AlcaLu, HP Combine on IT

Ray Le Maistre
News Analysis
Ray Le Maistre, International Group Editor
6/18/2009



Alcatel-Lucent (NYSE: ALU) and HP Inc. (NYSE: HPQ) have decided that combining their product and marketing resources is the best way to address the telecom and IT technology needs of carriers and enterprise worldwide.

The two vendors, already well known to each other, agreed today to commit to a 10-year alliance that, once signed off (the ink is due to dry before the end of this year), would see them jointly market their combined portfolios and offer managed services with a view to running their customers' networks. (See Microsoft, Alcatel Renew Deals and Enterprise Security Partnership.)

They expect the alliance, which will have its own dedicated sales and business development team, to generate billions of euros in revenues during the lifetime of the deal.

AlcaLu and HP, which only recently announced the formation of a business unit focused on the needs of telecom operators, say they plan to relieve carriers from the "burden and complexity of coordinating the transformation of IT and telecom infrastructures." (See HP Creates New Telecom Unit.)

The combination could chime with large telecom operators, which are increasingly looking to deal with fewer and fewer suppliers. (See Analyst: New AT&T Policy Puts Vendors at Risk.)

In addition, AlcaLu says its next-generation platform architecture will "take advantage of HP IT and telecom technologies as well as HP supply chain efficiencies," helping carriers "exploit the advantages of standards-based server, processor and operating system technologies."

That positioning might raise some eyebrows, as Alcatel-Lucent has for a long time had an AdvancedTCA hardware platform strategy, while HP has dropped its ATCA strategy in favor of its home-grown blade servers. (See ATCA Attacks the Data Center, ATCA: Homegrown or Third Party?, ATCA Finds Its Stride, and HP Ditches ATCA.)

When asked about the possibility that it might develop its next-gen platform on non-ATCA hardware, AlcaLu responded in an email to Light Reading that it will be "working with HP to re-platform/port a number of Alcatel-Lucent solutions that rely on proprietary implementations/OS onto the open systems platforms from HP."

The company says it's "not going to get into the specifics" of its next-generation platforms at this time.

Services clout
Of particular note is the partners' focus on managed services, a growing sector where, combined, they've got considerable power.

Alcatel-Lucent has expanded its services division considerably in the past two years. It was the company's shining light in 2008, reporting a near 9 percent growth to generate revenues of €3.45 billion (US$4.82 billion), and it's set to be the only division in AlcaLu's portfolio that will increase its sales during 2009. (See AlcaLu Ends 2008 With €5.2B Loss.)

HP, following its acquisition of EDS last year, is the No. 2 player in the global IT services market, behind IBM Corp. (NYSE: IBM). (See HP's $13.9B Power Play.)

HP also has an increasingly close relationship with AlcaLu IPTV partner Microsoft Corp. (Nasdaq: MSFT) and is an experienced and sizeable player in the increasingly important OSS sector. (See HP, Microsoft Team Up and HP Lists OSS Wins.)

For mid-sized and large enterprises and public sector organizations, the duo say they will combine AlcaLu's VOIP, unified communications, mobility, security, and contact center products with HP's IT systems, and will target that sector through HP's extensive network of resellers.

While Alcatel-Lucent did not mention it specifically, a tieup with HP also provides the telecom giant with much greater clout in one of the hottest areas of communications just now: cloud computing, where HP is regarded as one of the heavy hitters.

As part of the alliance, HP will help AlcaLu streamline and manage its IT operations -- effectively an extension of the data center deal that was struck in February 2008.

The move, in which HP will be "entrusted with a large part of Alcatel-Lucent’s IT operations," should see AlcaLu "migrate more quickly to advanced IT infrastructure and services that deliver higher performance and greater efficiency," today's press release notes. About 1,000 AlcaLu staff will transfer to HP as part of the IT outsourcing arrangement.

Rival response?
With the HP news now out in the open, Alcatel-Lucent's telecom rivals such as Ericsson AB (Nasdaq: ERIC) and Nokia Networks might just be wondering two things: Whether such a complex combination might slow AlcaLu down in some markets; and whether they should be talking to the likes of IBM about forging similar relationships themselves.

— Ray Le Maistre, International News Editor, Light Reading

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