IDC gives its view on Alcatel-Lucent's Enterprise strategy following the Alcatel's recent Analyst Conference in Chicago.

1. E V E N T F L AS H
Alca te l-Lucent Bu ilds on Its En ter pr ise
Momentum
Rich Costello Rohit Mehra
Ksenia Efimova Evelyn Pineda
IN THIS EVENT FLASH
At its annual Alcatel-Lucent Enterprise Analyst Conference in Chicago from June 26- 28, Alcatel-Lucent
Enterprise brought together worldwide analysts covering both the Enterprise Communications and Enterprise
Networks Business Units. The presentation topics ranged from an overall Alcatel-Lucent Enterprise vision and
strategy discussion with president Michel Emelianoff, including an update on the Genesys carve-out, to more
focused breakout sessions on Alcatel-Lucent OpenTouch Suite, cloud-based collaborative conversations,
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visual communications, Alcatel-Lucent’s AFN (Application Fluent Network) vision, and Alcatel-Lucent
strategies to drive networking revenue growth. There were also Alcatel-Lucent North America enterprise
business and Alcatel-Lucent Enterprise partner ecosystem updates.
SITUATION OVERVIEW
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As expected, one of the initial topics for Alcatel-Lucent Enterprise President Michel Emelianoff in his state of
the business discussion was the progress made so far in the carve-out of the Genesys contact center
business, which Alcatel-Lucent Enterprise sold to venture capitalist Permira in late 2011 for US$1.5 billion.
Commenting on the technology agreement execution between Alcatel-Lucent Enterprise and Genesys that
was put into place under the terms of the sale, Emelianoff indicated that key steps such as the transfer of
source code and tools between the two entities were successfully completed; and important validation and
acceptance measures were also done. The ramp-up of Alcatel-Lucent Enterprise resources in support of the
Genesys technology agreement continues, but has reached a satisfactory level to date, according to
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Emelianoff. With the sale of Genesys, Alcatel-Lucent widely acknowledged that it has lost a significant amount
of marketing muscle and resources that were attached to the Genesys brand. However, it was encouraging to
hear that a smaller and perhaps more nimble Alcatel-Lucent - post-Genesys - will be more focused than
before, which still remains to be been seen for sure.
In the Unified Communications segment, Alcatel-Lucent indicated a strategic focus on developing UC and
collaborative applications, and driving the IP/SIP transformation, for its existing customers. The company also
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indicated that it is targeting new customer growth at the mid-market business level (100+ to 1,000 end-user
companies), and it will help enable the BYOD (bring your own device) trend via its "Change the Conversation"
initiative for enterprises - specifically around collaboration, mobility, video and cloud deployments. Alcatel-
Lucent has typically enjoyed success at the small business and large enterprise levels in telephony, so
successfully targeting the mid-market and its specific UC requirements will present more of a challenge for
Alcatel-Lucent, and its channel partners, beyond just offering a cut-down version of its enterprise offering, or
an enhanced version of an SMB offering, for the mid-market, which Alcatel-Lucent tended to do in the past
with limited success.
Alcatel-Lucent talked about a shift from the "PC era" to the "personal cloud era" and how it intends to help
customers shift their communications and collaborations to this personal model. It announced several new
products and applications for visual communications, including the cloud-based OpenTouch Video Store for
enterprise-class video sharing services with record and store capability. The OpenTouch Video Store was
described as sort of a "YouTube for enterprises" with a lot more of the security and control features required
for business customers. Businesses can access a dedicated portal for viewing and uploading videos that are
accessible to people who share the same e-mail domain. The content is fully under the control of the business
and remains its property. The portal, and the content that gets uploaded, are hosted on a secure server
managed by Alcatel-Lucent’s smart cloud management system.
Another key take-away from the session for IDC was the highlighting of its pending OpenTouch UCaasS (UC
as a service) offerings and how they would be positioned to support new customers and legacy Alcatel-Lucent
telephony users based on size (SOHO, SMB, midsize, large and very large customers) and existing telephony
environments. The company indicated that Alcatel-Lucent OpenTouch cloud-based offerings could begin to hit
the market in 4Q 2012 in geographic areas such as EMEA and APAC, and possibly by 1Q or 2Q 2013 in
areas such as North America, as the ramp-up continues for the partners who will be providing these Alcatel-
Lucent UCaaS offerings.
In Enterprise Networks, Alcatel-Lucent’s enterprise data portfolio continues to make progress building on its
innovation and measured tactical successes over the last couple of years, all under the umbrella of the
Application Fluent Network (AFN). New capabilities and functionality continue to be added to further augment
the three key pillars of AFN:
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Filing Information: July 2012, IDC #undefined, Volume: 1, Tab: Vendors
Enterprise Communications Infrastructure: Event Flash

2.  Architecture- Building resiliency
 Control- Driving automation around policy
 Operations- Streamlining provisioning, monitoring and management
Having put its architectural building blocks in place during 2011 - mainly around its OmniSwitch 10k and
OmniSwitch 6900 platforms - Alcatel-Lucent has now launched its 40GbE- Mesh solution with wire-rate
capabilities. Highlights of this solution include support for Shortest Path Bridging (SPB) to support cloud
rollouts, virtual-chassis support, Lossless-Ethernet, and Virtual Edge Port Aggregation (VEPA) and vNP for
improved QoS and security functions. In addition, having added Citrix to its eco-system partner program,
Alcatel-Lucent now claims to be “Citrix-ready”, meaning its AFN components can now be integrated with Citrix
for delivering the full L2-7 stack for server virtualization, WAN optimization, and for an improved virtualized
desktop experience.
2011 was a very challenging year for Alcatel-Lucent in the EMEA market. Instead of expected double-digit
growth in networking (which in Alcatel-Lucent's case consists mostly of Ethernet switching and WLAN, with a
very small security component), the company could achieve only single-digit growth results. Alcatel-Lucent
experienced a revenue decline during 2011 in the markets in which it is traditionally strong (Italy, Portugal and
Spain). The tough economic situations in those countries, and constant pressure from competitors, were the
main catalysts for the results. In IDC’s opinion, Alcatel-Lucent’s problem in these areas are temporary and
renewed collaboration with several SPs, along with new market initiatives in those areas, will help to stabilize
the situation. Regions such as MEA, CEE and CIS showed pretty good growth. Alcatel-Lucent sees great
opportunities in those markets and continues to invest in their development. According to IDC, competitive
data solutions, strong relations with SPs and technological partners, as well as vertical orientation, were
among factors that led to stable growth in those regions.
The company plans to strengthen its presence in Asia and Latin America, especially Brazil and Mexico. The
importance of Latin America for Alcatel-Lucent is relevant. With a workforce of 5,000 employees now reduced
to 3,000, large numbers of those employees have been transferred to Latin America (as well as Asia) in an
effort to leverage already trained personnel and develop major projects in the region.
FUTURE OUTLOOK
Alcatel-Lucent Enterprise has always provided a strong telephony and UC portfolio of products for large,
global customers. Some of its challenges have been around marketing, channels and brand awareness,
especially in the North American market. Therefore, it was very good to hear at the analyst conference that a
new marketing approach for Alcatel-Lucent UC products and solutions was a part of the Alcatel-Lucent
Enterprise strategic picture going forward. Alcatel-Lucent indicated plans to more proactively leverage things
like social media, webinars, virtual events, and marketing automation tools to help drive this strategy globally.
In addition, new resources such as an Alcatel-Lucent customer reference store, an SMB site, and a My
Marketing Agency application for Alcatel-Lucent channel partners should be well received.
The company indicated that there is particularly strong demand for its UC products in vertical market
segments, such as healthcare and education, and that it has also been making good progress in the
hospitality market lately. It also sees growing interest in its product portfolio in areas such as financial services,
state/local governments, and utilities in particular going forward.
IDC thinks that Alcatel-Lucent is going in the right direction in EMEA region, especially in regards to re-
targeting its efforts in mid-market and SMB segments, while large and extra large enterprises experience
tightening of IT budgets and postponing of modernization of network infrastructure. In IDCs opinion Alcatel-
Lucent’s orientation on strategic partnering with local companies including local channels and local
technological partners will pay off in offering better customized deals for local customers and open doors to
verticals that were difficult to reach before.
The success Alcatel-Lucent has had in Latin America has led it to recruit a significant number of new
channels, offering customers alternative carrier-class equipment. According to IDC, Alcatel-Lucent could
achieve better results in Latin America through a major marketing campaign that reinforces the Enterprise
segment, its positioning, and experience in delivering solutions. Proper channel strategy should help
contribute significantly to improved results for Alcatel-Lucent in the region.
Having showcased several new enterprise and datacenter customers over the last few months, Alcatel-Lucent
can certainly claim improved market presence in North America, a question that is asked by many who are
aware of ALCATEL-LUCENT’s global presence and reach across other key regions and markets.
From a portfolio perspective, Alcatel-Lucent has made positive strides over the last couple of years in
developing a solid foundation in its networking solutions for the enterprise and for cloud rollouts. Starting with
good raw performance capabilities, an attractive price point for its scalable 10Gbe and 40GbE platforms, and
an eco-system that can leverage internal (Alcatel-Lucent routers, optical) and external (e.g Citrix, VMWare)
solutions, Alcatel-Lucent is likely to make gains in its worldwide positioning and visibility, that could lead to
improved market share in the next short to medium term.