Lucent Leaves Nest, Takes On Integration
By Shannon Henry
A one-year-old company is setting the stage for a new kind of telecommunications business.
Created as an AT&T spin-off last February, Lucent Technologies Inc., Murray Hill, N.J., unarguably had a head start in the telecom world, especially with its Bell Laboratories research arm.
But Lucent has moved at a clip that is surprising many industry observers, defining a strategic focus that both analysts and the public are embracing. Its blockbuster initial public offering in April, which raised $2.9 billion, is evidence.
The core of its plan is to create a multivendor environment in which technologies from different companies are sold as a single solution, with added consulting to help the customer figure it all out. In other words, Lucent is becoming a systems integrator.
"Lucent has recognized that the telecom industry is going through a major change," said Maren Symonds, an analyst with Vanguard Communications, Morris Plains, N.J. "They've been able to chart their own course."
|Last month Lucent formed a new unit and hired James O'Neill, who had been in charge of Digital Equipment Corp.'s federal government segment, to run it.|
In the multivendor environment, said Symonds, customers buy the best technology from a number of vendors. "It's the wave of the future," she said."
Patricia Russo, executive vice president of Lucent, has been the woman behind much of the navigation. Russo directs strategy, business development, government affairs, human resources, public relations and advertising at the $23 billion company. Russo was instrumental in choosing the now ubiquitous Lucent logo - the red ring.
"It isn't often you spin off as a market leader," said Russo. "We literally formed a company, got a name, established a brand, separated from our parent, had an IPO and didn't miss a beat," she said.
Indeed, some analysts say Lucent is setting new standards for swiftness.
"There's a penchant for speed at this company," said Symonds. Still, Russo said the company's greatest shortcoming now is not being fast enough. "We're working hard at becoming a speedier company," said Russo. "We're not as fast as we can be or want to be."
Besides the multivendor strategy, the element that sets Lucent apart is its focus on merging voice and data, the rallying cry of convergence. "Lucent will be at the head of the pack in this area," said David Kline, an analyst with the Gartner Group.
Lucent will become known especially for its expertise in voice/data systems integration, Kline predicted. "The world of voice and data networks will come together over time," said Russo.
Kline agreed with Symonds' analysis as well. "To be an integrator today you have to have multivendor skills."
Lucent's emerging strategic focus changes the telecom gear competitive landscape. While companies such as Nortel, Siemens and Rolm were traditionally rivals, Lucent now lists Cisco and Microsoft as its biggest competitors.
In fact, the line is blurring as systems integrators such as Electronic Data Systems Corp., Plano, Texas, and San Diego-based Science Applications International Corp., in turn, get into the telecom business.
While Lucent is becoming a player in the integration world, many industry experts don't expect its traditional competitors to make that strategic shift. "I don't see Nortel or Siemens expanding their role beyond traditional telephony," said Symonds.
Lucent is going after the multivendor market in part by forming strategic partnerships, some with competitors. "Depending on which space we're focused in, one day we can be competitors and one day, be partners," said Russo. Examples of competitors and partners include Bay Networks Inc., Santa Clara, Calif., and Redmond, Wash.-based Microsoft, she said.
There are now four main segments Lucent is targeting: mobile/wireless; customer service/call center; collaboration and telephony/networking.
Russo said the two major trends driving Lucent are the desire of people to be able to communicate wherever they are and the deregulation of many state telecommunications monopolies around the world. (See Page 1 story on the World Trade Organization's pact to open up telecom markets worldwide). "There's a growing need for what we call turn-key systems integration to do it all," Russo said.
Karen Long, offer manager for collaborative conferencing and messaging at Lucent, said selling technologies designed to help people work together is an enormous market. "People don't realize how important it is because it's like breathing," said Long. As an example of the multivendor strategy, Lucent is working with companies such as Lotus and Intel on collaborative conferencing and messaging offerings. "No one vendor will be an expert in all of these [collaborative] technologies," said Symonds.
"In the past we've been focused on products. Now we're focused on solutions," said Long. Lucent is moving more into the systems integration realm as its customers say they don't want to manage that solution, she said.
Lucent is also stepping up its pursuit of the government market. Just last month it formed a new unit, government solutions, and hired James O'Neill, who had been in charge of Digital Equipment Corp.'s federal government segment, to run it.
"Our name is new but our technology is mature," said O'Neill. "We're number one in the federal government." O'Neill said his 5,000-person division will become a lot more visible in the coming months as it launches an aggressive advertising campaign to make sure customers know Lucent has left the AT&T nest.
The government division is an
important part of the whole company's integration focus. "We're a channel for Lucent's products and services to government," said O'Neill. It's one-stop shopping, including systems integration," he said.
Symonds said it's still early in the transition phase of telecom companies. However, she added, "Lucent's successful competitor has to be doing what Lucent is doing."