7 ways Alcatel-Lucent hopes to change the conversation

New president of Alcatel-Lucent Enterprise looks to lift fortunes with focus on key market niches in Ethernet switching, data centers

A favorite marketing tagline for Alcatel-Lucent Enterprise is "Change the Conversation."

But Alcatel-Lucent doesn't come up much in conversations about leading Ethernet switching vendors.

Maintaining flat revenue share over the past three years hasn't helped the company on that front. But Alcatel-Lucent nevertheless remains bullish on its prospects, and in gaining share in its strategic markets, based on fourth-quarter and full-year 2011 results.

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Alcatel-Lucent saw its enterprise LAN revenue grow 4% in Q4 and 7.3% for the full year. Wireless LAN revenue grew 31.6% in Q4 and 66.7% for the full year of 2011.

In Layer 2/3 switching specifically, Dell'Oro Group found that Alcatel-Lucent grew 4.2% in Q4 and 6% for the full year. Market share, however, remained at 1.3% and has never exceeded 1.5% over the past three years, according to Dell'Oro.

Nonetheless, Alcatel-Lucent Enterprise's new president, Michel Emelianoff, has seven priorities in line for this year to build on the modest success of 2011:

• Accelerating initiatives around cloud.

• Targeting the converged campus LAN.

• Building up its presence in data center networking.

• Selling its switches in managed LAN services opportunities.

• Going after vertical markets, customers that are similar to small carriers.

• Bulking up its go-to-market capabilities in North America.

• Gaining market share in key niche market areas, like converged campus and data center.

"What's important to me is not to be the biggest player in the market, but one bringing value to customers in the areas where we decide to play," Emelianoff says. "There are multiple areas where we decide not to play because we don't think we are relevant and we don't think we can execute that well. So I prefer to be a niche player but a successful one that is able to deliver value and grow." 

Emelianoff's appointment to lead Alcatel-Lucent's enterprise group coincided with that group's sale of Genesys, its contact center business. There were rumblings that Alcatel-Lucent was looking to sell the Ethernet switching business as well, and Emelianoff did concede that the company was investigating "strategic options" for the entire unit for nine months.

But with the sale of Genesys and retention of the switching business, Alcatel-Lucent's enterprise networking business is ready to get down to business.

The trend among carriers to deliver cloud-based services presents an opportunity for Ethernet switch sales into those markets, Emelianoff says. Carriers are building large data centers as their cloud delivery infrastructures, and with cloud-based services like unified communications being delivered to corporations, Alcatel-Lucent is looking to be an integral part of that activity.

"We're accelerating our initiatives around the cloud," Emelianoff says.

Part and parcel of that is offering a compelling data center fabric switching portfolio, both for cloud service providers and for enterprises building private clouds. Emelianoff says Alcatel-Lucent has had some "very interesting traction" in the data center with its OmniSwitch 10000 core switch and OmniSwitch 6900 top-of-rack device, and the Application Fluent Network and pod and mesh architecture approach.

"I was actually surprised by it, knowing that we were not a player," Emelianoff said of the interest and demand for Alcatel-Lucent's data center product and approach. "I wasn't expecting the approach we have with pod and mesh to pick up that fast."

Alcatel-Lucent introduced its pod and mesh concept a year ago. Pods are smaller fabric switching configurations of two to six 6900 switches that can be connected together through an Alcatel-Lucent OmniSwitch 10000 in the core to form a mesh of pods, or a cloud-type environment.

The company said its pod and mesh design, with 40G links, could support 14,400 server ports and 169Tbps of switching capacity, with latency of 5 microseconds.

Emelianoff says the pod and mesh approach has generated a lot of interest.

"I've been surprised by the kind of customers in the U.S. that came and talked to us about our pod and mesh approach to the data center," he says. "For us to reach out to [major] accounts is obviously something which is not simple. Accounts actually reach out to us, and are willing to have a conversation. That is very encouraging."

The company is also going after the converged campus, where a new generation of edge switches provides the infrastructure to deliver multimedia applications to work groups. Alcatel-Lucent just announced a new OmniSwitch, the 6450, to tackle this task.

The company is looking to sell data switches into its voice installed base to boost sales of the converged campus switches.

"We want to convince customers on the voice side of the house to leverage our infrastructure," Emelianoff says. "Voice represents 42% of our sales and we grew 15% last year. We see significant traction selling data to non-data customers."

And enlisting non-data partners to sell it. Emelianoff also sees a role for Alcatel-Lucent switches in the managed LAN services offered by its carrier customers, especially to midmarket enterprises.

He notes that with Cisco focusing on high-end customers with its end-to-end IT architectures, it's opening up the midmarket to Cisco alternatives focusing just on Ethernet switching requirements.

And selling more switches through carrier customers goes hand-in-hand with Alcatel-Lucent's plan to increase its partner ecosystem for Ethernet switching. Emelianoff acknowledges that this is currently a company weakness, especially in North America.

"We have a weakness in that market but a lot of opportunity," he says. "We're looking at shifting resources from areas where we have less chances to generate growth -- in North America we're increasing the focus on networks. We are trying to accelerate the recruitment of new partners in North America in line with our business priorities; and also leverage the partnership model we launched in [Asia Pacific] and Europe."

In early December, Alcatel-Lucent enlisted Citrix and NetApp as ecosystem partners in data center virtualization, storage and servers. The company is also engaged with VMware and Emulex.

"We go beyond interoperability testing to field engagements with management," Emelianoff says. "It's not about the number, it's about quality of partnership."

The same might hold true for customers. That's why Alcatel-Lucent is looking to line up more enterprise customers in select vertical markets that have sophisticated needs in Ethernet switching. Such verticals include education, government, healthcare, hospitality, public safety, transportation and utilities.

Alcatel-Lucent hopes these verticals, along with its other strategic priorities, help it gain market share in the areas it's focusing on: cloud, data center, midmarket managed services, converged campus, etc.

"Gaining market share in areas where we've chosen to play is absolutely a priority," Emelianoff says. "Will we go from 1.7% to 10% share in 2012? Absolutely not." But Emelianoff believes such focus will make Alcatel-Lucent Enterprise a better partner for customers and other vendors.

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Copyright © 2012 IDG Communications, Inc.