Siemens Converges in Venice

German vendor rolls into the Broadband World Forum with its convergence plan

September 21, 2004

4 Min Read
Siemens Converges in Venice

VENICE -- Broadband World Forum Europe -- Siemens AG (NYSE: SI; Frankfurt: SIE) was one of the few companies to break away from the building site that was the Broadband World Forum Europe 2004 in Venice on Monday, to outline its convergence strategy and offer up a little news (see Siemens ICN: Carrier Ethernet Enters the WAN).

As the jackhammers and power drills of the construction crews thundered through the Palazzo del Casino on Venice's sausage-shaped Lido island, Siemens Information and Communications Networks Inc. (ICN) executive Anton Schaaf decamped to a hotel for a "convergence" press conference. Basically, he laid out how Siemens is to match carriers that are merging their fixed and mobile operations by doing the very same (see Siemens Makes Management Changes).

From October 1, Siemens ICN, the fixed-line unit, and Siemens Information and Communication Mobile Group will merge to create Siemens Com. Together, ICN and ICM have 60,000 staff based in 180 countries, and generated revenues of €17 billion in fiscal 2003, says Schaaf.

"In 1999 and 2000, many of the major operators split their units so they could IPO a number of different businesses. Now they're converging these units" in preparation for the world of the single, converged IP network, says Schaaf. He adds that Siemens needs to configure its business to provide the converged solutions they'll need.

Siemens Com will comprise three units: Carrier, Enterprise, and Devices, which will supply all manner of broadband customer premises boxes and wireless modules as well as mobile handsets. Schaaf says it's vital to be in the device as well as networks market as greater degrees of intelligence are installed in user devices, and also to keep the top line healthy. As the network infrastructure becomes more commoditized and cheaper, device sales will help to maintain cashflows, says Schaaf.

But such mergers usually unsettle companies, causing disruption and fear of job losses. Schaaf concedes that jobs will be lost as the administration and support functions of ICN and ICM are merged, but that will free up resources that can be pumped into R&D, he claims. "It's not the most pleasant marketplace, so we have already been creating efficiencies," he notes (see Siemens Confirms Offshoring Plan).

In addition, Schaaf says Siemens's fixed and mobile infrastructures have historically been developed from the same core platform, and that will make integration much easier. As for which team, fixed or mobile, will dominate the new unit, Schaaf says the two will combine in peace and harmony under a single board-level CTO, who just happens to be Schaaf himself. He comes from ICN, by the way.

But, Schaaf was asked, isn't this convergence another example, along with the company's belated entry into the emerging WiMax space, of Siemens being a lemming, following the latest trend instead of setting the agenda for the telecom sector? "That's like being asked, 'Have you stopped hitting your wife?' There's no right answer," says Schaaf.

Well, not really, but carry on.

Schaaf doesn't think it's important to be first, and pointed out that Siemens had built successful positions in the TDM switch market and other telecom equipment sectors without being first to market. "But we have become a much faster follower, and we are leapfrogging the market with our strategy."

So what will be the focus at the Siemens Com carrier division? A top priority is the development of horizontal transport and access platforms to replace the closed, vertical network solutions that have resulted in today's separate and closed fixed, mobile, IP, cable, and other networks. Equally important is the provision of the control platforms and enabling applications that will work on top of the new converged network infrastructure.

Ethernet will play a major role here, Siemens believes, as it is the best protocol capable of delivering the multitude of bandwidth-hungry services, such as video and gaming, that will need to run efficiently over access networks (see Siemens Sees Ethernet Everywhere). Schaaf says Siemens is involved in a major carrier Ethernet trial in Asia with its Korean partner Dasan Networks Inc., and that the pair have just won their first European carrier Ethernet deal in Europe with Dutch cable operator Casema NV, which plans to offer a triple-play services package of voice, video, and data. Financial details of the deal were not disclosed.

Schaaf says there is a very high level of interest in wide-area Ethernet among Europe's incumbent operators who have been visiting the vendor's Munich development center, and that trials will be announced with some national PTTs in the next 12 months.

— Ray Le Maistre, International News Editor, Light Reading

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