Can Alcatel-Lucent Be Networking’s Comeback Kid?

Alcatel-Lucent has secured the financing it needed to shore up its balance sheet and prevent a messy problem, but the company still faces the same demons it’s faced since the merger.  Those problems have been enough to stall a giant with the best strategic influence of all network vendors and the best strategic product set.  Can they now be solved?

In our surveys of strategic influence, Alcatel-Lucent is the runaway winner in terms of raw score, scoring a full third higher than their nearest competitor.  They’re also the most consistent, with good scores in every aspect of network infrastructure.  Finally, they’ve managed to stay engaged on every single major hot monetization issue in the market.

In product terms, Alcatel-Lucent has the only complete service-layer architecture, the best framework to link PaaS cloud deployment to service features, the only respectable IMS evolution strategy, a good content story and excellent mobile story, and what’s emerging as a powerful cloud and SDN story.

So why aren’t they kicking posterior?  Here’s my insight.  Last night, I dreamed of umbrellas.  Why?  Because when you’re focused on picking low-hanging fruit one tree at a time you create a forest of trees that look like umbrellas.  The Alcatel-Lucent merger occurred just as the industry was transitioning from one that tolerated cost to one that was obsessed with controlling it.  They were immediately faced with the challenge of creating value for their shareholders, and the obvious path of consolidation pitted every business unit against every other one in proving its immediate value.  That focused everyone on grabbing those low apples.  You don’t need a strategic ladder if you’re stuck on the ground, so they never really managed to tell a story that valued all the leadership positions they had.  Sales people were focused on doing deals not building relationships, and that helped for a while but built up strategic disengagement like genetic load.

Remember that third-higher score I mentioned?  Well, the problem is that it’s been dropping every single survey for the last three and a half years.  Remember those strategic assets they have?  The problem is that while customers know about the parts, they don’t understand the assembly instructions.

There’s always good and bad news, so let’s get to that.  The bad news is that when you mess something up for half a decade or more, there a powerful reason to believe you’re structurally incapable of fixing it.  One reason may be “Bell Labs”, which gives Alcatel-Lucent the heart of a market-disconnected geek and turns its innovation culture into abstract experimentation.  If ever there was a company that needed to turn the product management whips on the R&D masses, Alcatel-Lucent is that company.

The good news is that their problems are truly cosmetic.  The right product management and marketing and positioning and articulation could cure everything in two quarters.  A trivial example is Old Spice.  If you can sing pretty in today’s market, you can BE pretty.

The specific place where Alcatel-Lucent needs to focus is the cloud, and most specifically the cloud/network boundary.  There are compelling opportunities with SDN and NFV, created in no small part because the interest has far outrun the reality.  Alcatel-Lucent is in a position to create an SDN story that easily migrates upward into being a story about the service architecture that will support both future network services and future cloud applications.  Such a story, if compelling, would make Cisco’s server position much less significant as a tool in gaining influence and engagement.  Cisco itself is likely to be coy in this area to protect its base, but if Juniper does something compelling (a big IF) with the Contrail assets and if they can position it in an arresting way (a bigger IF) they could force Cisco’s hand.  And they could also limit Alcatel-Lucent’s opportunity.  For Juniper, you can’t knock off number one if you can’t get number two, competitor-wise.

So to go back to Alcatel-Lucent and its prospects, it’s simply a matter of will.  I know of no company whose problems could be solved so easily, whose future could be so bright.  They are the only player in networking who could truly derail Cisco’s plans and who could almost single-handedly reshape the industry in a stroke.  I would love to think that they would do that, but as Alcatel-Lucent (and competitor Juniper) has shown in the past, there is no inertia so strong as company-culture inertia, and none so destructive.

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