John Roese’s Blog CTO, Nortel

A few dozen blogs ago, I wrote about the need to have both strategy and tactics to execute a successful business plan. That post was in response to some interesting comments that expressed concern that our day-to-day activity was not providing “instant gratification” to long-term market, company and industry challenges. My main point in that post was that it is critical to recognize that a successful long-term business plan is driven by a strategic view of where you want to get to over time and then realized by a huge number of tactical activities that, when done in concert with that strategy, move you forward.

I think we’ve been pretty clear about our strategy. We are transforming Nortel to be a company focused on capitalizing on the trends of Hyperconnectivity. Our key areas of focus are: 1) to accelerate the shift to a true broadband world (where capacity and availability of mobile, low-cost bandwidth is made possible at an order of magnitude improved economics); and 2) to communications-enable the applications and IT world (where the tools and capabilities of telecommunications become accessible to any interface, application or  business process in a simple, well-integrated and seamless manner).  I talked more about this strategy (and positioned it in terms of the “supply” and “demand” side of Hyperconnectivity) in my July 14th post.

Over the last year, we’ve undertaken a host of tactical activities to capture the opportunity articulated by our strategic vision. I won’t list all of the activity here (too many, and much of it was covered during our recent Nortel Analyst Day) but among the most significant: we’ve rebuilt the senior leadership team; we've transformed our business operations to drive a totally different economic equation (the result is our gross margin and operating margin have improved dramatically both in terms of trajectory and absolute values); we've refocused our R&D model to direct more investment to the future (we went from 55% legacy R&D to about 20% and shifted huge R&D spend to future technical areas and investments); we reorganized our global R&D footprint to give us a skills-based R&D model aligned for the future; we established partnerships with the leading IT companies in the world (Microsoft and IBM); and we've made countless other changes that are tactics aimed at making Nortel’s strategic vision real.

I wanted to focus this post on another form of tactics – small, targeted technology acquisitions. Over the past three weeks, we’ve announced three of them. When you have clarity of vision and commitment to a strategy - which Nortel does - tactical acquisitions can accelerate the execution. I want to take a few minutes to talk about our three recent acquisitions.

Novera Optics is a technology company we have been working with for a while that specializes in WDM-PON (wave division multiplexing passive optical networking). Many years ago, Nortel exited most carrier wireline access technology markets (DSL, for example) so we could focus on our core businesses but also because the cost of being in that business and being a profitable player at that time was questionable because of commoditization and too many divergent, short-term technologies.

Unfortunately, the reality of fiber access today has been primarily delivered via shared systems such as EPON, BPON and GPON. Additionally, each is slightly different and the fragmentation of these technologies makes for a very difficult market for those who participate in it because none of the technologies is fully complete nor do any of them achieve true critical mass economics.

At Nortel, given our huge understanding of optical systems in the core, it became clear that the ideal fiber access technology would be a simple WDM system that provided a “wavelength to the user”. Such a technology did not really exist a few years ago but over the past few years we have been working with companies like Novera (via our LG-Nortel JV) to demonstrate and even provide early deployments of WDM-PON technology.

Its advantages are clear. It is dedicated, not shared, capacity; it is far more passive than GPON, EPON or BPON; it scales better; and it has similar or better capital costs than the others with far less operating cost and complexity. After working with Novera to develop this technology and after proving it is in line with a new end state for fiber access, we made the decision that it would be to our competitive advantage to have LG-Nortel acquire the technology. Although WDM-PON is not yet fully mainstream, we have enough traction and interest to confirm that inevitably this technical approach is the long-term path for fiber access. It is also highly complementary to our optical business and, as such, makes sense for Nortel. It also gives us a technology that supports our focus on true broadband because it drives down the cost and complexity of access at an extraordinary rate and makes abundant, simple capacity available to users.

Pingtel's business was acquired by Nortel August 8. First, some disclosure. At one time I was on the advisory board of Pingtel but it’s been many, many years since I’ve been involved with the company. I was “reintroduced” to them when Nortel selected them as a technology provider for some of our small business IP based voice systems. (I excused myself from that decision to avoid perception of conflict of interest.)  

We originally engaged Pingtel to work with us to leverage the open source software base of its product to create a new class of small business voice system. We also worked closely with companies such as IBM and Dell to take advantage of world-class “off the shelf” hardware. This combination of the open source leverage of some of the software and the computer industry’s leverage of general-purpose hardware created a very different class of call server. That initial engagement in creating our Software Communications System 500 was new territory for Nortel but seemed to be in a space that inevitably the industry would need to operate in. After a year of real-world experience and actual delivery, it is now clear that this model does indeed meet a market need and gives us both a speed and cost advantage over our competitors in this segment.

As such, having proof that it works, we made the decision to acquire the expertise behind the technology so that we could accelerate our execution in this segment. With Pingtel’s technology and team, we have created increased scale and differentiation in a very significant emerging segment of call processing and real-time and unified communications delivery to the market. We have always said that the vision of unified communications and communication-enabled applications is not just for the large enterprise or corporate campus but should also be able to reach any enterprise, any individual and any organization. Expanding our capability in the smaller sized customer segment with novel systems like the SCS500 directly supports our strategy.

DiamondWare was acquired by Nortel today. This company is a leader (in my opinion, it is the  leader) in advanced spatial audio systems and associated technologies.

About a year ago we began (or restarted after a multiple-year hiatus) funding incubation programs in Nortel. These startups inside the company are focused on truly disruptive or innovative new areas of collaboration and communications technology. One of those areas, which I blogged about in March, uses mixed and virtual reality as an interface for communications and collaboration. One of the key technologies in that immersive experience is a rich audio capability that not only sounds clearer via wideband codecs but also has spatial reality, where virtual entities can interact based on proximity -  both visually and in the audio domain.

In the development of our systems in this space, we evaluated a number of approaches and ultimately found DiamondWare to have not only the most effective but also the most mature and scalable system, expertise and technology in this domain. We worked closely with them and demonstrated their technology as an element of our overall system. Based on exceptional feedback from early customers and great technical interaction, we concluded that an acquisition made sense to accelerate our move to these new immersive clients and environments for the new communications world. All of their technical expertise and capability – which goes beyond spatial audio – is in line with our vision and strategy of creating better, more realistic and more useful communications and collaborative experiences as communications and IT converge. Again, very consistent with the overall vision of the company.

You might be interested in the announcement we also made today about web.alive – the first application we’re developing that incorporates DiamondWare technology. This is the application behind the virtual employee session I blogged about in March. It is a virtual world software application that can facilitate internal collaboration as well as customer and partner interactions over the web. It leverages things like spatial, high-definitition audio, identity, and presence that is integrated with corporate systems and software to create a truly “real-life” experience in a virtual world. You can hear directly from the chief architect behind web.alive and see a video of the solution here.

In summary, you must use many tactics to execute on a strategic transformation. Some are financial and operating transformations. Some are people transformations and organizational renewal. And some are capturing relevant external technologies to secure and accelerate your ability to reach leadership ahead of your competitors.

Expect us to continue to use every tactic necessary to win and complete our transformation but recognize that everything we do is aligned to a clear vision of the future and the need to get there ahead of our competitors.

When I took on the role of CTO for Nortel two years ago, I moved to Ottawa, which is home to Nortel’s largest site and the heart of much of the company’s R&D efforts (4500 of our 30,000+ employees are located here, and most of them are in R&D). Ottawa is also the capital of Canada and the seat of the country’s political power. It didn’t take long for me to understand the important role that our Ottawa labs have played in developing the innovation that has made Nortel a global telecom player or to understand the historical leadership that Canada has had in telecommunications.

It also didn’t take long to understand (through conversations with other business leaders, customers, competitors, and government leaders), however, just how vulnerable this leadership – and industry – is, not only in Canada, but also in the United States and in Western Europe (Siemens’ recent exit from telecom is a good example), and of just how urgent it is that action be taken now to reverse a very disturbing trend that shows that the power base for leadership is shifting.

The single most significant reason why I believe this shift is occurring is because the governments in other countries – particularly those in Asia – have recognized that information and communications technology (ICT) will be the competitive tool for their future so they have made ICT a national priority. They have a clear understanding that the adoption of ICT correlates directly to a country's productivity, which in the simplest of terms will impact the very social and economic fabric of a nation and its standard of living. Increasing productivity in Western nations is particularly critical given current demographics and the aging and pending retirement of large numbers of our workforce.

ICT also represents a key source of innovation (read jobs and higher wages) for years to come, as we work to build out the next generation of communications.

Although Canada and other Western nations are making progress in updating their regulations and legislations, it is not happening fast enough to meet the changing competitive environment. In Canada, for example, the current Telecom Policy dates back fifteen years, to 1993, and in the US to the 1996 Telecom Reform Act.

Consider the environment back then. In 1993, networking was focused on voice; services were aligned to infrastructure ownership; bandwidth was scarce and therefore expensive; customer access to services could be controlled; networks were deployed to offer single applications; product life cycles were long, justifying substantial R&D investments; mobility was a niche market; copper was the primary form of access; telecom influence was primarily within national boundaries; and competition was limited and domestic.

Fast forward to 2008, and we live in a very different world. Also not foreseen in early to mid 90s was the penetration of broadband in such countries as South Korea, China, and Singapore, where telecom policy and regulation are today key planks in national programs of economic development.

At the invitation of the Globe and Mail, one of Canada’s premier national business publications, I put some of my thoughts on this topic into an op-ed piece that ran last week and which I’ve pasted below. This gives my view of the state of telecom in Canada but also of the opportunities in front of us if we act now. By proxy you can extrapolate this to the rest of NA and Western Europe.

The bottom line is that if we fail to recognize the value of our telecom industry and the role that it will play in our future prosperity and if we fail to nurture and cultivate it as a national priority, we risk giving up our historic leadership in this industry and we will lose our ability to control our communications future.

Of all the things in the industry that are challenging (the macro economic climate, the competitive landscape, the technical transformations I’ve talked about in past posts, etc.), I think this one is the most dire. An innovation-oriented industry cannot be taken for granted. It needs to be cultivated. It needs country support and government leadership, hand in hand with industry leadership.

I’d be interested in your thoughts on this topic …

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ICT industry needs help to regain edge
by John Roese

Globe and Mail, August 4, 2008

Not so many years ago, Canada was a global leader in communications, the envy of most of the world. Today, the view of Canada as a leading-edge creator and user of communications technology is gone.

Other countries around the globe – particularly in Europe and Asia – are outpacing Canada in both the creation and deployment of advanced information and communications technologies (ICT) and in offering their citizens the advanced productivity-enhancing applications and services that ICT makes possible.

A recent report from the United Nations' International Telecommunication Union, for example, ranks Canada 15th in broadband penetration. Only five years before, Canada ranked third, closely behind South Korea and Hong Kong. A growing number of other ICT-related indexes also suggest Canada is falling behind. According to the World Economic Forum's 2007 “network readiness index,” which measures the ability of a country to participate in and benefit from ICT developments, Canada ranked 13th, down two spots from the previous year.

All Canadians should be seriously concerned by this downward trend. Why? Because ICT is directly related to a country's productivity and competitiveness – and, hence, its wealth and prosperity. In fact, it is widely acknowledged today that ICT as an enabler of broad economic development has surpassed that of the value of the sector itself. ICT will be the competitive tool for a country's growth for the next several decades.

Does Canada have the capability to regain its historic leadership in communications? I believe so. Do we have the will? I hope so.

The opportunity
There are two reasons why I believe Canada can regain its leadership. One, we are on the threshold of a new era in communications (and new eras always create opportunities for those who move quickly to take advantage of them); and, two, all of the core competencies required to lead in the new era exist in Canada today.

First, the opportunity. We are moving from being a fully connected society to a “hyperconnected” one, where the number of network connections will soon far surpass the number of humans connected to the network. Every computing device and application that could benefit from being connected to the Internet will be connected – cars, home appliances, medical equipment, cameras, industrial machinery, entirely new classes of devices not even dreamed up yet, and even business processes and software applications, themselves.

This unprecedented connectivity is also helping bring together the historically separate worlds of telecom and IT – a convergence that is impacting everything from social behaviour, to business models, to technology investments, to price points and industry structures. By combining communications capabilities with IT applications (what I refer to as “communications-enabled applications”), we have the opportunity to create an almost infinite variety of new and revolutionary services and experiences that will significantly enrich the lives and productivity of individuals, governments, and business of all types and sizes. Think health care, the environment, security, and social services, to name a few.

The core competencies and capabilities required to lead the world in this next generation of communications exists in Canada today. We have world-leading optical, wireless infrastructure, voice and handset technologies; some of the world's best applications companies, operating companies, universities, and research institutions; and world-class talent.

The foundation is here. But success requires scale, agility and cost competitiveness to compete at home and abroad.

What we are lacking is a co-ordinated national strategy and focus to make ICT a priority.

Although many companies – including Nortel Networks Corp. – are making individual contributions and are collaborating with one another in specific areas, industry, alone, cannot tackle this challenge. To ensure success, our communications ecosystem must be made stronger by the participation of government at all levels.

How can governments help? In many ways. By making ICT a policy priority. By showcasing the abundant Canadian capabilities in next-generation technologies and applications through purchasing initiatives, especially when they are comparable in deployment and competitive in price. By moving faster to implement the next generation of wireless technologies and to make high-speed broadband connectivity available to all communities across the country. By ensuring a competitive tax environment for research and development, which will also help offset the reality that today Canada, with its strong dollar, is considered a “high-cost” place to do business. And, by getting very serious about promoting science and technology in grade schools and high schools to address the rapidly declining enrolment across the country in these disciplines at the same time that large parts of our aging work force are heading into retirement years.

As change accelerates across the converging telecom and IT landscape, I am optimistic and energized by the opportunity in front of us to help shape that future, to restore Canada's historic leadership in ICT and, ultimately, to bring significant benefits to all Canadians. But the time to act is now, before it really is too late.

John Roese is chief technology officer at Nortel Networks Corp.

It’s been a crazy, eventful month, with more and more activity both in the industry and inside Nortel. We continue to make huge progress in our multi-year transformation plan to recreate Nortel into what Mike Zafirovski describes as “a high-performance company that is consistently profitable and is known for its technology innovation, outstanding quality and operational excellence.” What’s also significant is that we continue to see the transformation of our industry occurring at a pace that is both exciting and challenging. The benefit to Nortel is that, as we recreate this great telecom icon, change is our friend. It opens up doors for consideration and disrupts incumbents in ways that are not usually seen when change is absent.

The real focus of this blog entry though is to highlight yet another example of the repositioning of Nortel and our increasing visibility in the industry as we execute on our strategy. Earlier today, the London Organising Committee of the Olympic Games and Paralympic Games (LOCOG) announced that it has selected Nortel as the  official network infrastructure provider for the London 2012 Games. (Click here to read the news release.)

As many of you know, Nortel was selected last year as the Official Converged Network Supplier for the Vancouver 2010 Games. Now with the selection of Nortel to deliver the robust and scalable network infrastructure required to stage London 2012, we are seeing a significant endorsement that Nortel can – and does – provide technology that is scalable, secure, reliable, and advanced enough to be a foundational element of some of the most visible events on the planet. I look at this as a ringing endorsement of our R&D capability and product excellence. That’s particularly true when you consider that support for the Games is equivalent to building from scratch the infrastructure necessary to underpin a Fortune 100 company, placing it at the center of the world’s attention for a month, and operating it flawlessly behind the scenes to stage truly momentous activity.

What is also interesting is that Vancouver 2010 will be the first all IP-based Games and now London 2012 will progress that further to be the “Games for the Connected World.” The Olympic movement understands that it is the focus of the world for a few weeks every two years, and it also recognizes that not all of the world’s population can attend the Games in person. So bringing the experience to the world places huge demands on the telecommunications infrastructure. At the same time, every year more people are added to the Internet and their experiences are increasingly more complex and demanding. It is easy to expect that the amount of video content created and delivered over the network that will support London 2012 will be greater than any Olympic Games staged before. It is also easy to anticipate that the sheer number of people watching and their desire to collaborate and interact will be greater than ever before. That is one of the fascinating parts of being involved in the Games – every time the event takes place, it reflects the growing demand and consumption of communications and the increasing sophistication of the collaboration technology that we in the industry deliver.

As I have blogged about before, Nortel’s view is that, in the hyperconnected world, two needs are present. First, we must continue to innovate and deliver true broadband experiences where the cost and complexity of transport are driven down while the capacity is scaled up significantly. In many ways, when we released our 40G/100G Adaptive Optical Engine, Nortel demonstrated this expertise by not just scaling the capacity 4X but also by doing so over the existing fiber optic infrastructure and topology. That unique advantage saved our customers huge capital and construction costs and, most importantly, allowed them to scale instantly.

Second, we recognize the responsibility to communications-enable the IT world. In support of this, yesterday Nortel fully released our Agile Communication Environment (ACE) which allows customers to present real-time communications services to their ENTIRE IT ecosystem of applications, even in heterogeneous environments. This capability suddenly allows for the unlocking of all of the rich telecom capability present in networks by the entire applications world of an enterprise. This technology will bring information and communications together in a simpler and more effective way than ever before. In terms of the Olympic and Paralympic Games, the need for true broadband and communications enablement of IT will be a critical aspect of the underlying communications infrastructure. As such, our selection as the network infrastructure provider to the London 2012 Games (like Vancouver 2010 before it) is both an endorsement and a validation of the criticality of Nortel’s technology and our industry leadership.

Our involvement will include transport and real-time infrastructure and the technologies that communications-enable the experience. Our expectations are that we will deliver carrier-grade, robust, and scalable systems that cannot fail. The benefit to Nortel will be that we will once again participate in a great and profound experience and, most importantly, will further validate that we can – and do – build the most advanced and trustworthy technology solutions in the communications world.

The entire Nortel family is tremendously proud and gratified to have been selected by LOCOG for London 2012 and is excited to again be a partner in what can be viewed as the most visible event on the planet.

Earlier this month, one of Nortel’s technology pioneers
was honored with Canada’s highest award - the Order of Canada – for his "pioneering contributions to the development of innovative technologies and for his sustained scientific leadership in Canada’s high-technology sector."

I’ve never met Dr. Rudolph Kriegler – he retired from Nortel in 1998 as a Fellow Emeritus, after a 32-year career with the company – but I’ve certainly heard a lot about him since I joined Nortel two years ago. Not only was he a brilliant scientist, but from what I understand quite a character (as brilliant scientists often are).

In this post, I wanted to take the opportunity to publicly congratulate Dr. Kriegler (who is known by colleagues simply as “Rudy”) on his much-deserved award and to recognize him for his contributions over the years – many of which are highlighted in the press release Nortel issued 10 years ago when he was named a Fellow Emeritus.

As the 1998 release says, "During his career with Nortel, Dr. Kriegler made invaluable contributions to Nortel's global success. He conceived and implemented the optoelectronic and high-speed electronic research programs at Nortel. The laser devices and integrated circuits that resulted - including high-power lasers for the OC-48 Transport Node (2.5 gigabit/second system) and a gallium arsenide chip set for the OC-192 Transport Node (10 gigabit/second system) - have become fundamental enablers of Nortel's high-speed optical communications products. Both the OC-48 and OC-192 systems hold commanding leads in their respective markets."

Without a doubt, Dr. Kriegler’s contributions helped lay a solid foundation for Nortel’s leadership in optical networking – a leadership that continues today because of ongoing investment and the efforts of today’s R&D teams. A great example of that leadership is our 40G/100G optical network solution. This technology platform can increase the capacity of existing in-the-ground fiber plant to 40 and 100 gigs, without the need to dig up the ground. This reduces the capital, cost and time of scaling the network. No other company in the world can do this. And we’re gaining significant customer traction, with 20 customer wins to date on a solution that has only been available since May 2008.

The recognition of Dr. Kriegler also signifies for me a sense of continuity within the company, linking our past achievements with our present leadership and even with our future aspirations. And that continuity comes through people.

As I’ve said many times, one of the main reasons I came to Nortel was because of the people – smart, innovative, and passionate, with a long history and a track record of developing products, systems, and solutions that have shaped the very nature of modern communications. That’s as true today as it was 10, 20, 30 years ago. The names may be different, but their impact is as significant.

Each of our Nortel Fellows, for example - Peter Ashwood-Smith, Nigel Bragg, Simon Brueckheimer, Alan Graves (just retired), Maurice O’Sullivan, Kim Roberts, John Sitch, Wen Tong, and Peiying Zhu - are at the forefront of their disciplines (in areas as diverse as wireless, optical, Carrier Ethernet, and healthcare) and each is playing a pioneering role in transforming the industry and Nortel. Many of these individuals have also been recognized with significant external awards, including Kim Roberts (our most prolific inventor in the optical field) who received the 2008 IEEE Canada Outstanding Engineering Award, and Simon Brueckheimer who received the prestigious U.K. Royal Academy of Engineering Silver Medal for foundational inventions that are at the heart of next-generation networks. These are just two example of many others that recognize outstanding contributions by extraordinary people.

Dr. Kriegler is one of those extraordinary people.  On behalf of all of us at Nortel, "Rudy," congratulations and thank you for the very significant role you played in establishing Nortel as an optical leader. I look forward to meeting you at some point in the not-too-distant future.

In this post, I wanted to share with you some of the discussions from our recent 2008 Nortel Technical Conference. This annual conference, which we launched last year, brings together 300 of Nortel’s top engineers and designers from across company. They come together for five days – this year in Orlando, Florida – to network, share innovations, discuss the future, and to focus on some of our greatest opportunities and challenges.

Last year, the focus of the conference was on the atom chart (which I’ve talked about in other posts) and making it real within Nortel. Today, by and large, the company is focused on creating value at the centre of the atom chart, where the six domains of interest (wireline and wireless, enterprise and carrier, and applications and infrastructure) intersect. The intersection point is where things like fixed mobile convergence, wireless backhaul, and telecom/IT convergence happen.

CEO Mike Zafirovski joined us for the Awards Ceremony, where we inducted 4 Nortel Fellows and 12 Distinguished Members of Technical Staff.

The theme of this year’s Conference was “Revolutionizing the End User Experience: How Hyperconnected People Will Live Work and Play.” All of the paper presentations, keynote addresses, poster sessions, panel discussions and workshops focused on some element of this theme. (Having the conference in Orlando was certainly an appropriate venue. It’s a city known for its entertainment and end user experiences, and is living proof (especially with the Kennedy Space Centre) of how technical creativity makes it possible to overcome challenges to achieve big dreams.)

In many ways, I view the Tech Conference as a moment in time where we put a stake in the ground and get the entire R&D community (12,000 strong at Nortel) focused on the bigger picture and the direction we’re heading.

Where we’re heading – and this was a message I think came across clearly at the recent Financial Analyst Conference– is that we are not just focused on the supply side (infrastructure) of Hyperconnectivity, which has been our traditional area of strength (in optical, wireless, Carrier Ethernet, etc.), but also on the demand side (i.e., applications), where we have a real opportunity to be a leader in the converged world of telecom and IT. Our biggest opportunity lies in the creation of new applications and the communications-enablement of existing IT applications. (The chart below shows our key areas of focus on both the supply and demand sides of Hyperconnectivity.)

We will of course continue to focus on the supply side (driving for high-capacity, low-latency, low-cost, abundant bandwidth) to ensure the infrastructure can support the growing number of applications that will ride over it. But an increasing portion of our R&D budget is being directed to the demand side, where we are combining the network capabilities and intelligence that exist in the telecom world (including real-time voice, instant messaging, video, and network capabilities like conferencing, location, presence, proximity, and identity), with the rich world of IT applications. 

Being successful on the demand side requires focus on three key areas, topics that shaped much of the conversations in Orlando: agility, network enablement, and user-centric thinking.

Agility
Although we have more to do, we are making progress by focusing on technology reuse, faster cycle times, and IT standards and tools (like CMMI, agile development, etc.) In terms of reuse, 12% of our designs today use technology that is also used in another Nortel product. That’s up from the low single digits just two years ago, and we have a target of 25%. This focus on reuse is not only lowering costs, but is also speeding our ability to get things out the door more quickly.

We’re also very much focused on reducing cycle times. Our Open Innovation Lab (a small group that’s part of our advanced technology efforts), for example, is exploring new technologies by building prototypes and proof-of-concept demonstrations targeted at revolutionary user experiences. What is most significant about these prototypes/demos, however, is not the actual service itself, but the fact that this building block approach is enabling a new operating model - small tiger teams working hand-in-hand with customers to create new communications-enabled services within weeks versus the months/years it would have taken in the past. This model is also opening up many customization opportunities for our Global Services team.

Network Enablement
The value we bring to the converged IT/Telecom market is world-leading telecom knowledge and understanding. We are experts in real-time communications, and know all about designing for scale, dependability, resiliency, reliability, quality, and availability – characteristics that have not been synonymous with the IT world. These are incredibly important attributes and of distinct value to the end user. My message to the design community during the Conference was that we cannot lose sight of that.

Our focus is on taking the communications functionality and capability that exists in the telecom world and marrying it with the IT world. I’ve talked about this in other posts.

User-Centric Thinking
In order to revolutionize the end-user experience – and to be successful on the demand side - it’s essential that we look at the experience from an end user’s perspective. It sounds obvious, but in a large technology company it’s not always a given, particularly when telecom equipment vendors have historically been two or three steps removed from the end-user.

That thinking is starting to change. A big part of the goal of the conference was to challenge the design community to put the end-user first. Identify the needs that are not being met. Ask the question “How can we make the human experience more productive, more effective, more enjoyable? What’s wrong with healthcare? How can we improve education? Wouldn’t it be great if we could (fill in the blank)… . And then, once the need is identified, work backwards from there.

Nortel used to have (before the telecom bubble burst) a world-leading end-user design capability, led by an internal group called Design Interpretive. Close to 100 individuals that ranged from industrial designers, to sociologists, to psychologists, to graphic designers were all focused on ensuring we were designing with the user of our products in mind, and also the customer’s end user. With the bubble burst, this capability went away, as it did in many other companies in our industry. We are slowly starting to rebuild that capability inside the company, and already are seeing very positive results.

Our challenge – and our goal – is to institutionalize that thinking across the company.

In all areas on the demand side, we’re making progress. We also have scores of examples of applications that are revolutionizing the end-user experience. Here are just a few that are gaining traction with customers:

• a “Rendezvous” service that enables you to plan an event with friends based on your location and their availability, hold a quick conference call that is automatically set up by the system (no one needs to dial in), and provide everyone with directions (which, again, is done automatically by the system);
• a “LiveContact” prototype that makes it possible for users to use their existing phones and any web browser to create an integrated experience with voice, video, IM, application sharing, co-browsing, etc.;
• a “LoneWorker” solution that helps keep social workers who go into potentially hostile environments in constant contact with their supervisors, increasing their safety and, if needed, the response time of emergency vehicles;
• a “Collaboration” solution that uses spatial audio to enable you, when you’re in a conference call, to track each individual’s audio stream, understand who is talking, and engage in sidebar conversations without anyone else on the call hearing;
• a “Delivery Alert” solution that enables you to specify when you would like to be notified (on the device of your choice) that a delivery or service truck is a certain distance from your house, eliminating the need for you to be waiting between today’s typical multi-hour window; and
• an “Emergency Response Solution” that with the click of a mouse brings together all of the technology and all of the people with the right skills who are the closest to the emergency situation, ultimately saving time and lives.

Last year’s Conference yielded tremendous benefits to the company. It got us focused on the atom chart, it resulted in a number of incubation projects, it improved collaboration, etc. Millions of dollars in quantifiable benefit.

I have equally high aspirations for this year. We left the Conference with a better understanding of some of the challenges and opportunities in front of us; tangible action plans from the workshops; new relationships and connections; and the collective will to drive culture change throughout Nortel by focusing our efforts on revolutionizing the end user experience.

In the last few weeks there has been a large volume of dialog around which technology should define the “core packet transport” of the Internet. Mostly that dialog has been focused on the ongoing debate between the MPLS technology camp and the Carrier Ethernet camp. If you are not familiar with this debate I have included (at the end of this post) some links from various trade and other web sites that show the level of passion and, in some cases, hostility in this dialog.  

The reason I point this out is that one easy way to determine the significance of a technical inflection is the level of defensiveness that emerges when a technology is challenged by a viable alternative. I remember when the Token ring camp (which I was involved in) determined that “this Ethernet thing” was not robust, predictable or mainstream enough to be relevant. I also remember when the Novell IPX and DECnet camps argued that Internet Protocol (TCP/IP) was also not sufficiently mature to be used in the corporate world. Obviously they were both wrong and the world moved forward. Today, most new IT people don’t even know what Token ring or IPX or DECnet are (not to mention APPN, LAT, Banyan Vines, AppleTalk, and others).  

What is clear is that the technology that ultimately won each debate and became the common model was the technology that offered the lowest cost, the simplest operating model and the greatest scalability and flexibility to move forward. The industry has always gravitated to technology with those benefits.   

Once again the industry is in this debate. We are debating if the future is about the multi-protocol label switching (MPLS) path or if it will ultimately evolve to a model that is Carrier Ethernet over a high-performance optical layer. At its very core the debate is around whether or not we should use Ethernet to transport Ethernet services or if Ethernet is best transported over another technology, such as IP/MPLS.

Today, the industry is split. There are clearly many MPLS carrier customers, but there is also a rapidly growing number of operators using Carrier Ethernet (more than 40 using Nortel’s gear alone). Additionally, there are millions of enterprise customers using Ethernet as their primary transport technology. The contentious point is that Ethernet as defined by IEEE 802.3 and 802.1 was not initially designed for carrier applications. Today, however, the IEEE 802.1ah (Provider Backbone Bridging), 802.1Qay (Provider Backbone Transport) and 802.1ag (connectivity and fault management) amendments in the standards track are emerging to add the needed carrier services to an Ethernet switched network. With these technologies it is very easy to provide most Ethernet VPN services over large-scale carrier infrastructure at much lower capital cost and a simplified operating model.  

When we look at the MPLS side we see that there is significant active work and a host of draft documents and requests for comments (RFCs), which are the IETF code for a defined and generally accepted specification or document (note that I am simplifying dramatically the IETF standards process, as defined by RFC 2026, as it is easily one of the most rigorous and complex in the industry and, as such, results in very few fully standardized technologies). Even though MPLS has been in existence in some flavor since roughly 1996 (I was at many of the first meetings back before MPLS as a term existed), it is not fully standardized in all dimensions because of both the complexity and the process to solidify its real objectives.  

Additionally, the MPLS model has evolved in terms of what it was originally trying to do. Initially it was designed to accelerate the forwarding of software-based routers. That became somewhat irrelevant as hardware-based routing emerged. The technology then became a mechanism to provide QoS using complex signaling and label stacking. That was of use but largely not used because the industry simply created more capacity and was comfortable with CoS. It then became a technology focused on providing virtualization of subscribers. This is of use but not unique to MPLS; many VPN solutions exist that can do the same thing.

What makes MPLS interesting is that it has a broad set of optional capabilities because it is a conglomeration of many iterative technology streams applied to recreate the TDM carrier network over a packet switched network. It gets even more complex when you look at the actual core of MPLS and realize that there are actually many different approaches under this umbrella, including VPLS, T-MPLS, and a host of other vendor-specific approaches. 

The bottom line is that the MPLS world is a complex space. The MPLS working group (to quote the group’s charter) is “responsible for standardizing a base technology for using label switching and for the implementation of label-switched paths over various packet based link-level technologies, such as Packet-over-Sonet, Frame Relay, ATM, and LAN technologies (e.g. all forms of Ethernet, Token Ring, etc.). This includes procedures and protocols for the distribution of labels between routers and encapsulation.” 

So, why would there be a huge debate over Carrier Ethernet versus MPLS? Three reasons. One, is that the telecom core is still in an evolutionary phase where there has been broad adoption of the various MPLS technologies. Two, most MPLS networks work reasonably well at providing the services they were chosen for over the past decade. And, three, the carrier landscape is usually fairly slow to adopt new technologies because the capital and operating costs of change are nothing to trivialize when one considers the scale of a national or international carrier’s network. Compounding this is the fact that many equipment vendors have made significant investment in both time and dollars to build up MPLS product lines and the idea that this technology investment may not be suitable for one of the most rapidly growing elements of the equipment market (metro networking) is unimaginable.

The bottom line is that there are as many near-term reasons to defend the status quo as there are longer-term reasons to move to an Ethernet over Ethernet technology, such as Carrier Ethernet.

The purpose of this post is not to educate you on MPLS or Carrier Ethernet, but rather to put into context the dialog, which is now front page news every time a customer makes a decision about one of them and every time a product or standard is launched.

Over the next few months, I will try to update the story as it unfolds and add additional context, but for now I ask you to keep in mind that this debate is really no different than many technology inflections of the past. This, too, will unfold with much debate and passion and, like every technology evolution before, we will see a continued movement to simpler, more effective transport and IT systems. The challenge will be in managing the transition and evolution to what is the inevitable. 

References:
IETF MPLS Working Group Link 
IETF Standards Process: 
IEEE 802.1 Web Site 
Face Off: MPLS vs. Carrier Ethernet 
Ethernet Goes Carrier ClassWhat’s
Next for PBT-less BT? 
Analyst: PBT is Not Dead Yet 
Nortel Wins PBB Deal with Verizon

Just a very quick post today, as I sit in the Toronto airport on the way to Washington. I do hope to use the flying time to finish a couple of blog entries I’ve started but haven’t had the time to finish.

In the meantime, I thought you might be interested in a blog entry that Andrew Willis of the Globe and Mail posted today, which you can find here. He offers his thoughts following a meeting that Mike Z, George Riedel, and I had with the Globe and Mail Editorial Board this morning.

You’ve heard me talk in previous posts about the value of the network shifting - becoming less about the ability to move bits and more about the ability to create a truly personalized, immersive communications experience. In this respect, “context” and “identity” are key areas of opportunity for innovation in the infrastructure space.

I’m pleased to share with you another guest blog from Nortel’s Visiting Fellow, Dr. Andrew Lippman, who offers his perspective on this topic. (Andy is one of the founding directors of the MIT Media Lab and is currently with Nortel as part of a year-long sabbatical.) 

Andy Lippman

In the end, there are only two things that are critical in communications: identity and context. Both are complex, and neither is completely understood or well used. But they are the opportunities of the future.

Identity means who you are. While in reality there is only one of each of us, in practice we all present many different faces to the world. In some cases, this is a matter of persona - we act one way at the office and another way at the family barbeque, yet we remain the same person. Conversely, we maintain multiple identities as a means to, for example, insulate ourselves from different experiences on the Internet. John Yoakum, at Nortel, has given this a lot of thought and has insights into how one exposes, protects and manages these distinctions. He notes that identity is something you own and you assert to gain trust and foster interaction, and not something to be managed for you by others. The level of trust necessary for each situation varies significantly. The overriding objective is to establish just the right level of trust while preserving privacy and avoiding identity theft exposure.

Context is likewise a small word that covers a lot of territory. Some of it is based on pure fact - geographical coordinates are just numbers but where you are is a construct predicated on inference, assumptions and the intersection of more than one database. A particular latitude, longitude and altitude co-ordinate doesn’t reveal whether you are indoors or at the movies. Hal Abelson just ran a class at MIT on programming open phones that sparkled with the exuberance of youth. One student made his phone vibrate in the theater and ring loudly elsewhere (i.e., the phone changed the volume because it was aware of its location). Another student buzzed a reminder to get milk as he passed a food store.

Ultimately, we will make real-world mashups that tell you when to head for a market checkout line so you can catch the bus that is now three blocks away and will get you to the train station on time (something I talked about in my last guest entry). 

But wait, there's more. Suppose we assume that even identity is a mashup, something that is computed on the fly as the product of a negotiation. Why flood the world with "dumb keys" and "smart locks?"  What happens when they become equals?  Here's a couple of examples …

Last year, I took my daughter out to dinner and we got "carded" while ordering wine. This may be a distinctly American problem, since we worry so much about alcohol, yet it makes no sense. "Carding" means asking for ID to prove you are of legal drinking age (i.e., 21).  Fifty years ago, age was just about the only thing that was known about you, and it was reliably printed on your driver's license. We used it as a proxy for being responsible enough to drink, or to vote, or to see an adult movie. We can do better now. For voting, there are already communities that use a different age for local elections than they do for national ones. Clearly there is a difference between having wine in town with the family and rolling out of a jeep with six drunken friends after a college football game. In fact, perhaps my daughter's rights could be authorized by me, even though I might be 600 miles away. Distance is no longer a problem; if we can validate a toll pass at 30 kilometers per hour, I could certainly grant her real-time permissions as needed.

At the MIT Media Lab, we built a prototype ID that negotiated with a door to decide whether you should be allowed in - a smarter key. When you approached the door, it asked you via your cell phone who you were, and you could respond with either a name or a reason. You might be a student, or you might have a temporary authorization to enter as a surrogate for me, or your validation could be that you are attending a meeting, in which case, the door could tell you where the conference room is. The point is that we replaced a unitary response with a negotiation. Instead of telling everything to every door that asks, your phone asked the door what it really needed to know.

Where does it go from here, and how do we get there? 

My guess is that we need to think "horizontally" and build open protocols versus continuing to think in vertical silos that are each a fully packaged application. This trend is well under way but it might benefit from a little formalization. Think of it as a general parts catalogue for the creation of services and negotiations. There are inroads being made in web mashups, social networks, and in sensing both the environment and the activities of people within it. These are a good start but are largely ad hoc.

A second trend is that the network to which we connect is opening up more and becoming less the focus of a service. As Chris Hobbs, of Nortel, has noted, increasingly we will subscribe to services directly rather than the network that delivers them. The Amazon Kindle and the SPOT emergency locator are the poster children for this enlightened view.

This is Hyperconnectivity in action - it heralds an era where we move past products and into architectures. Instead of customers, we will have partners who design the products with us and with our tools. To get there, we need research, reliability, and ways to scale on demand.  This is as true for an insurance company as it is for a communications enabler, and Nortel recognizes that, both in the ways that it deals with its partners and customers, and in the structure of the company itself.  That's what makes for innovation.

In the past several months, I have been involved in a number of discussions around the world, where governments are trying to push for “next-generation” broadband as a government-sponsored initiative. The reason for this is that in the last decade many countries have used broadband roll-out as a way to stimulate economic development and GDP growth. In fact, many studies and reports (including the data in the graphs below) show clearly that where Internet and data services have been deployed, the GDP has expanded at a significant rate.

Source: Michael Minges, TMG Telecom, and ITU World Telecommunications Database Statistics, 2003.

It is also clear that many countries have claimed bragging rights on broadband penetration and adoption. Northern Ireland, for example, talks often about its target of becoming one of the first countries to have 100% broadband access penetration with ½ a megabit of capacity per user. Korea and many of the Nordic countries also talk about significant milestones in broadband penetration and capacity. And Singapore speaks of its fiber deployments and broadband penetration as a competitive advantage. The list goes on.

The question now is: “Given that there is significant broadband penetration, what is the next step to further capitalize on technology for GDP growth, attracting business and differentiating one country or region from the others? In other words, “What is the definition of “Next-Generation Broadband”?

First, I will tell you what – in my opinion – it is not. It is not simply about scaling up the capacity of existing systems purely from a bandwidth-per-user level. The reason I do not view this as true next generation is that if we look at any broadband system, inevitably we have seen incremental technology improvements that boost the speeds in the technology. DSL, for example, started at a few hundred kilobits per second and then evolved to the point where today we can deliver megabits or even tens of megabits of capacity per copper line. I doubt anyone would consider the DSL evolution as a true next generation of broadband; it is simple an improved model of the current broadband paradigm. Similarly, DOCSIS 3.0 by itself is not next-generation broadband; it is simply the same paradigm at a higher capacity. My intent is certainly not to belittle these advances – without a doubt they are significant in terms of both technical merit and customer impact – but when a country states that it is going to launch a “next-generation broadband effort” in my view it has be transformational not simply incremental.

So, how should “next-generation broadband” be defined? I am sure there are many transformational aspects of broadband and that a uniform view of “next generation” is probably not easy or even possible to agree upon. For the purposes of starting a dialog, though, let me throw out two significant changes that if applied to broadband systems and services might meet this threshold. 

1. A wavelength to every person or business. In this paradigm shift, the value of the optical network is applied to access. In such a service, rather than users sharing a packet network for broadband access, the principles of wavelength division multiplexing (WDM) could be applied to access, and each user or business would be given a wavelength (or lambda). Because dense WDM (DWDM) systems can scale to huge capacities (up to 40 or 100 gigabits per second per lambda in core systems), the result would be a revolutionary change in capacity. Additionally, because optical is a physical layer network, the types of traffic over the system could be extremely flexible. It could be IP- or Ethernet-based but it could also evolve to include any communications technology that can run over optical networks. Additionally, the characteristics of optical networks are such that symmetrical capacity can be delivered. Today, most broadband is asymmetrical, in that downstream capacity is usually far greater than upstream capacity. That works fine in older Internet models, where consumers predominantly consume content, but in Web 2.0 and 3.0 we will see far more user-created content being sent into the network and that will require symmetrical bandwidth systems. Today, there are some early technologies being tested and deployed that provide this type of broadband experience. The most prominent is WDM-PON (Wavelength Division Multiplexing - Passive Optical Networking) but other models may be possible assuming they deliver flexible, ultra-high capacity, symmetric broadband services.
2. Multi-network mobile broadband. Today, there are many broadband offerings to the populations of countries but most of them are focused on delivering a single network to homes and businesses. These are usually known as “fixed broadband” systems, such as cable and DSL. Additionally, there are some emerging wireless broadband systems, such as WiMAX and eventually LTE. These wireless systems provide broadband over the air. Sometimes it is to a home, much like fixed broadband, but in some cases it is to a mobile device such as a phone. One could certainly consider mobile broadband as “next generation” and I would be inclined to agree, but the real revolution will occur when we recognize that the future is not about a single network providing all Internet services but rather about a set of networks working together to deliver a complete communications experience.That’s why I believe that the other true “next generation” broadband system will be one where fixed and mobile networks begin to act in concert to create a seamless user experience. Some early models of this are known as Fixed Mobile Convergence (FMC). These technologies make possible things like the handoff of phone calls between an enterprise PBX and a mobile device, but they could be expanded to include making a single identity and subscriber set transferable across any network access. Imagine if you could interact with a network that understood who you are, where you are located and within what environmental context (e.g., in close proximity to something or someone; available or not available to accept calls, etc.), and then used one of many possible network connections to deliver communications to you. Take that forward and imagine that you could use your mobile phone to control your television or a video conference without forcing the devices to exist on the same type of network. This model recognizes that a plurality of networks will operate in a coordinated fashion to deliver complex and immersive – yet transparent – communications, entertainment and business functions. As we consider “next-generation broadband” maybe it is less about a single physical network and more about a multi-network experience. If that is the case, then governments must consider that their role may be to facilitate interaction rather than to partition the industry into segments based on connection type. In this model, broadband suddenly becomes bigger than transport, and policy related to it must now include a much broader set of industries.

There are undoubtedly other definitions of next-generation broadband, but for the purposes of starting a dialog I put forward the two options above. The only aspect of this dialog that is critical in my mind, though, is that if we are to really call something “next generation” it seems that we should have greater aspirations of change than simply increasing the capacity of an existing system.  

I welcome your thoughts on this

Location: Toronto

After a crazy few weeks of travel, including attending a trade conference in Northern Ireland, meeting UK Prime Minister Gordon Brown, Northern Ireland First Minister Ian Paisley, and Deputy First Minister of Northern Ireland Martin McGuinness – and a host of other activities – I am finally back in Canada for a few days.

Today Nortel held a media event in Toronto to discuss a project we initiated a few months ago with industry analyst firm IDC. In essence, we asked IDC to validate our thinking around if and how the hyperconnected world is emerging. The key take-away is that we were in fact correct in asserting that not only are people becoming more connected, but that a new identity of information and communications user has emerged that far exceeds the usage level and complexity of prior generations. That new user is more connected than ever before, and expectations are clearly shifting from “anywhere, anytime” to “everywhere, all the time” communications. Some key conclusions from the study:

• 16 percent of business users are already hyperconnected: The hyperconnected have a much higher adoption of communication devices and applications than those in other clusters. They are reasonably happy with their work/life balance, even though they use almost all devices and applications for both, and they are willing to communicate with work on vacation, in restaurants, from bed, and even in their place of worship.
• Asia Pacific is leading the way in Hyperconnectivity: The largest percentage of “hyperconnected” are in Asia Pacific. And, while hyperconnected business users can be found in all countries, they are higher than average in the U.S. and China, and lowest in Canada and the United Arab Emirates.
• 40 percent of business users will be hyperconnected within a few years: With an aging workforce retiring, younger employees entering the workforce, and a current majority of increasingly connected users, 40 percent of business users may be hyperconnected within a few years.
• Enterprises will compete for talent: As baby boomers retire, corporations will find themselves increasingly competing for talent. Hyperconnected individuals expect to work in a rich communications environment and consider the newer communications solutions a condition of their employment. They don’t want just anywhere, anytime communications – they demand it “everywhere, all the time.”
• Latin America has largest percentage of hyperconnected/increasingly connected users: 64 percent of business users in Latin America rank as hyperconnected/increasingly connected, compared to 59 percent in Asia Pacific, 50 percent in Europe, and 44 percent in North America.
• Phones are more important than wallets and keys: When asked which item people would take if they had to leave the house for 24 hours – and if they could only take one thing with them – more than 38 percent of global respondents chose their mobile phone over their wallet, keys, laptop, and MP3 player. Less than 30 percent chose their wallet first. In Latin America, more than 50 percent chose their mobile phone over any other item. The hyperconnected preferred taking their laptops.
• Social network adoption is growing in the Enterprise: More than one in three business users use social networks and online communities such as blogs, wikis, and online forums for business communication – with workers in the Caribbean and Latin America leading the world. Personal postings to social networks and online communities are nearly three times as common as business postings.
• Enterprises are struggling with disparate communications: Nearly one in five respondents found it hard to manage multiple disparate sources of communication. Users in the finance and high-tech segments are the most dissatisfied with the way their companies manage multiple communications sources. More than 25 percent said their corporate communications systems are slow and unreliable.
• Different industries, different stories: Hyperconnectivity varies by industry, from 9 percent of respondents in health care ranking as hyperconnected compared to 25 percent in high tech and 21 percent in finance industries.
• Multiple devices are the global norm: 70 percent of respondents connect to the Internet at home with more than one device. In Asia Pacific, that number jumps to 80 percent. Nearly 80 percent of 18 to 34 year olds connect to the Internet at home using more than one device.

What all of this means for our customers and Nortel is that the importance of a Unified Communications strategy and technology will only increase. If the vanguard of users in the hyperconnected world represents 16% of the existing population (and a full 40% are not far behind) then it is critical that CIOs begin to develop core strategies to embrace this connectedness. The means and modes of communications will increase exponentially over the next decade, and that explosion will put huge stress on the networks in place. Inside the enterprise, the challenge will be less about capacity issues and more about a diverse set of communications interfaces and experiences – and the growing expectation of users that all will be coordinated. It will not be acceptable to have diverse address books, presence information, or even identity. It will also be critical that a wide range of collaboration experiences be available broadly, from video to voice to IM to immersive environments. Additionally, the CIO will be unable to tightly link these attributes to a set of well-defined applications but must think about embedding a set of communications functions into whatever application the business user or customer needs to use.

The strategy at Nortel has been to enable that communications integration in a way that the entire applications ecosystem can be empowered with embedded communications services. Imagine that any application that stores information or creates it can seamlessly interact with collaboration and communications tools and services and can do so in a unified way. While we have espoused this belief for some time, the just released study from IDC (http://www.nortel.com/idcstudy) – entitled “The Hyperconnected: Here They Come!” – has validated that a growing and significant portion of the end user base (on a global level) has exactly that same expectation.

It is good to see statistical data that shows we are heading toward the market demand we have anticipated and, as many of you know, the last year has seen double-digit gains of market share from Nortel in the Enterprise market primarily linked to our leadership in Unified Communications. Since the transformed enterprise is a key element of our company strategy, this study and the trends it captures are a good indication that we placed a wise bet on this evolution of the voice market and stand to have both access and opportunity in the market. Take a few minutes to review the study and ask yourself if you see the hyperconnected emerging around you (or even, if you are one of them) and more importantly ask yourself if the majority of the population becomes like those profiled, what will that do to our thinking on how people use communications and networking technology going forward?

I’d be interested in hearing what you have to say, both related to this blog entry and the study itself.