The service provider and enterprise networking markets are markedly different, and the current economic downturn is further highlighting those variances, according to Don Peterson, president and CEO of Basking Ridge, N.J.-based Avaya Inc., formerly the enterprise networking arm of Murray Hill, N.J.-based Lucent Technologies Inc.
Last week, at Networld+Interop in Atlanta, Peterson discussed these differences and issues affecting enterprise network customers with Computerworld's James Cope.
Q: You said in your keynote address that there are very different dynamics at work in the service provider and enterprise networking markets. What are those differences?
A: Well, the telecom or carrier space, in my view, is a far more volatile area than the enterprise. There are fewer buyers, for one. And if you look back in recent history, there's a high probability of [different carriers] making the same purchasing decision at the same time.
For example, when telecom companies installed 10-gigabit cross-connects on their wide-area networks, Nortel soared on the volume of equipment sold. The reality is that spending by telcos tends to move from network bottleneck to bottleneck. So, there's a spike in spending, followed by a contraction in spending. This makes selling equipment to carriers a very lumpy business.
Q: So, if the service provider business is "lumpy," does that make enterprise sales smooth?
A: Let's say the downturn in telco spending makes me grateful that I've moved into the enterprise side of networking. Enterprises continue to offer significant opportunities for companies like Avaya.
Overall, though, the /[customer company/] CFOs and CEOs are saying, "I don't know what we can afford; let's slow down." Purchases haven't stopped, but many are being held. Everything is just sort of pending.
Q: When will networking customers start buying again?
A: If budgets set during this time of contraction aren't used soon, then spending plans will roll over into next year's budget. This is the problem scenario. But [purchasing] could turn on very quickly, too. We'll know which way it goes over the next couple of quarters.
Q: You mentioned in your keynote address that there are several lessons to be learned from what you call "market and economic disruptions." Could you please elaborate?
A: The first lesson we should learn is the importance of return on investment. Enterprises should take a lesson from the telcos reuse technology and then evolve from there to new technologies.
Second, companies should really have a compelling purpose for deploying IP technologies. Think about the application and what it will do for the company. And the third lesson is "think velocity instead of speed," because velocity implies direction as well as the rate of movement.