Are these the real reasons for the fall of Nortel?
By Brad Reese on Thu, 01/29/09 - 4:53pm.
I am personally fascinated by the following comments that were made to a previous blog story of mine. The authors appear to be former Nortel and Bay Networks employees (keep in mind that none have been verified) offering comments as to the real reasons for the fall of Nortel. According to the comments listed below, the seeds that would lead to Nortel's future fall from grace were actually planted when Nortel was enjoying its greatest success (before the dotcom bubble burst). I encourage readers to add their own comments too, but please keep the focus on when and how the seeds for Nortel's fall were planted. My objective is to offer a "centralized repository" to read the real reasons that led to the fall of Nortel.
By ex-Nortel acct mgr (not verified)
"I started at Nortel in the 80's and was layed off in 2006. I can tell you that the problems began with the Bay Networks merger. Bay was checkmated by Cisco, and for some strange and sad reason Nortel decided to follow Bay's losing managers and strategy, turning a once strong and proud company into an also-ran in the enterprise market. They destroyed a vibrant reseller marketing strategy and replaced it with a non-functional direct touch plan that did nothing but compromise decades long reseller relationships and allow valueless ex-Bay reps. to receive compensation for work they didnt do (i.e.- Hey Mr. Reseller what business are you about to close? I need to know so that I can get comp'ed on it)."
By Ken (not verified)
"The comments in the aforementioned blog about Nortel and their demise is right on point. I provided 22 years of service to Nortel and left last year. Since the Bay Networks aquisition and then the subsequent Alteon aquisition, the focus and strategy of the company changed away from the culture that made the company strong. It was built around relationships with customers. With the influx of Enterprise talent that were focused on short-term relationships, eventually everything went toward that strategy and away from strong, long-term relationships. As part of short term focused strategy, they outsourced their manufacturing, development and systematically "outsourced" of all of their valuable assets. This trend included the people/personnel and direct control of development and manufacturing that made it a strong company. Without people, manufacturing and development assets, what is left? This is exactly what potential buyers and clients are asking now."
By Ex Bay Networker and NT Employee (not verified)
"WRONG! The Bay Networks aquisition was one of the best buys out of Roth's outrageous spending spree. The people were dynamic and products leading edge, providing a real alternative to Cisco in the enterprise space...which many customers loved. Most of the very good Bay people (techy's, senior managers, sales guys etc) left when they saw what Nortel were doing to the company. The Nortel ethos of politics, bureaucracy, non-reward and the 'NT boys club' was the reason for the demise of Bay Networks...and Nortel. Also not taking advantage of emerging technologies such as IPT when voice is there "heritage"..prior to the likes of Cisco is a major factor."
By Vyatta vice president Dave Roberts (verified)
"In the telecom growth spurt of the late 1990s, Nortel was one of the fastest growing companies and stocks in the world. Unfortunately, the company got very off-balance as it grew. It was very clear when I was there that anybody who wanted a long term career in Nortel had to be associated with the carrier group, preferably an optical product line. That was where all the momentum was within the company. If you were an employee working on other things (enterprise products in my case), it was clear that you weren't going to get any of the investment, attention, or promotions. In contrast, the optical management teams were masters of the universe. When the bubble burst in late 2000/early 2001, the company's 'core businesses' were smack in the middle of the action (or sudden lack of action, really). With the chair suddenly pulled out from under it, Nortel could not retrench quickly enough. They had allowed many of their other businesses to decay as the company got tunnel vision with all-things-optical, and there was nothing to fall back on. This was not the beginning of the end, but rather the end of the beginning, however."
Read Dave's blog story: Nortel: Perspective Drives Feelings
Dave's new blog continued regarding the Wellfleet/Synoptics merger (the surviving entity was called Bay Networks) before Bay's acquisition by Nortel, "At a macro level, almost all new product development ground to a halt because nobody could get enough critical mass to move the ball forward. Projects would start and then get repeatedly canceled. This problem particularly devastated the Wellfleet product lines. Synoptics was very much bought into the idea that Asynchronous Transfer Mode (ATM) was THE NEXT BIG THING. ATM, it was said, would obsolete Ethernet and obsolete routing. While Synoptics wasn't the only company to believe this, they made big bets in this direction. Anybody advancing a project plan that focused on advancing the company's Ethernet switching (in which, again, Synoptics was leading) or routing product lines was often doomed to failure as budget was redirected to work on ATM-related projects. I talked with multiple Wellfleet engineers who had worked on five or six projects since being part of Bay, all of which had fallen victim to the budget redirection axe and been canceled in favor of 'ATM will make that obsolete' thinking. But it wasn't just Wellfleet people. I met many Synoptics engineers trying to push forward Ethernet switching projects that suffered the same thing. So, when I got to Bay, you had a bunch of fairly talented, but bitter people, all mad at each other, and almost no new product development coming to fruition. The sales force was desperate for something, anything new that it could sell."
By Jake (not verified)
"I started with the company in 1974 and left in 2002 and all but the last 3-4 years I considered it a privilege to work at Nortel. I spent most of my career in the manufacturing, operations, quality and service side of the business. Ten of those years were dedicated to developing service programs and relationships with Nortel's channel partners. John Roth, Bill Conners, Frank Dunn, and other so called visionaries at Nortel were at the root of the demise of this once great company. They were so consumed by acquisitions (Bay Networks) and competing against John Chambers at Cisco. By focusing all energies in trying to be like Cisco they began to ignore their core businesses. Roth, Conners, Dunn and other yes men/women dismantled a world class manufacturing and egineering team after they already spent millions of dollars in upgrading facilities. These so called bright of the brightest began to shuttle Nortel’s highly respected distribution strategy and started competing against their channel partners."
By Anon (not verified)
"I started in 1999 and left in 2005 (voluntarily), and worked in the Enterprise division. I can categorically say the issue was NOT the Bay Networks acquisition. It was inept management from the top, and a failed understanding of how to properly integrate multiple acquisitions. That combined with putting to much emphasis on one product (the optical line) led to there downfall. Lets look at this.. Bay Networks. Arguably the #2 or #3 R&S/Switching vendor at the time of the acquisition. When 3Com went out, they were the only credible alternative to Cisco. There was competent leadership, engineering, and sales in this division. The problem came down to support from Mother Nortel. There was a complete drop in R&D, and very few new products made it to the field during the first few years after the acquisition. This combined with Nortel sucking engineering talent out of the BayNetworks business into the Optical business caused a huge loss of sales inside that division. Clarify. I'm not sure what Nortel was thinking when they did this. They purchased a CRM company for many billions of dollars, with no idea on how to market, sell, or support the product. This left us ALL scratching our heads, and wondering what master plan Nortel had. Well, as it turns out, they had none."
Don't be shy, what is your take on the real reasons for the fall of Nortel?
BradReese.Com Cisco Refurbished
- Could Cisco EnergyWise kill the thriving secondary-market for Cisco equipment?
- Cisco to release new February 2009 edition of its famous product quick reference guide!
- HP ProCurve wrestles Cisco with new tag teams
- Cisco distributor says customers demanding HP ProCurve
- Nortel chief flying in corporate jet as company files for bankruptcy protection
- Brocade BCFD trumps Cisco CCIE R&S in salary survey
- Padmasree Warrior as Obama choice for U.S. CTO: Huge win for Cisco, total disaster for America!
- Nortel employee severance payments frozen by bankruptcy
- Nortel board of directors vote to file bankruptcy
- Nortel employees speak out: Hopes of becoming multimillionaires dashed
- View Brad Reese on Cisco Story Archives
- About Brad Reese on Cisco
Brad Reese cofounded BradReese.Com Cisco Refurbished, which enables affordable Cisco networks globally by assuring customer satisfaction with guaranteed one year warranties on both Cisco Repair as well as Refurbished Cisco.
Don't be shy, contact Brad Reese online or call him Toll Free:
866-864-0506
International callers may wish to call Brad by dialing:
850-364-4115
- Archives
- February 2010
- January 2010
- December 2009
- November 2009
- October 2009
- September 2009
- August 2009
- July 2009
- June 2009
- May 2009
- April 2009
- March 2009
- February 2009
- January 2009
- December 2008
- November 2008
- October 2008
- September 2008
- August 2008
- July 2008
- June 2008
- May 2008
- April 2008
- March 2008
- February 2008
- January 2008
- December 2007
- November 2007
- October 2007
- September 2007
- August 2007
- July 2007
- June 2007
- May 2007
- April 2007
- March 2007
- February 2007
- January 2007
- On The Web
Sponsored Links
- Cisco Webcast: Leveraging 802.11n, Is your WLAN ready for Enterprise Video?- Cisco
- Turn your desk phone and mobile phone into one with Sprint Mobile Integration.- Sprint
- Discover the Four Trends Driving the Future of Data Centers - Emerson Network Power
- Visit Oberon for more information- Oberon Wireless
- Next-generation firewalls control applications and prevent threats.- Palo Alto Networks
- Troubleshoot in Minutes! Search & Report on all Network data - Free Download.- Splunk Inc.
- MoneyGram leverages Windows/Novell InteropAbility- Novell Microsoft
- VTI puts Windows & Novell interoperability to work- Novell Microsoft
- Educational Wi-Fi Reference Poster Program to help get you up to speed on Wi-Fi Standards, including 802.11n- Xirrus
- Driving Operational Efficiency in the Datacenter- Microsoft
-
Network World, Inc
The Leader in Network Knowledge
So-called professional
So-called professional managers who are run their business by the quarter. End of story.
IMO the first poster is off-base
Nortel had little to no direct touch - all their business was directed through a few or one reseller. The Bay acquisition provided a structured direct touch sales force that was needed, and of course a sorely needed Enterprise IP portfolio. I believe one of the sad things that happened was that Bay's core routing portfolio, the BN series, was not continued forward. The BLN and BCN routers consistently beat out Cisco with customers and in technical reviews and reports. To this day Cisco is still incapable of performing some of the processor tasking and independant protocol restart functions that made the BN series a solid entry in the Enterprise routing arena. I don't care to comment on the downfall or success of a company - it's just conjecture and hypothesis. Just reminding folks of some of the facts from 1996-1999.
Off-Base?
The viewpoint was not off base. The point was, there was no direct sales force previous to the Bay Networks acquisition. One of the great things about the Bay Networks acquisition was that it gave Nortel a top notch direct sales force. This sales force was much more used to stiff competition from the data side, versus any sales people Nortel had selling voice. The point was that they picked up a gem with Bay Networks, but let it die on the vine. They did not develop any products for them to sell, and raided there talent for other parts of the company.
I lived through it, I watched our product portfolio quickly become out-dated in the matter of a few years, and all of our top SE's and Sales people leave to go sell Shasta, Optical, Passport, or whatever the "cool" carrier product of the week was.
No doubt, the BLN and BCN were great routers. Cisco should have learned something from the overall architecture of those products. However, one thing I have learned.. You can have the best product in the world, if you cant support it or if it's to hard to manage, it is as worthless as a brick.
The management interface on ALL BayRS routers was horrible, and with 7% market share (the share when the acquisition happened) good luck finding someone to support it.
Bay Networks was a great company, with great products, and great people. Nortel bought them, and within 2 years had managed to gut the company, and turn it into a footnote of history. That is the sad legacy of Nortel.
Did you read the same post I
Did you read the same post I did? It called Bay's sales teams inadequate and operating with a losing strategy - that doesn't sound like it was supporting the Bay team or in support of Bay's portfolios.
As for the router share, I agree, Site Manager wasn't the most eloquent method of configuring a router, but the command line being driven by SNMP was actually quite smart because it didn't cripple the deep configuration abilities they way IOS did... granted over time IOS improved and Bay came out with the BCC but from a pure technology and architecture point of view, Bay routers smoked Cisco and always will.
Sometimes you don't know what you have
Enterprise did take a back seat for a long time. This is not the first time that this has happened. Back in the DEC days Networks was making money but so much of it was taken to shore up other parts of the company that R & D fell behind.
Also remember Y2K? Enterprise spending tanked during the last 6 months of 1999. The only spending on networks was insuring that everything had code upgrades and the rare box replacement. When January rolled around Nortel and their magic spreadsheets started chopping enterprise people right away. Had it been Bay I believe that they would have understood what had happened and given sales and SE's some number of months to get customers to start spending again.
Again it goes back to not understanding the business. Spreadsheets and bean counters help some decision making but somewhere someone has to understand the business enough to make a gut call.
Enterprise has short sales cycles for the most part. Voice opportunities could run into months and months before a sale was closed. The field knew this but somehow the message never seemed to be reflected back by upper management.
A culture clash
As a < 5 yr Nortel employee, I have no insight into what may have gone wrong with Nortel/Bay. But having worked in the telecom transmission business for a decade, then an enterprise-oriented multinational for another decade, one thing seems clear - the culture and mindset of those ecosystems is so completely different that it's difficult to image any attempt to merge them. Oil and water.
How either could understand or give appropriate guidance to the other is a challenge that transcends the previously-mentioned issues.
But, a fact-check, please - that ATM was Synoptic's priority. ATM was, from inception, a telco (Bellcore) technical solution looking for a problem. Did Synoptics really buy in to the telco perspective?
Synoptics and ATM
Oh, yes, Synoptics bought into ATM. Anybody remember the LattisCell? The Synoptics group within Bay also purchased Centillion, a manufacturer of ATM systems, less than a year after the Synoptics/Wellfleet merger that formed Bay. I ended up managing what was left of the Centillion product line at Bay. The products were quite good. Unfortunately, great products won't do well if the market is basically non-existent and shrinking.
Eh....
I think its hard to go back to Synoptics and blame them. ATM was a industry failure. A technology solving a problem that no one really had. Sure, ATM had it's neat features, but it was so stringent and complicated that it never had a chance against IP/Ethernet. Ethernet ALWAYS wins.
Synoptics + Wellfleet should have dominated the industry. Bay + Nortel should have dominated the industry. In both cases, technology didn't let down the merger, it was incompetent management. Say what you will about Cisco, but one thing they have managed to obtain expertise in, is merging and acquiring company's. They have it down to a science, and with that science comes a great power to dominate the market in whatever field they choose. If tomorrow Cisco wanted to enter the Carpeting business, I have no doubt they would be #1 in that business in about 2-3 years.
Nobody is blaming Synoptics
As the originator of the quote that probably generated this reply, let me say that I certainly don't blame Synoptics for pushing Nortel into Chapter 11. I would blame the people at Bay (both Synoptics and Wellfleet, though mostly Synoptics) who pushed ATM at the expense of other technologies that won out. You say, "...it was incompetent management." I agree. It was incompetent management that built a wonderful ATM product line for a market that didn't exist while Cisco banked billions of dollars with Ethernet switching. It was incompetent management that let leading-edge Ethernet switching technology die on the vine for lack of funding. I know very much of what I speak on this. The folks in my group inherited all of these problems when we got to Bay.
ATM a failure - not necessarily so...
The statement that ATM was a solution that was looking for a problem sounds like something that one might hear from an Ethernet wonk who thinks the only solution to poor network QoS is throwing more bandwidth at the problem or re-segmenting the network yet again...