Alcatel-Lucent tackles partner concerns
Despite the vast sums of money that Alcatel-Lucent lavished upon its first Enterprise Forum as a combined company, the overriding mood among the attending partners was one of trepidation and uncertainty. Doug Woodburn reports from Paris
About 8,000 customers and business partners converged on the plush Concorde Lafayette hotel in Paris earlier this month to hear Alcatel-Lucent set out its enterprise vision.
But almost two months on from the completion of the union between France-based Alcatel and US rival Lucent, resellers claimed they have yet to hear a detailed account of how the vendor will run its enlarged channel in the UK.
Tom Perry, head of marketing at Alcatel VAR Freedom, was typical in his view. Speaking to CRN in Paris, he said: “To determine whether the merger is a good or bad thing for the channel, we need more information on the structure of the channel, its indirect versus direct strategy, products and support.”
The merger of two of the telecoms industry’s genuine behemoths was always likely to create opportunities and challenges in equal measure.
On the positive side, the union produced an 80,000-employee global titan with the largets R&D capacity in the communications industry. genuine clout on both sides of the Atlantic and a pro-forma 2006 revenue of 18.25bn euros
But on a negative note, Alcatel-Lucent is already in hot water from French unions over the scale of job cuts stemming from the merger. The vendor recently admitted worldwide personnel losses would hit 12,500, which is substantially more than the 10,000 cuts it originally predicted.
Questions have also been raised about the manufacturer’s profitability and growth potential. Even chief executive Patricia Russo admitted that results in its most recent quarter were “clearly disappointing”. And with Alcatel-Lucent conceding that turnover will decline in the present quarter, partners claim that the next six to 12 months could be a critical period in the vendor’s history.
Furthermore, the firm’s legacy is firmly routed in the service-provider space, but detractors have cast doubt on whether Alcatel-Lucent can really compete in the enterprise channel against the might of Cisco.
Against that backdrop, Hubert de Pesquidoux, president of the enterprise business group at Alcatel-Lucent, assured a packed audience that the vendor was “deadly serious” about taking on the “elephant” in the enterprise market.
“We need to make people understand that we are very serious about this market by putting energy and focus into it,” he said. De Pesquidoux outlined four tactics that Alcatel-Lucent will use to reach that goal.
First, the firm is to create a single team to handle global accounts. Second, it plans to throw more weight behind specific verticals such as defence. Third, the vendor will attempt to leverage more service providers to reach the SME market via a managed service or hosted model. Finally – and crucially – de Pesquidoux highlighted increased investment in the channel as key to Alcatel-Lucent’s enterprise fortunes.
To this end, the vendor announced it is in the process of creating a Global Competency Centre: a single, worldwide virtual channel team designed to ensure that partners across the world are consistently trained and certified.
Peter Tebbut, head of pre-sales, post-sales and marketing at Alcatel-Lucent UK, told CRN: “This will mean more focus on best-in-class practices, so if there is an improvement in one market it can be rolled to others. Over time Alcatel-Lucent will become easier to do business with.”
The vendor also hinted it would give in-country management teams more autonomy, as well as setting out clearer guidelines on the rules of engagement with the channel on its direct versus indirect strategy.
But the new initiatives met with a mixed reception from UK partners. Mark Hatton, managing director of distributor Sphinx, said: “I didn’t expect anything more because these things take time and [Alcatel-Lucent] did give a reasonably detailed product roadmap. I was hugely impressed by the sheer scale of the event.”
John Massey, managing director of Actimax, one of about 10 VARs that Alcatel-Lucent supports directly in the UK, said he was pleased with the new collaboration products showcased at the event.
But with granular detail thin on the ground, others argued the event had left the channel with more questions than answers.
Martin Ratcliff, business development director at VAR Amilan, said: “One’s immediate reaction [to the Global Competency Centre] is, ‘oh no, not another load of certifications’. We’ve only recently invested a six-figure sum in the last set of certifications, so we hope the goalposts aren’t changed again merely for us to put a tick in a box. But we need to wait and see what [Alcatel-Lucent] says.”
Perry said: “It was good to see the new global management team and it definitely put some meat on strategy bones at a pan-European level. But now it has used the forum as a platform at a global level, we would like to see that cascade down to the UK. We’ve not seen any more details on how the UK market will be structured and we need to see that quickly.”
Perry highlighted a lack of training and pricing information on the new Lucent products, including its Brick VPN firewall offering, as one key concern.
Tebbut claimed that the wait was necessary to ensure the firm’s channel partners were competent to sell the new products.
“The objective is for our channel partners to have contracts to sell the products by the end of the quarter, and this will all be clarified in a month or two,” he said. At the same time, rivals also claim to be profiting from uncertainty surrounding the merger.
Paul Louden, SME sales director for UK and Ireland at Avaya, claimed several of Alcatel-Lucent’s UK sales staff have joined Avaya’s ranks in the past 12 to 18 months.
“There is a level of frustration with Alcatel’s go-to-market strategy,” he claimed. “When the merger was announced, some sales people felt it was too internally focused and was not concentrating enough on the channel.”
Alcatel’s trump card down the years has arguably been the breadth and quality of its technology, which supporters argue matches that of any other vendor in the market.
But against the might of Cisco’s colossal marketing machine, the vendor has struggled to gain a brand foot hold in the enterprise segment, particularly on the data side.
Also, UK VARs have complained that they encountered a second barrier when pushing Alcatel-Lucent to UK enterprises. French management, they said, has always been reluctant to commit the same level of marketing funds to the UK as it does elsewhere in Europe.
However, there was optimism that Lucent’s influence can act as a counterweight to Alcatel’s perceived Gallic bias.
Ratcliff said: “The hope is that the marketing side will pick up momentum and gain from the Lucent side, and that the UK will get more of a mass-marketing approach. In the UK, the Alcatel name is not as well-known as on the continent, so there is a level of awareness that needs promoting.
“When we approach an enterprise, we have to spend time explaining who Alcatel-Lucent is, which puts us a few paces further back than if we were with another vendor. There has certainly been a number of communications that [marketing] will have a big focus. But although we’re hearing good stories, we want to see some action.”
Perry said: “Alcatel has never marketed enough in the UK. If that changes with Lucent coming in, that’s great.”
One sure-fire way to boost brand strength is by securing high-profile wins with the public sector and large enterprise accounts. And that will be a central tactic of the UK team in 2007, although Tebbut hinted that Alcatel-Lucent would have to break with its 100 per cent indirect sales strategy to net more of the big deals.
He pointed to a recent 120m euros victory with the Highways Agency, which Alcatel bid for without partners because of the high potential cost of the financial penalties involved.
“We will see more of these deals, but the majority of business will remain in the channel,” Tebbut said. “This will be for large government contracts mainly. We have no intention of building an arm that can build and manage in the field.”
He also claimed that partners will benefit from the strategy because Alcatel-Lucent will typically bring in several VARs to carry out the implementation work once the contract has been won.
But Perry was downbeat on the news. “Alcatel-Lucent has always been indirect and I would be concerned with any move back to the direct model,” he said.
And adding to the provisional feel of its UK channel, Alcatel-Lucent has yet to finalise its distribution strategy.
In January, the vendor announced the appointment of security specialist Sphinx to carry its voice portfolio (CRN, 15 January). At the same time, it parted company with existing distributors MTV Telecom and Rocom.
But that leaves a black hole on the data side. Tebbut said: “We’ve made an investment on the voice side with Sphinx. We have an objective to add a data distributor to the portfolio, but nothing has been agreed yet.”
Hatton said: “We are focused on the voice side. If there is an opportunity to engage with [Alcatel-Lucent] on the data side, we would do so. The partnership has gone very well. We’ve been impressed with its commitment to make the partnership work.”
So what does the future hold for the Alcatel-Lucent channel?
With challenging market conditions, particularly in the US, the firm said this is likely to prevent the company’s turnover from rising in the first quarter. But the vendor is bullish for the whole year, forecasting above industry-average growth as the benefits of the merger begin to hit home.
Although declining to offer an individual forecast for its enterprise business, the vendor did reveal its enterprise turnover rose by a solid 15 per cent last year. That compares with an industry average of between five to seven per cent, it claimed.
Certainly, if the rhetoric is anything to go by, Alcatel-Lucent will aim to beat that growth rate this year. “We are in this [enterprise] game to play and win, and we are deadly serious about winning and winning big,” de Pesquidoux said.
And the vendor insists any teething problems in its UK channel will be ironed out before the summer. “There will be a lot of good things coming out from Alcatel-Lucent,” Tebbut said. C
>> Further reading:
Alcatel-Lucent launches assult on Cisco
Alcatel-Lucent launches big iron switch
Alcatel and Lucent complete merger
Contacts:
Actimax (0126) 824 3900
Alcatel-Lucent (0870) 903 3600
Amilan (0121) 260 8100
Avaya (0148) 330 8000
Freedom (01923) 654 321
Sphinx (0870) 850 7007