Alcatel-Lucent, battered by high costs and declining revenues and by internal tension since the merger, is now going to have to get another CEO. Ben Verwaayen is stepping down, having failed to turn the company’s fortunes around. That he didn’t is beyond dispute. Whether he could have is open to debate in my view, and whether it will do any good is the biggest question of all.
With all of networking slipping into the status of “plumbing” there’s no question that something radical was needed to recondition Alcatel-Lucent. The company has an enormous exposure to the low-margin sides of a market with shrinking margins overall, which is never a good thing. It has a very expensive R&D process that, to be a contributor to profit, would need to be focusing on areas where Alcatel-Lucent’s customers could make money. It didn’t have that focus. The company has arguably been the leader in developing a service-layer position that WOULD have helped customers transform, but the articulation was never equal to the products. And Verwaayen was never the guy to fix any of these problems in my view.
If you look at the telecom equipment scene today, you can only conclude that the most important attributes of a vendor CEO are charismatic drive and naked aggression. That pretty well describes Cisco’s Chambers but none of the other players in the network-vendor-CEO game. It’s not that the CEO has to be the mouthpiece of the company as Chambers is, but the CEO has to be the driver of company culture, which is the thing Alcatel-Lucent has to change.
Changing culture means making the company into a master positioning-marketing-sales trajectory team. Networks are a cooperative community of smart elements, and you can’t sell them in product silos for that reason. Any successful networking company has to start with a vision of HOW IT MAKES ITS CUSTOMERS PROFITABLE that is compelling and realistic at the same time. That vision has to then translate into specific “transformation initiatives” that are service-targeted, and those initiatives then finally implicate specific products. You fine people who say things like “we sell IMS” or “we sell routers”. No you don’t. You sell profits for your buyers, which creates profits for you.
To make this work you have to focus on some compelling target, and that target is created by the intersection of technical initiatives like SDN and NFV, architecture initiatives like the cloud, and service initiatives like mobile broadband. I’ve said for over a year that there is only one place where these come together, and that’s the metro network. Alcatel-Lucent has to transform itself by transforming metro, because that’s the place where all the money is going to be spent. But if you do a Google search on the company and metro networking, you get not a vision for the network but a bunch of product pitches. And none of these focus on the cloud, SDN, or NFV, despite the fact that Alcatel-Lucent is active in all three of these areas.
There is nothing important happening that’s more than 40 miles from the customer. Not now, not ever. Why? Because in a mass market for content and experiences and compute services, there’s nothing that’s valuable that isn’t OPTIMALLY positioned close to the buyer. How many movies will people watch? A bunch if it costs nothing, but far fewer if they have to pay, and if something costs nothing it earns nothing. And the few movies will simply be cached in CDNs. Same with cloud; if there’s a big opportunity then the opportunity is big enough to justify metro data centers.
Alcatel-Lucent has all the pieces, but they won’t show us the picture on the front of the puzzle box. While it’s not impossible to put a puzzle together without knowing what the final product would look like, it’s a darn sight harder than it should be, and many won’t bother. With Alcatel-Lucent, many haven’t and that’s the problem. A problem that could be fixed in ONE CALENDAR QUARTER if they really were determined to fix it.
This isn’t a test of intelligence or even one of product depth. This is a test of WILL. Does Alcatel-Lucent have the will to be radical instead of conservative? They either have to prove that in 2013 or they will be unlikely to ever be able to do so. Other players from Ericsson and Huawei to Juniper and Brocade and Extreme and Ciena and Tellabs have the opportunity to do the right thing too. Any productive move any of these other guys make will occupy a step on the value-proposition stepping-stone bridge across the market stream. That will mean Alcatel-Lucent will have to get wet to move forward, and wetness is only a small step from drowning.