Older: 
The Software War Accelerates
Location: Ottawa, Canada
In my past two blog entries, I have begun to discuss “communications-enabled applications” - the second of the three mega-trends that I am convinced are reshaping the communications industry. (For those of you new to my blog, I introduced the concept of the three mega-trends in an earlier entry.)
Before I continue the dialog on redefining the applications space, I wanted to consider a few major events and activities that have happened in the industry in the past few weeks and how they are clearly showing that this second mega-trend is real and important to all of us.
The first event was VoiceCon in Orlando, Florida in early March. I had the pleasure of doing a keynote there with my boss, Mike Z, where we re-introduced the new Nortel to a few thousand of our customers, partners and industry peers. We shared our strategy and vision and, in general, received a pretty overwhelmingly positive reaction to the focus of Nortel and our views on industry evolution (including the mega-trends discussed herein).
The key point of interest with respect to redefining the applications space, though, was the fact that despite the advertised focus of the conference – business IP telephony – every presentation and dialog I observed was about a new set of applications, frameworks and services that are reinventing the communications experience (versus a discussion about telephony as a discrete element of the industry).
Some of these approaches, however, were pretty basic. One of the prior keynotes to Mike’s and mine, for example, focused on how SOA and business process integration were where the value would be for the future. While this was a good slide presentation, in my opinion it was empty calories in the sense that we all know that apps must provide a better experience or they would not be next gen or even useful in replacing what we already have. The particular issue I had with this dialog was that the definition of those apps was simply to make them better in the domain they already exist in. There was no mention of how they would interact with the rest of the communications system (such as the networks of enterprises, mobile broadband networks or home networks). There was also no mention or focus on how the apps would create synergy between organizations or across carriers and enterprises.
While it is true that the talk supported the premise that applications are being redefined, this particular company’s approach (because of their limited focus - voice in the enterprise) is neither aspirational nor visionary enough to really change the communications experience to the degree of Nortel’s vision, where the network (signaling and transport), middleware and applications tightly interact to create a new communications richness. Below is a chart I presented on Unified Communications and what the vision should aspire to be. Both directions are about change, but the broader vision is about change that truly revolutionizes the end user’s overall experience.
The second event this week that shows that the mega-trend is real was the acquisition by our “friends in San Jose” of a company called WebEx. While they have clearly been buying a wide range of small applications companies, this one is different because it places them as a service provider and moves them into a space where direct competition with Microsoft, IBM and even service providers is inevitable.
It is one thing to sell a product that happens to be an application; it is a change in business strategy when a company moves into the direct delivery of a hosted service of applications to the mass market. This may be a necessary move as they may need new addressable markets.
To me, though, it shows two things: first, that applications are critical in the dialog with customers at a level never seen before; and, second, that the industry structure is changing to make that dialog possible.
In this new structure, there will be new alliances and new competitors. Theirs is to be the single provider of everything (a big task for anyone and probably not achievable). Ours is to be a well-integrated part of an ecosystem of leaders (with our Innovative Communications Alliance - ICA - with Microsoft and our engagements with IBM, as examples).
Regardless of approach, what this shows is that Nortel is not the only one to validate that for communications equipment providers to be relevant, they must be able to exist in multiple domains and must provide value to the applications ecosystem and experience closer to the user. Our approach is to do it as an enabler of all applications via presentation of new services and functions to next-generation frameworks (such as .Net, WebSphere and IMS), which I discussed in my last entry, and to create some of the next-generation applications themselves, such as high-end contact centers and other specialized areas Nortel has strong capability in.
What this signals is that the war has begun and the ability to compete in the next phases of IT and telecom will be based on a company’s ability to shape and provide value to the communications experience.
We think that companies that are strong in only one domain (carrier or enterprise, apps or infrastructure, wireless or wireline) will have difficulty, whereas companies like Nortel, with broad multi-spectrum domain expertise (see the diagram here), will be able to deliver value to the new ecosystem that understands the synergy.
We shall see if we are right in a few years when we look back, but so far the tone of the industry confirms this and the alliances (such as ICA) and acquisitions (such as WebEx) of the past six months seem to indicate that change is afoot.
