Nortel recommits to IP, enterprise

Despite reports to the contrary, Nortel Networks remains committed to the enterprise and IP (Internet Protocol) markets, according to a company executive recently appointed to oversee both.

In an exclusive interview with Network World, his first since being named president of Nortel's Metro Networks business earlier this month, Frank Plastina scoffed at suggestions here and in other journals that Nortel had and will continue to de-emphasize its enterprise and IP operations.

"Nothing could be further from the truth," he said in last week's interview.

As part of a recent reorganization that includes the imminent departure of Chief Executive Officer (CEO) John Roth following another multibillion-dollar quarterly loss, Nortel trimmed the number of its strategic target markets from five to three. Two markets focused on IP were jettisoned.

Nortel's IP endeavors have now been tucked under the Metro Networks mantra as Intelligent Internet. Enterprise operations, which company observers have long considered a market neglected by Nortel since the acquisition of Bay Networks in 1998, have also been folded under Metro Networks.

The rationale? Nortel says sales of metro optical transport gear depend on enabling services on top of it.

"The metro optical story is becoming just as much or more about data than it is about optics, and you have to combine the Ethernet capabilities with optics," Plastina says. "Circuit-to-packet [another subset of the Metro Networks group] is all about providing IP services once you get to packet, not just moving circuit-to-packet."

Enterprise chief information officers (CIOs) are increasingly looking to take advantage of carrier offerings to reduce cost and increase performance, Plastina claims. So Nortel noticed much overlap between its previously separate and distinct data, circuit-to-packet, metro optical and enterprise operations, and decided to consolidate them into one group to synergize marketing and R&D, and maintain platform, interface and feature consistency.

"A lot of our bids included two or three of those components," Plastina says.

He acknowledges, however, that recent bids, such as the SBC metro optical win, did not create pull through for enterprise or IP product.

"We've had more traction with Sprint and WorldCom in terms of marrying up the optics with the Ethernet capabilities," Plastina says. Nortel has a 1M bit/sec to 1G bit/sec optical Ethernet trial underway with Sprint in Las Vegas to provision incremental bandwidth-on-demand to enterprises as an alternative to jumping to - and leasing - T-3 from T-1, he says.

"That's one area where we are seeing the combination of the ease of use of Internet or Ethernet, and the ubiquity there in the enterprise, and expanding that into the carrier space, and trying to lift some of the legacy restraints or constraints" off the service providers, Plastina says.

He also says service providers want Nortel to hook them up with enterprises in order to gauge demand for new services. Five major Wall Street banks - including Goldman Sachs, Merrill Lynch, Morgan Stanley and Salomon Smith Barney - are Nortel metro optical customers, Plastina says.

Still, Nortel as an enterprise player faces an uphill battle, Plastina admits.

"We're not fooling ourselves in thinking that we have the greatest credibility in the world with CIOs," he says. "We definitely need to complement our traditional strengths with people who have that credibility."

That's why Nortel recently announced a partnership with IBM to wrap IBM services around voice-over-IP gear for the enterprise. And that's why Nortel recently allied with Sun to bundle Nortel's Alteon Web switches with Sun servers for the enterprise, he notes.

"There's no question there's been a loss of focus on the enterprise side as we focused on competitive local exchange carriers and the service provider side of the opporunity," Plastina says. "What we're trying to do now is rekindle that focus with our strengths in optics and voice, and complementing those strengths with other channels that have instant credibility in the minds of the CIOs."

We'll see if it turns into revenue and market share, which would go a long way in rekindling credibility in the minds of Nortel watchers.

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