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Nortel's Soft Sell

Light Reading
News Analysis
Light Reading
2/19/2004

Nortel Networks Corp. (NYSE/Toronto: NT) as a software company? You don’t say. But yes, that’s the vision that Nortel’s executives are pushing these days.

Nortel’s CEO Frank Dunn said yesterday at the company’s media and analyst day that he sees the company moving toward a software and integration model. That explains Nortel’s recent moves to outsource nearly all its manufacturing in a deal it’s negotiating with Flextronics Corp. (Nasdaq: FLEX). (See Nortel Talks Outsourcing.)

Meanwhile, Nortel’s CTO Greg Mumford told Light Reading in an interview that Nortel’s focusing its R&D investment on software development, particulary packet-based communications applications based on protocols such as SIP (Session Initiation Protocol).

Here’s some of what Mumford had to say:

Light Reading: So SIP is a big deal, is it?

Mumford: It’s a big deal to the service providers because it gives them a way to create new revenue services.

When I think of SIP I think of a protocol. It’s a protocol that allows applications outside of the network to function with applications inside the network. It’s an interface. With a SIP interface a carrier could decide that a third party has a good application and they can just interface with that… It adds service velocity.

Light Reading: So, Frank Dunn said today you are a software company. That surprised me. I thought all along Nortel sold hardware. Am I that dumb?

Mumford: Nortel for a long time has had a very significant part of its investment in software. It’s just that it’s been bundled with hardware. But over time that changes.

With MCS [Nortel’s Media Communication Server product], for example, we’re selling just the software. We need to ring the cash register on the software only. With hardware you put silicon in and you also have intellectual property. You need to be paid for both. When you sell software, all you are selling is the intellectual property.

If you look at any of our optical products, a lot of it is software. In the services edge, the Shasta product is IP processing. If you look at our Passport product, the processors and fabric we buy from others. Our role is the software development. And VOIP is software.

Light Reading: What do you make of this sudden land grab for multiservice products? For example, in just the last week Juniper and Tellabs have made multiservice announcements. [See Juniper Hatches the M320 and Tellabs Enhances Multiservice Routers.]

Mumford: We’ve identified multiservice with the edge, and we’ve done multiservice for years with the ATM in Passport and tag-label switching. Edge routing is now coming together with that. We also have IP processers at the edge, like Shasta and Alteon [Nortel's IP services and service-layer switching products]. We see all of this coming together. The recent Juniper announcement of a multiservice edge box validates that. We’ve identified the functionality in separate boxes. As far as one product that does it all, we have an investment going on, but we haven’t announced any new product per se. Light Reading: So what’s Neptune? We’ve heard that’s your multiservice box.

Mumford: Neptune is a code name of a product development. We’re investing in a next-generation services edge box.

Light Reading: So it's your multiservice box?

Mumford: It hasn’t been announced

Light Reading: Now it has!

[Mumford wrinkles his brow and promptly boots the reporter out of the room.]

— R. Scott Raynovich, US Editor, Light Reading

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dljvjbsl
dljvjbsl
12/5/2012 | 2:24:58 AM
re: Nortel's Soft Sell
The artilce shows that Greg Mumford understands what SIP and VoIP are about. This is very good news for Nortel and users. it si bad news for Nortel's competitors.

However I am very surpised that LightReading took his comments about SIP and coupled them with talk about services at layer 3 and below. These may share the adjecttive 'multi-service' but they share nothing else. I find this concatention very odd.
TJGodel
TJGodel
12/5/2012 | 2:24:56 AM
re: Nortel's Soft Sell
The vision articulated by Mumford means Nortel will have a bright future. By providing service provider with software to generate new revenue they will be a company to watch.
optical_man
optical_man
12/5/2012 | 2:24:54 AM
re: Nortel's Soft Sell
Go GREG Go
Peter Heywood
Peter Heywood
12/5/2012 | 2:24:52 AM
re: Nortel's Soft Sell
I hope you've noticed that Light Reading, in conjunction with the International Packet Communications Consortium, has launched a project that aims to accelerate the adoption of SIP/VOIP based services among service providers and enterprise users.

It's a directory of products in the form of one our "Who Makes What" reports. Here's a link to it:

http://www.lightreading.com/do...

We are enhancing company listings in this directory by hyperlinking them to information submitted by companies and held in "Product Directory Dossiers". Click on the link below for an example (Sylantro):

http://www.lightreading.com/do...

** CALL TO ACTION: DEADLINE - MARCH 1ST**

In order to get a similar listing for your company and its products, please download the questionaire below by clicking on the link, and then follow the instructions in it for completing and returning it to us.

http://downloads.lightreading....

The questionnaire is in "Word Tables" format and is guaranteed virus free.

Once we receive it, we will check the information, put it into a Product Directory Dossier, and make it so that when readers click on your company name in the "Who Makes What" report, they will be taken to your company's own, exclusive web page on Light Reading, like the Sylantro one in the example.

We will do all this **FREE OF CHARGE FOR THE WHOLE OF 2004** so long as you submit your completed questionnaire by March 1.

We already have completed questionnaires from a couple of dozen companies, and we've started putting the information into Product Directory Dossiers.

If you have any questions, please contact me at [email protected]

PS: We're still open to suggestions for modifying the Who Makes What taxonomy - by adding new categories, adding new sub-categories, changing descriptions or anything that makes sense.

We recognize that this is an evolving marketplace, one that we can help along the way by providing a framework in which products can be positioned. However, we also recognize that the framework might need modifying as things change and that this needs to be done in consultation with the whole industry. That's why we've partnered with the International Packet Communications Consortium and we've used the "Who Makes What" report format for the directory - to give us the flexibility to change things as the market itself changes.

Phew...sorry to go on. Can you tell I feel quite passionate about this project?

Like Greg Mumford, I think this stuff is at the center of where the telecom industry is heading.


Regards
Peter Heywood
the_lord
the_lord
12/5/2012 | 2:24:42 AM
re: Nortel's Soft Sell
I have a coffee mug at home that says...

"DEC is a software company"

NORTEL is following the ways of DEC.. The parallels are extreme... Basically, they were both primarily hardware vendors who built out an extremely successful organization around one piece of hardware (DMS for NORTEL and VAX for DEC).

During the late 80's, DEC could dump the hardware at cost and make up the difference software and upgrades (NORTEL strategy in the 90's).

As the VAX got old in the early 90's, DEC climbed into bed with other hardware vendors such as MIPs for workstations and radio shack for PCs (NORTEL's current strategy).

The problem was no customer could understand the product strategy. Were they going to put their compilers and software tools onto the new platforms? Is NORTEL going to put their OAM software on all of these new vendor platforms.... Will there be a unifying force other than a salesman with his hand held out??

DEC tried ALPHA; however, they could not transition the company from a high margin systems business to a low margin commodity business.

DEC (like Honeywell, Unisys, etc.) transitioned into a pure service systems integration model.

Finally, Compaq bought DEC and HP bought Compaq.

Anyway best of luck!!!

lokicat
lokicat
12/5/2012 | 2:24:40 AM
re: Nortel's Soft Sell
Nortel has been talking about being a software vendor for years ... and sure it sells software, just as long as you buy the box Nortel sells on which to run the software.

One of the big challenges (and I'm sure that DEC faced the same issues) is changing all their infrastructure to support software sales versus hardware sales. Selling software is different from selling hardware, so sales tracking systems, the approach to support, etc all need to change.
PO
PO
12/5/2012 | 2:24:29 AM
re: Nortel's Soft Sell
I know we've talked VOIP on this board for a long time, but I've often wondered why.

After all, isn't "Light" Reading about optical networking? Certainly the biggest driver for optical networking has been telecom, and telecom is migrating towards VOIP. Is this the link? There are plenty of other technologies involved which we could talk about, if that's the case.

Should we be looking for a new sister forum to launch soon?
PO
PO
12/5/2012 | 2:24:28 AM
re: Nortel's Soft Sell
We've discussed before on this board (I'd link to it, but to be honest I've never figured out the search functions on here) that Nortel's original hardware was required because there weren't viable alternative platforms available in the general market. Nortel has often redeveloped that platform, migrating from NT40 to 68000-based systems to even more advanced systems. Now, that intellecutal property base can run on a wide variety of platforms.

Of course, other products (such as optical) are -- and always will be -- hardware-centric.

I'm glad to hear Greg talking about this migration, and continue to wish Nortel all the best in their continual reinvention of themselves.
dljvjbsl
dljvjbsl
12/5/2012 | 2:24:20 AM
re: Nortel's Soft Sell

After all, isn't "Light" Reading about optical networking? Certainly the biggest driver for optical networking has been telecom, and telecom is migrating towards VOIP


THe applications surrounding VoIP are going to the biggest drivers of network utilization. Their needs will dictate the type of network which will be purchased and deployed. One cannot talk meaningfully about future networks including optical without a full understanding of these application drivers.

If one wonders why this is so, one need only look at the carange that resulted from the popping of teh bubble. An entire industry was built to provide equipment to nonexistent markets. Nortel went from over 100,000 employees to 36,000 because there was and is no market for the products that John Roth decided to build.

Greg Mumford now seems to have a good grasp of waht SIP is all about. There does seem to be a market for these applications. Nortel can now build a business that can be supported by customers.
ecipo
ecipo
12/5/2012 | 2:24:06 AM
re: Nortel's Soft Sell
correct me if I'm wrong but the telecom business is not the PC business and Nortel is not Microsoft. I think that Nortel has to develop its own boxes in order to sell its software.
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