Alcatel-Lucent announced its new strategy, and frankly I was disappointed in the articulation—or at least the amount of stuff that got articulated. The “Shift” plan to me so far states the obvious, and that makes it less obvious whether Alcatel-Lucent really has a long-term strategy that can save it.
If you look at the high-level comments made, the sense of the moves Alcatel-Lucent intends is clear. They’re going to trash R&D and sales emphasis on everything except ultra-broadband and IP, and in particular they are going to focus on “cloud infrastructure”. This is the only possible strategy to address the declining differentiation in the networking space, and the accompanying price competition and margin erosion. Get out of the commodity space and into something that’s not a commodity. Seems sensible.
It’s not, because every sector in networking is circling the same drain, some are just deeper in the bowl than others. Yes, Alcatel-Lucent can buy time by jumping out of the spaces where they’re inevitably going to lose to Huawei and/or ZTE, but all that will do is buy them a little time. The real question has never been whether the company would stubbornly try to defend its broad collection of product lines in the face of relentless commoditization, it’s been whether the company knew how to avoid commoditizing everything. So far, they’re not giving us enough to judge whether they have that vision.
“The cloud” is probably the thing that Alcatel-Lucent executives would point to as their touchstone for future profit, and if we define the cloud as being the union of information technology and networking, they’re right. What else is there, after all? However, neither IT nor networking are all that financially healthy. With CIOs reporting to CFOs in corporate organization charts, we’ve acknowledged networking as a premier cost center, not an innovation center. In any event, it’s not likely that Alcatel-Lucent will try to get into computing. Given that, just what is it that they could do in “the cloud”?
I think the only answer is the thing I’ve been calling the “supercloud”, the cloud created not by attempting to do hosted server consolidation but by the evolving needs of mobile broadband users. “Point-of-activity empowerment” is the goal of everyone these days, and while we’re demonstrably meeting the early demand in that space we’re clearly not thinking much about evolution. Absent a credible evolutionary strategy, mobile broadband is just another source of pressure for cheap bits, which means cheap networks.
Alcatel-Lucent knows something about this space. Their concept of the “high-leverage network” is spot-on in that it expresses the fact that for network vendors to prosper, network investment has to prosper. Leverage is a good way of describing that; you “leverage” your investment in many ways. Pushing bits to support five different applications isn’t five leverage strategies, either. It’s one strategy—pushing bits. That means that service intelligence is mandatory for Alcatel-Lucent, and for the industry. How do we get it?
Traditional cloud means hosting on the network. That’s back to pushing bits, network-wise. We have to think about creating things in the network that can differentiate and revalue it. Even here, Alcatel-Lucent has past credible positioning in their APIs. But they’ve not been able to make something happen with APIs and they’ve recently begun to pull back on some of their previous strategies—selling API warehouse ProgrammableWeb that they’d bought with great PR fanfare not that long ago.
Alcatel-Lucent still has the right stuff, tech-wise. What they don’t have is an inspirational articulation of the vision of the network of the future and a clear map as to how their pieces get a network operator to that promised land. It’s almost like they want to educate buyers and not inspire them, and sadly that doesn’t work for revolutions. So effective marketing/positioning is a must for Alcatel-Lucent’s survival.
So, IMHO, is NFV. This concept is, I think, bigger than even its own body acknowledges. It’s a way to create a model for deployment and operationalization of the supercloud of the future. That’s not the only ingredient for that cloud (you need a functional architecture to define what it can do and how you build it), but deploying something is obviously a prerequisite for using it. Here is where Alcatel-Lucent needs to focus in the near term; here is where they will likely stand or fall in a technical sense. It’s a bully pulpit for a concept that Alcatel-Lucent needs badly.
The big challenges that convergent supercloud-NFV has to face are less the deployment (which is an application of optimization and DevOps principles, complicated but understood) than they are of management and function modeling. We need to be thinking about how network/service/cloud features are best conditioned for being deployed in a supercloud. Operationalization is also key. Flexibility often comes at the price of complexity, and that can quickly escalate to eat any possible profits from service deployment. Operators understand operations, but they understand it in the old five-nines-regulated-monopoly framework. Everything can’t be ad-sponsored, and so the secret weapon of operators is that they know how to sell services people pay for. They just have to figure out how to build new ones to sell, and how to operationalize that new service model in a suitable way. And that’s what Alcatel-Lucent has to do, or its “Shift” won’t be a shift, but the beginning of a slow retreat.