Update: Nortel to simplify, expand services offerings

The equipment maker also says it will repair gear from other vendors

Nortel Networks Corp. announced today that it will simplify its services offerings as well as provide integration of equipment from other vendors, in an effort to spur new revenue from the services it offers to large businesses and service providers.

Even as it streamlines its services, Nortel is also adding new ones, including integration services for IPTV and for voice over IP to help service providers deliver voice, data and video services faster and cheaper.

Nortel is creating a services business unit that will focus on five commercial services areas: integration, security, optimization, maintenance and managed services, Curt Hopkins, vice president of sales and marketing for global services, said in an interview.

“Nortel has provided services for years, but not a separate, intentional strategy and business unit,” he said. “There will be a sweeping simplification, from 700 down to 70 discreet services.” About one-third of Nortel’s 30,000 employees work in services, he said.

Nortel CEO Mike Zafirovski recently said that services would be one of six key areas on which Nortel will focus, noting that services and applications now account for less than 20% of the company’s revenue. Nortel hopes to double services revenue in the next three to five years, Hopkins said.

Nortel has offered managed services of multivendor networks for a long time but will begin offering maintenance services for other vendors’ equipment, giving customers a single point of contact for repairs, Hopkins said. Two North American service providers recently became the first to use the new multivendor maintenance services, Hopkins said. He declined to name the companies involved.

For Nortel’s existing services customers, about half the network elements are non-Nortel, Hopkins said.

John Tichenor, chapter representative for the New York City Nortel Users Group, said Nortel's services direction is a "smart move." He predicted it will help Nortel and its customers, since IT shops face so many demands and will increasingly see needs for outsourcing all or part of the work.

"There's value for the IT department, which has less staff than two years ago," said Tichenor, the telecommunications manager for a Manhattan-based law firm, which he asked not be identified. "Wouldn't an IT manager want to take the operational part of a network and give it to somebody like Nortel to let the IT staff focus on other matters?"

Nortel's move might help it seem more comparable to Cisco with its strong services orientation, he said. Tichenor's operation includes both Nortel and Cisco gear, he said and serves attorneys in other countries.

While he said Nortel should be credited with its decision to repair all brands of networking gear, he's not sure he would count on Nortel to repair Cisco gear. "It all depends on what level of repair," he explained. "If you are simply swapping out a Cisco router, fine. But if it was a Cisco backbone switch with fluxuations, I wouldn't want Nortel to handle that."

Another Nortel user said he has had trouble with Nortel support in the past and would be concerned about future support. "I have not been satisfied with the Nortel support that we get...," said George Ahlenius, president of the Chicagoland Nortel Networks Users Association. He uses a Nortel voice switch and a Nortel CallPilot voice mail system at the Illinois College of Optometry where he is telecommunications administrator.

There are currently three unresolved trouble tickets on the voice mail system, which have been sent to the "black hole" which Nortel refers to as its "design group," Ahlenius said.

"The time to access Nortel support is more than we can afford in our business operations," Ahlenius said. "I would be concerned if I had to use Nortel for support based on the current level of communication on outstanding issues." The college relies primarily on basic network maintenance from AT&T (including former SBC technicians), which has been "excellent." But more difficult problems with Nortel gear are passed on to Nortel, which is where problems arise, he said.

Zeus Kerravala, an analyst at Yankee Group Research Inc., said that Nortel and other vendors need to support and maintain equipment from other vendors to compete. “If you’re not Cisco, you need to be willing to service multivendor environments,” Kerravala said.

NEC Corp. has been using a similar strategy successfully for nearly three years, he said.

Copyright © 2006 IDG Communications, Inc.

  
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