The honeymoon is over

After a rocky start, newly-merged Alcatel-Lucent set out to impress its customers in Paris last month; NME looked in to see how the lovebirds were doing.

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By  Administrator Published  March 1, 2007

Honeymoons are a tricky time - some appear to last for years, others for a few scant weeks, before reality kicks in and the fault-finding starts.

For Alcatel-Lucent (A-L), it almost seemed like the honeymoon was over before it began, with the merger of two of the IT industry's biggest players long troubled by questions and criticism. And whatever shine the new merged company had at the start of 2007 was swiftly tarnished by news of widespread shareholder dissatisfaction and later, a US$813 million net loss for the last quarter of 2006, announced last month.

By the time A-L's annual Enterprise Forum rolled around in mid-February, it was clear the company needed to impress, and needed to silence at least some of the growing numbers of critics. The four-day event, in front of press, partners and customers, gave A-L a chance to do just that - its main session, appropriately, fell on Valentine's Day, as the vendor aimed to recapture the spark in its relationships.

In contrast to many vendor shindigs of this kind, the 2007 Forum was largely free from extreme levels of marketing bombast; A-L top brass had clearly decided on an understated approach, and an attempt to let their products - and customers - speak for themselves. A-L CEO Pat Russo also gave a largely realistic assessment of the company's place in the market, as well as its aims for the immediate future.

"I'm well aware that in the broader market we have some formidable competitors - I'm well aware that we may not always be the first company that comes to mind when you think about enterprise solutions," said Russo at the event. "Frankly, I view that as a terrific opportunity for us - we grew our enterprise business by 15% last year, and we believe the merger allows us to bring a unique approach, as we merge our assets and capabilities to serve your needs and the whole enterprise market overall."

No company which has just posted a large loss is ever particularly happy to talk about it, but Russo came as close to addressing that and the other issues which dog A-L as might be expected.

"With any merger the size of ours, there's some uncertainty which is generated, as we work through our integration plan, and I'm pleased to tell you that's progressing well," said Russo. "I also want to be very clear in conveying there is something about which there is no uncertainty, in my perspective - that is our commitment to and the importance for us of our entire enterprise business and the enterprise market."

To make its point about the significance of the enterprise market, A-L brought in one of its most high-profile global customers, in the shape of Dan Drawbaugh, CIO of the University of Pittsburgh Medical Centre (UPMC) in the US. UPMC is an ambitious global player in healthcare, with operations and partnerships around the world, including in Qatar, where UPMC has partnered with local health authorities to offer its expertise in emergency medicine.

"A key way for us to create growth in our organisation is by strategically selecting partners for investment in commercialisation - this is a very thoughtful process, and very strategic to us," said Drawbaugh in his presentation. "Right now, we have selected five companies that we consider strategic: you can see Alcatel-Lucent at the top of that list. It is one of the most important relationships for us, going forward, with the trends of convergence of voice and data, and now the video requirements within the healthcare sector," explained Drawbaugh.

He then outlined his organisation's long-term IT strategy: the challenge, he explained, would be to rationalise the large number of disparate IT and communications systems across UPMC, while also preparing its infrastructure for future expansion both on the business side and in terms of new technologies and services available over the network.

A-L's choice of Drawbaugh as its main customer reference for the event reflected the vendor's drive to focus on specific verticals - healthcare is not only a major industry worldwide, but it is also set to adopt some of the most high-tech systems over the next few years, making it an excellent poster-boy for A-L. And for other industries, Drawbaugh's discussion of contact centres, customer relationship management systems and the like would have chimed with plenty of IT managers.

The vendor continued its market segmentation strategy in its product expo - visitors could explore sample set-ups for industries including hospitality, contact centres, government and military, and of course healthcare. A-L also offered up specific products for small and medium-sized businesses, alongside its well-established high-end enterprise ranges.

One of the most interesting areas of the exhibition was the ‘Innovation' stand, showing off A-L's forthcoming and high-tech systems. Many of these originated from Bell Labs in the US, long a powerhouse of technical innovation, and at the centre of some of the most important scientific and commercial developments in the last few decades.

Here security was a major theme, with a number of advanced IT protection systems on show, among them a new (and rather secretive) method of preventing attacks on carrier-grade wireless networks. A Bell Labs spokesman suggested that, while Bell's focus has historically been on the telco side of technology, the development labs of both companies will now be working together much more closely.

How successful this is in the long term remains to be seen - much of the criticism around the merged A-L focused on the clash of corporate cultures from companies on opposite sides of the Atlantic.

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