "certifying" specific key vendors such as Avaya, Cisco and Nortel on their flagship families of IP communications gear. They don't just rely on SIPconnect, partly because SIPconnect makes certain choices on SIP Trunking options that may not agree with some enterprise advanced features. That's why, when you go to Verizon's page for IP Trunking Services, you'll see "fact sheets" and "solutions briefs" speaking to relationships they've established with Avaya, Nortel and others to bring SIP trunking to the market. These are really references to interoperability tests but speak to the importance attached to knowing that specific gear provides a match to a carrier's SIP Trunking implementations. (By the way, this will still be as key after Avaya completes its acquisition of Nortel, as these separate platforms remain widely deployed.) Some of these tests apparently took quite some time and a great deal of communication among the vendors away from the standards forums. Even beyond that, the Verizon and AT&T panelists at my sessions have made the point that large customers can also come to their own labs to do their own tests. In this way, the ramp of SIP Trunking reminds me of the early days of MPLS, including in its original guise as IP-enabled frame relay, when customers felt they had to test older versions of Cisco IOS software releases to see if they would be supported over these new label-switching protocols. Basically, the larger and more complex your organization, the more legwork is invariably involved with SIP Trunking, despite its roots as an IP standard. At some point the legwork factor will be reduced, especially if the service takes off in the marketplace, although there are plenty of signs that the major carriers would prefer to carefully manage this transition away from their traditional and profitable local trunking services. It's an arc we'll be following closely as the SIP Trunking story continues.

Mobile Device Management: For your benefit or for your vendor's cross-selling goals?

Thu, 08 Oct 2009 18:13:00 -0400

The following is a guest post by TC2 Asia-Pacific managing director Joe Schmidt, who is based in Singapore. Mobile Device Management (MDM) is a conundrum for enterprises that provide smartphones and other mobile devices to their employees, or who allow employees to access company resources using mobile devices. At TC2 we've been advising clients to pay attention to this burgeoning support requirement and to take steps to implement a solution, or risk exposing the enterprise to security breaches and support issues down the road. It's certainly a major consideration in the more-developed regions of Asia, where wireless device deployment is almost universal and user demand for mobile business applications functionality is pervasive. As a result, last week's Mobile Device Management Asia conference in Hong Kong, where I spoke, was heavily attended by handset manufactures like Nokia, regional service providers such as Optus from Australia and Maxis from Malaysia, and third party MDM software and service providers. And it provided a great window into what's coming down the pike globally, especially as smartphone use displaces older devices in many vertical industry markets. What was clear from the presentations and my discussions with attendees is that MDM is being targeted at the enterprise market. But one key hinge point I'm watching is whether the service providers and device manufacturers are using MDM more to support the enterprise or more to grow their own revenue by selling applications and value-added services. After the founder of the Device Management Forum gave his opening remarks, he launched into a presentation on the evolving landscape of MDM in the enterprise. The main points of his talk were that in order for MDM to deliver business and end user benefits, it must be able to acquire, configure, deploy, secure, and maintain mobile devices. He went on to say that the key players that have emerged in the MDM market are the mobile service providers, device manufacturers, and third party software houses and integrators. Many of those players followed on with presentations on the latest developments in MDM. These presenters explained how MDM can provide over-the-air software updates and how their products and solutions can remotely lock a device or wipe it clean if necessary. The MDM providers elaborated on the level of information that can be loaded and maintained for a device, including a device's operating system, the applications loaded on a device, how the applications are used, and even the location of where a device is used. But one service provider openly explained how it is using the massive amount of data it captures to build life logs of each subscriber. It then uses the logs to create marketing campaigns and promotions targeted at the subscribers. That's fine for them, but what does it do for you? Well, one of the reasons the conference producer invited me to speak was to "keep it real" and to let the audience know what enterprises really want when buying mobile services and to provide the enterprise's view on MDM. I told the audience that mobile services are indeed strategic to enterprises and that demand would continue to grow, thanks to the proliferation of smartphones and the expansion of high-speed wireless networks. I said that MDM ranks very low on an enterprise's list of requirements when initially buying mobile services, but that MDM does hit the radar screen once a deal is done. I explained that enterprises grapple with tough questions when they consider supporting an enterprise mobility program, such as: -- How can enterprises permit user choice while enforcing corporate governance? -- Are mobile applications productivity enhancers or security threats? -- Where should MDM stop and user privacy start? My takeaway from the conference and what I've seen while helping clients procure mobile services around the world is, like it or not, if you're an enterprise that uses mobile services, you're going to need to understand MDM and eventually you'll need to implement a solution. But before you do, make sure you define your mobile strategy, then develop and implement mobile policies that address corporate vs. employee liable plans, entitlement and reimbursement, acceptable use, demand management, support, and security. If you take these steps first, you'll have a better understanding of the type of MDM solution that works best for you and your users -- and that enables most of the benefits you're paying for to flow in your direction. We'll be keeping tabs on this key emerging support requirement and invite your comments as well.

Price doubles for Avaya, but it clinches the Nortel buy

Mon, 14 Sep 2009 21:36:00 -0400

Nortel Enterprise Solutions is going into the hands of its onetime arch-rival for voice premises equipment, Avaya. That result was assured with Monday morning's announcement that an auction for the Nortel enterprise unit -- a key element of Nortel's bankruptcy proceeding -- had been completed. While not explicitly announced this way, it's widely believed that the Siemens enterprise unit bid up Avaya's original offer of $475 million over several rounds before letting Avaya have it for $900 million. Avaya's clinching of the Nortel prize keeps intact many of the expected user impacts of the impending marriage of the one-time No. 1 and No. 2 U.S. PBX vendurs. Avaya gets feet on the street through Nortel's extensive distribution network, although much of that network is also now invested in the enterprise voice and convergence products of Cisco. Indeed, Cisco and Avaya are now set up as the Coke and Pepsi of the enterprise voice gear market, with the possibility of far more concentration than this market has ever seen in the past. Acquirers often are ruthless wielders of power, deciding which of the acquired company's products, employees and projects to keep and which to get rid of. And let's be fair -- it's clear that Avaya would be justified in doing some rationalization. Possibilities include: -- A convergence-products alliance that Nortel had with Microsoft has never really borne fruit, especially since Microsoft is pursuing enterprise voice in an explicitly Windows-based softphone environment, and that alliance may go. -- Avaya may also see no value in the longstanding problem Nortel has had in making sense of its data switching product portfolio from the basically botched acquisition of Bay Networks in the 1990s. -- Of perhaps more concern, support for some Nortel products (or some distributors) may change or drop, a concern being made explicit by Verizon as one of Nortel's legacy "RBOC"-type distributors. Excellent discussions of these detailed matters are taking place with our friends at NoJitter.com; I particularly like a post by Allan Sulkin called Questions re the Future of Nortel ES. But from a strategic standpoint, one thing that I think enterprise telecom managers should be asking themselves is what kind of role voice and unified communications equipment should play in managed services procurements going forward. Many corporate PBX footprints are very scattered and diverse based on long-lived legacy considerations in various business units, geographic divisions and even individual locations. But if Cisco and Avaya go head-to-head as the dominant players, we know that this can be played to strategic advantage going forward. From a data perspective, obviously most companies are "Cisco shops." But from a VoIP/unified communications standpoint, holding out a large chunk of business for archrivals to bid on could be in the offing. Thus, the looming Cisco vs. Avaya war could be seen as a reduction of choice -- or, alternatively, a big opportunity for savvy enterprise users, especially when you consider that managed services procurements often offer the best transport pricing. Much remains to shake out, but we'll be watching this closely.

Friday is a red-letter day for Nortel ... and the entire PBX industry

Wed, 09 Sep 2009 15:34:00 -0400

You may remember that earlier this year, Avaya struck a deal to buy Nortel's enterprise division out of bankruptcy for $475 million. But the process has always been set up to make Avaya's offer a "stalking horse." That means that Nortel's bankruptcy trustee has always planned ultimately to hold an auction to see if anyone wants to outbid Avaya. That auction is due to take place this Friday, September 11. In a narrow sense, the auction is obviously key for Nortel users. For its wide base of voice equipment users -- including many companies that may use other vendors, but have lots of Nortel installations too -- the question is whether Nortel products will be actively supported, or slink along to end-of-support and ultimately end-of-life status. Siemens' enterprise group, which itself has had a rocky few years, is mentioned as a possible bidder, as are some less likely players. But you do have to remember that much of the traditional PBX industry has already been sold out (in full acquisitions or joint ventures) to various private equity groups, who are all managing debt loads and may be wary of taking on further leverage to expand by acquisition. So Avaya could walk away with the prize with little or no further effort. But in a larger sense, the question is whether the PBX or enterprise/unified communications industry (by whatever name) is heading inevitably for duopoly, like so many other industries. If no one outbids Avaya, then Avaya -- the ultimate successor to the original AT&T PBX business -- will gain Nortel's big if somewhat degraded distribution channel. That will leave two major players: Avaya, the champion of the traditional phone switch business, and Cisco, the behemoth data networking company that successfully clawed its way into the premises voice communications market. For all intents and purposes, enterprise managers going forward would be left with a binary choice on their strategic unified communications partner. Does that simplify matters in the historically fractured voice equipment market, or is it an anti-competitive warning shot? And should the government step in? That's a fascinating parallel with the emerging situation of AT&T and Verizon in the network transport (and managed) services market -- one that would have been unthinkable until recently, given the dozens of players that have given the PBX market a fair shot. Right now there is a lively debate on the matter hosted by our friends at NoJitter.com. Kind of a portal to the debate can be found in one of NoJitter editor Eric Krapf's recent e-newsletters. We'll examine the matter more after the results of Friday's auction are known, and we look forward to your views as well.

Avaya offer to buy Nortel enterprise cements new era in voice CPE

Wed, 22 Jul 2009 15:11:00 -0400

For all the changes in the telecommunications industry, almost all enterprises still make their primary "long distance" provider the descendants of the original AT&T, MCI or Sprint. The same cannot be said of the voice equipment industry. You can draw a straight line between the entry of Cisco into the IP PBX market and the events of the last few days, where Avaya has offered $475 million to buy Nortel's enterprise unit out of bankruptcy. The traditional leading players in the PBX industry are coming together to compete with a new player, much as if the legacy AT&T and MCI had to come together to compete with a new, fully successful long distance entrant that actually made it to the first tier (which never happened). Of course, it was Nortel's cost structure in a recessionary environment that was the proximate cause of its bankruptcy filing at the beginning of the year. But looking at the big picture, it's worth remembering exactly who Avaya and Nortel are. Avaya is the descendant of the old AT&T PBX business, when AT&T, even divested of the "RBOCs," was still a combination of a long distance provider, a PBX maker, and a seller of central office switches to phone companies. On the PBX side, AT&T typically sold direct into corporate accounts. This same business eventually became Lucent and then further spun off into the separate Avaya (because Lucent management succumbed to the siren song of the "carrier" business when people thought hundreds of alternative carriers would succeed). Nortel is the old Northern Telecom, which typically sold PBXs indirectly into enterprise accounts, through RBOC account teams and certain specialized channel players. This method of approaching the market changed from time to time, but was the time-honored way they did business. It's now as if the market is pulling together these venerable players with opposite channel strategies to set up an ongoing challenge with voice communications entrants from the data world. Several of the columnists at the NoJitter.com VoIP website are also noting that the smaller, traditional PBX players are going to have to combine if they want any traction at all in the new market. How Microsoft with its fully software-based softphone applications reacts after having something of an alliance with Nortel also remains to be seen -- and it could be a big player in its own right. And what happens to Nortel's data equipment that comes from the legacy of the original Bay Networks also remains to be seen. It's not 100% certain that Avaya will actually buy Nortel. The shape of the bankruptcy proceedings and the terms of this "stalking horse" offer could make it the opening shot in a competition. One way or another, however, the PBX market is now truly upended.

Juicy transport pricing found in managed services procurements

Mon, 27 Apr 2009 12:03:00 -0400

When I say "managed services," what do you think of? Managed services can be limited to extending the scope of the data network service to include the WAN access router, or they can include outsourcing the management of a company's entire network infrastructure, including data, telephony and related ancillary equipment. Different managed service operating models suit different companies, and there's no single overarching best practice in this area. But one decision point is especially important to business users considering the various service-delivery options for managed services. That's the sourcing decision to combine a transport services procurement with managed services procurement. A straightforward managed-router service is almost certain to be procured with transport services. But at the other end of the scale, some companies don't think of doing an RFP for voice and data transport along with a comprehensive network services management deal. Not considering this sourcing approach can be a mistake, because the traditional transport service providers have been responding very aggressively to opportunities that include a significant degree of managed services on their part. In fact, large deals that include both transport services and managed network services are currently driving the leading edge of the market for transport pricing. Some of these large deals also feature some of the most improved terms and conditions, and the biggest cushions between the annual commitment and the expected transport spend. Think about the ways in which you may need this deal flexibility going forward. Just consider the possibilities of more wild economic swings, or carrier restructurings, or radical behavioral changes by end-users, all with possibly huge impacts on the size and mix of telecom spend in your company. To get those benefits, you don't have to be shy about customizing your managed services requirements. It's typical for companies to retain core and unusual competencies in-house (such as custom network security management processes, network architecture and design, or vertical-industry-specific management tasks), while outsourcing more routine network management tasks including equipment monitoring, incident management, configuration management, reporting and the like. Of course, finding the transport pricing gold mine isn't the only consideration in taking on a managed services procurement. Among the key factors that an enterprise should consider in their managed services decision-making: -- Migration. Doing both transport and managed services together is a big undertaking, and you may have to calculate whether any time lag in booking your savings cancels out some of the advantage in hitting the transport pricing sweet spot. But do your own time and savings analysis! Tipping off carriers to this point is an invitation for them to make "RFP avoidance" offers that deliver a quick price-down but provide neither market-leading savings nor appropriate going-forward leverage. -- HR issues. You'll need to assess the costs and complexity of displacement of internal staff by the outsourcer. -- Provider capability and sourcing flexibility. For global deals, a large carrier may or may not have best price and service for both their core transport and managed service in each and every country or region. Some resulting deals require multiple awards and some don't, depending on the performance measurements and other mechanisms used. -- Hidden cost traps. You obviously don't want the provider's profit from the managed services piece to outweigh the data and voice transport savings, so a close analysis of all available enterprise market experience and data is warranted. And watch for pitfalls -- in areas of the world where Value Added Tax is collected, if it's not reclaimable on the provision of a management service, it could be offsetting other cost gains. This should be modeled against a volume baseline in advance, just like any tax or surcharge. With those precautions, "discovering" the leading-edge market in this way can be a very rewarding experience. As with any deal, an all-in Total Cost of Ownership model is the way to go. It's rigorous to achieve but key to a great result in the end.

Nortel's bankruptcy and the impact of corporate culture

Wed, 11 Feb 2009 16:24:00 -0400

Many of our group's clients and friends know that I cut my teeth in the industry as a journalist for a specialized trade publication. Don't worry! Everyone else in TechCaliber is a former corporate telecom manager, carrier deal-pricer/negotiator, member of a name-brand "Big X" consultancy, or some combination of the three. Actually I slide in there too with a brief stint at the Yankee Group before I came to TC2, but it was really my time as a reporter, editor and columnist for Network World during most of the 1990s that helps me shed unusual light on key industry events right up to this day. Last month's Chapter 11 filing by Nortel provides a perfect example. One day during the late 1990s, I flew to Toronto along with one of Network World's top editors to interview John Roth, then CEO of Nortel. Roth was a long-time executive of the venerable Northern Telecom, which had spent decades providing telephones, key systems and PBXs to business users and central office switches to phone companies. Now the refashioned "Nortel" was going to mix it up in the world of computer networking and the emerging world of convergence to be a player in the 21st century. Their tool of choice? In the late 90s, how could it be anything else -- the expensive acquisition! Nortel had just bought Bay Networks, itself the result of a merger of two earlier networking gear providers and, at the time, Cisco's principal competitor for routers and LAN hubs and switches at enterprise locations. Roth had invited one of his young, hotshot marketing executives -- a guy I had met at a number of trade shows -- to his office to sit in on the interview. We thought that was okay until we started the interview. Here was the problem: Every time we veered off the subject of Nortel's legacy business into any product detail about the Bay acquisition, the marketing exec would jump in and begin answering the question. After this happened several times, I turned off the tape recorder and we explained that the intention was to publish a verbatim Q&A with the CEO, and that having someone else answer our questions defeated that purpose. I turned the tape recorder back on, and we tried again. But it became painfully clear that Roth was simply not conversant with the company he had just spent billions to buy. Ever since then, of course, Cisco has only grown in dominance and Bay Networks is barely remembered, with Nortel having completely fumbled the acquisition. Now to be sure, other enterprise equipment providers have also shriveled up in the face of the great Cisco machine. But at least 3Com actually announced at one point that it was simply getting out of the U.S. enterprise router market (although it later re-entered it in a specialized way). Nortel, instead, went through episode after episode of new strategies, projects, roadmaps, relaunches, and so on. At one point Bay denizens blamed what was happening on the fact that Nortel management was focusing most of its attention on the carrier market, particularly optical gear. But today it's a truism that Nortel's remaining strength is back in its enterprise base -- except, lo and behold, it's essentially the enterprise voice equipment market that they're talking about, as if Nortel had never acquired a router vendor. Sure, we're now talking IP PBXs, unified communications, and related services. But it's remarkable how communications markets still essentially break down along voice and data lines. And it's also remarkable how, given that markets are resistant to new players to begin with, it can be the kiss of death for scrappy young players who are actually making headway to lose focus via a merger into a company with an entirely different culture and core competency. Try this test to prove it: Do a search on "Nortel bankruptcy." I dare you to find any news story that describes the company as anything other than a "phone equipment provider" or "telecom gear manufacturer." Just like 30 years ago! I want to be clear about Nortel's bankruptcy itself. The company is not toast, and the U.S. Chapter 11 filing, plus equivalent restructuring moves in Canada and some European markets, were clearly made to forestall a situation looming by the end of 2010 where the company's legacy costs as an old-line manufacturer were going to overwhelm the demand depletion from the current recession. Nortel still has a wide network of distributors, although many have moved on from a strong focus on Nortel gear to a wide range of offerings, including Cisco's own voice and convergence platforms. If the company is sold off in pieces, Nortel's PBX base is still going to be the core of what remains. But none of this would have happened if Nortel's vision had been matched by actual focus and deep understanding of the enterprise data networking space. Something to think about when assessing vendors across a wide range of networking needs.