Part 2
By John Mulqueen
Network World, 01/04/99
 WAN SWITCHES: Cisco, Ascend duke it out
In its early days, frame relay was often portrayed as a low-priced version of ISDN or a cutdown kind of ATM. It didn't have the feature set of the former or the robustness of the latter. Still, frame relay had the advantage over both because it worked better, cost less and solved problems for people who bought it.
It's no wonder corporate America has come to love frame relay and that two of the biggest acquisitions in the network industry -- Cisco's purchase of StrataCom and Ascend's buyout of Cascade Communications -- have been among the most successful.
For Cisco, picking up StrataCom secured it a spot in the WAN -- a spot it first tried to get by buying LightStream Corp. for its ATM technology back in late 1994. Cisco's real WAN efforts have gone into the StrataCom products, to which it has added integrated voice features that enterprise and carrier customers find attractive.
By the same token, the Cascade acquisition turned Ascend into a real WAN power. In fact, the company has been so successful selling frame relay and ATM switches that many believe Lucent, always looking for good acquisitions, may want to add Ascend to its growing portfolio.
But for now, Cisco and Ascend are still fighting over the top WAN spot.
Cisco
Smartest move: Buying StrataCom.
Greatest strength: Can buy its way into any market, including the WAN.
Achilles' heel: Slowdown in IT spending.
Chief competitors: Ascend, Newbridge, Nortel.
Ascend
Smartest move: Buying Cascade.
Greatest strength: It has the frame relay and ATM switches that carriers need to deliver new services.
Achilles' heel: Slowdown in IT spending.
Chief competitors: Cisco, Newbridge, Nortel.
IXCs: MCI WorldCom on a roll
You can't talk about MCI WorldCom without mentioning CEO Bernie Ebbers, and you can't do that without drawing a comparison to MCI Communications founder Bill McGowan.
Ebbers is not exactly McGowan, but the two men seem to have drawn on similar gene pools. Like McGowan before him, Ebbers is an irreverent wit who loves to poke fun at AT&T and the old-line telecommunications warhorses.
McGowan took a little company that was using microwave towers and knocked the largest company in the world on its ear. Ebbers stitched together a bunch of second- and third-tier long-distance carriers, money-losing competitive local exchange carriers and an ISP before he picked up McGowan's mantle by buying MCI for $37 billion and becoming president of the new company.
That acquisition doesn't seem to have slowed MCI WorldCom. The company posted strong revenue in the first quarter reflecting the combined operations.
But the pieces haven't been totally integrated yet, and as recent leave-takings and layoffs show, the company is still working out some kinks. Another problem is that not all remaining members of the MCI WorldCom family seem to know each other. Sales executives from different WorldCom companies sometimes call each others' clients. It makes you wonder how well MCI WorldCom has put together the bundle of local, long-distance and Internet services that it is touting.
But at least MCI WorldCom has something to tout. AT&T is still struggling to pull together the pieces.
MCI WorldCom, Jackson, Miss.
Smartest move: Shoving aside British Telecommunications.
Greatest strength: Portfolio of long-distance, local and Internet services.
Achilles' heel: Making all the pieces work together.
Chief competitors: AT&T, Sprint.
LOCAL CARRIERS: Bell Atlantic/GTE on top?
Think about the impending Bell Atlantic and GTE combination, and you can come up with just about any scenario you want -- the two companies have been that unpredictable.
GTE has done some strange things, such as bidding $28 billion in cash for MCI. And Bell Atlantic is trying to recover from NYNEX's colorful history of mishaps, including botched incentives to get employees to retire, network outages in Manhattan and influence peddling with regulators.
The combined company might be too big to manage, and it might stifle competition. And that's not to mention that neither Bell Atlantic nor GTE has a solid-gold reputation for service.
But done well, a combined Bell Atlantic/GTE powerhouse could provide hope for people looking for a different sort of public network infrastructure. Maybe the combined company could even bundle long-distance, local, Internet and wireless services in an attractive package. It's a much-talked-about idea, even if no one is sure it'll work.
Bell Atlantic already has the major East Coast markets locked up with its local telephone operations and has an embryonic long-distance business in the works. It's not necessarily a great provider, at least not if you believe customer complaints about service and the length of time it takes to get service, especially in the former NYNEX territories. But Bell Atlantic is out there, and no one has found a way to dislodge it.
GTE's strong local telephone business is in smaller markets that don't overlap with those of Bell Atlantic. What's more, GTE has BBN's Internet operations, is building a national long-distance network and has been learning about long distance over the past year by reselling MCI WorldCom's service.
Even their international investments complement each other somewhat -- both are players in wireless markets in Latin and South America.
So put Bell Atlantic and GTE together, and who knows what you'll get -- certainly a bigger business with the reach that everybody seems to want. But wait -- isn't this what divestiture was supposed to end?
Bell Atlantic/GTE, New York/San Antonio, Texas
Smartest moves: For Bell Atlantic, buying NYNEX. For GTE, buying BBN.
Achilles' heels: For Bell Atlantic, the combined company could be too big to manage. For GTE, a reputation for poor customer service.
Chief competitors: SBC Communications/ Ameritech, BellSouth, US WEST.
ISPs: UUNET has the sizzle
When WorldCom bought MFS Communications in 1997, many thought the most valuable part of the deal was UUNET Technologies, the leading ISP for business customers. Never mind that UUNET was losing money -- so were all the other ISPs. Never mind that its revenue was only a fraction of the revenue that voice produced -- that wasn't the point.
The Internet was the sizzle to this steak. It just added to WorldCom's appeal before the MCI deal came along.
Things have not changed. Say "MCI WorldCom" and the next word is almost inevitably the Internet. That's one of the reasons UUNET CEO John Sidgmore is now WorldCom's vice chairman.
With an international network of 1,000 points of presence and 1998 revenue coming in at about $1.2 billion, UUNET is the biggest ISP in the U.S. and a vital part of the overall corporate strategy.
That's not a bad record for a business that still produces only about 7% of MCI WorldCom's revenue and none of its profits.
UUNET, McLean, Va.
Smartest move: Offering shared access lines.
Greatest strength: MCI WorldCom parentage.
Achilles' heel: Poor product development.
Chief competitors: AT&T WorldNet, Cable & Wireless, GTE Internetworking.
NETWORK APPLICATIONS: Lotus prevails
IBM's Lotus subsidiary still edges out Microsoft in this market, even though at times it looks as if the company is trying to live up to the rumors that it is destined to be Microsoft's next big victim.
Why else would Lotus decide not to continue developing Notes/Domino for NetWare? Is it because Microsoft's Windows NT is grabbing market share from Novell? So Lotus wants to help Microsoft by detracting from NetWare? The same Microsoft that is trying to knock off Notes? Bright idea.
Also confounding is Lotus' attempts to shift cc:Mail users to Notes, says Eric Arnum, editor of "Electronic Mail & Messaging Systems," an industry newsletter.
"It is like Rasputin," Arnum says of the durable cc:Mail. "You can drown it, you can stab it, you can shoot it. It won't die."
Arnum is much more upbeat about the potential of Notes 5.0, especially the nifty Multi-purpose Internet Mail Extensions enhancement that will let users attach a Web page, including graphics, icons and text to a Notes message. He credits Nick Shelness, Lotus' chief technology officer, with pushing the technology and moving standards bodies in the right direction.
Arnum says Lotus sold 9.2 million Notes licenses through Sept. 30 and that he would not be surprised if Lotus closes the year with 13 million or even 14 million sold. Sales like that should keep Lotus ahead of Microsoft for the time being. Lotus has some 28.5 million Notes licenses worldwide, compared with the 19.8 million Exchange licenses Microsoft holds.
Lotus, Cambridge, Mass.
Smartest move: Sending Chief Technology Officer Nick Shelness to help the Internet Engineering Task Force develop standards.
Greatest strength: IBM's backing.
Achilles' heel: Constant rumors of Notes' demise.
Chief competitors: Microsoft, Novell, Netscape.
NETWORK MANAGEMENT: Tivoli, CA jostle
Network management is valuable, no doubt about it. Users say so, as do vendors and consultants. But it has never been easy to determine how valuable net management is.
Users notoriously never want to spend money on it. Vendors don't like to invest money to develop something from which they can't earn a profit.
Still, vendors do the research and development, and if nothing else, they use network management as an enticement or as a reward for buying other products. That is what is believed to be Computer Associates' strategy with Unicenter TNG, its popular and highly praised management system.
"It is hard to say what sales are because CA gives Unicenter TNG away with large orders of mainframe software, for instance," says Ray Paquet, an analyst with Gartner Group, a market research firm in Stamford, Conn. "So it is hard to know how many people who have it installed are actually using it."
In any case, both products capture most of the headlines when it comes to network management systems. Each company claims to be the market leader. Paquet says Tivoli made a strategically important acquisition a year ago when it bought Software Artistry and got consolidated help desk capability.
Another important factor, according to observers, is an OEM relationship Tivoli has with Systems Management Arts for its InCharge tool. This utility can tell users the meaning of all those alarms that Tivoli's TME 10 sends from network events.
Tivoli also has won plaudits for Tivoli Enterprise, a framework meant to simplify implementation of the product through a simple Java call.
CA earns praise for its schedulers and neural network technology, which Paquet notes are part of a good marketing pitch aimed at enhancing Unicenter's image of technical superiority over Tivoli's offerings.
CA also has unrivaled distribution channels, and the company seems to strike a deal a week to have other software and equipment vendors tie their products to Unicenter.
"Both of these companies are very smart," Paquet says. "Neither one ever seems to make a mistake."
Computer Associates, Islandia, N.Y.
Smartest move: Building up customer services.
Greatest strengths: Job scheduler software and distribution channels.
Achilles' heel: Mixed reputation for services, pricing and customer support.
Chief competitors: Tivoli, Cabletron, HP.
Tivoli Systems, Austin, Texas
Smartest move: Buying Software Artistry.
Greatest strength: Its automated help desk.
Achilles' heel: Much of its future hinges on the success of its Tivoli Enterprise framework.
Chief competitors: CA, Cabletron, HP.
SECURITY: Network Associates reaches out
Bill Larson likes to say that when he landed at Network Associates in 1993 (then known as McAfee Associates) he felt like he was in the bar scene from Star Wars. Engineers were babbling in seemingly every known language, and one would only communicate from behind his locked door via an electronic bulletin board.
It was a techie company that Larson, chairman and CEO, would transform into the acquisitive marketing machine that has come to dominate the antivirus and network security markets. Sometimes Larson and his company, formed from the merger of McAfee and Network General, charge too hard -- witness the brouhaha that came out of Network Associates' unsuccessful $1 billion bid in 1996 to buy Cheyenne Software.
Little deterred, Network Associates continues to buy companies, expanding its reach.
It follows Microsoft's model of packaging applications as suites and pricing them aggressively. Lower per-seat prices are leading to higher average sales orders. In the second quarter of 1998, Network Associates had six $1 million deals, more than it had had in its entire prior history.
Almost all of the acquired products are sold in suites, compared with none at the beginning of the year. The acquisition of Dr. Solomon in August gives Network Associates the chance to sell Total Network Security and Total Virus Defense to Dr. Solomon's 10 million customers. It also extends Network Associates' reach ever farther -- this time into northern Europe.
Network Associates, Santa Clara, Calif.
Smartest move: Selling product suites.
Greatest strength: Aggressiveness of Bill Larson, chairman and CEO.
Achilles' heel: Differences among merged entities.
Chief competitors: Internet Security Systems, RSA Data Security, Symantec.
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