Alcatel-Lucent: New CEO, Same Three Problems
Alcatel-Lucent is bringing in a new CEO, but The VAR Guy remains highly skeptical of the networking giant for three key reasons.
First, the executive changes: Ben Verwaayen, former CEO of BT Group, will replace Alcatel-Lucent CEO Patricia Russo; and former EADS co-CEO Philippe Camus will replace Chairman Serge Tchuruk. The Wall Street Journal broke portions of the story, then GigaOm offered some follow-up.
Now, the problems.
1. Mergers of Equals Don’t Work: When two super-large companies get together, there’s no clear leadership. Instead of blending, corporate cultures clash with one another. Alas, you need a big buyer (example: Cisco Systems) and a small seller (example: Hundreds of small networking companies acquired by Cisco) in order for there to be a strong corporate culture that moves forward quickly.
2. Distance Hurts: Sorry, but long distance relationships don’t work. Sure, companies can leverage telepresence and video conferencing to improve long-distance communications. But merging two struggling companies — one based in the US, one based in Europe — only creates bigger problems.
3. Competition Moves Forward: While Alcatel-Lucent was busy getting hitched, big rivals (i.e., Cisco Systems) and nible startups (Digium comes to mind) continued to race forward at record speed.
Can Verwaayen and Camus energize Alcatel-Lucent? Perhaps. It’s certainly possible. And it’s always good to have one clear leader — Verwaayen — rather than two executives from opposite sides of the globe trying to glue together vastly different businesses.
But when they were separate, Alcatel and Lucent each were struggling. Putting them together doesn’t necessarily make for a stronger whole.
Ben Verwaayen is a great choice for them, but he has a monster task ahead. Many of their product lines are dead or dying. The traditional PBX, fixed line broadband will fade away. Their low-end networking business will be taken by the Chinese. And in the cutting-edge areas where Cisco is pushing forward, like telepresence, A-L is a laggard.
In the UC space, innovation is moving to software like Unison unified communications or Microsoft or Lotus, which will commoditize the hardware offerings of the likes of A-L. Even for VARs selling hardware, customers will demand an appliance, so it all comes back to the software anyway…
Rurik Bradbury
Unison Technologies
@Rurik: Let’s face it … Alcatel-Lucent has a big but aging brand among big telecom companies, no clear brand in unified communications, and major headaches in the forms of internal culture clashes and external rivals (CSCO, open source, unified communications, VoIP, and the list goes on).
The Alcatel-Lucent board was foolish to think two struggling companies could quickly come together to form one strong company. Busted brands can be restored (example: IBM in the early 1990s), but this one’s going to take serious time and some serious thought leadership from Verwaayen.
Agreed — in tech, 2 busted brands = twice the trouble, not 0.5 times. Unless Verwaayen really shifts direction radically, the business may die.
But the question is: can any of these big traditional PBX/networking vendors escape the low end of commoditized hardware and move upstream into value-adding software? The answer may well be ‘no’: software is not in their DNA.
The only exception seems to be Cisco, which has already made some moves in the right direction with Webex and PostPath. But compared to MS and Lotus, Cisco still looks like a long shot, because it has little foothold on the desktop. (That’s actually one reason why we created Unison Desktop — so Unison can control its destiny.)