Shift Plan: credible or more of the same?

This article was authored by Joseph Waring, and was originally posted on telecomasia.net.

The question on everyone’s mind at Alcatel-Lucent’s annual analyst conference last Thursday and Friday in New Jersey was will the Shift Plan, announced in June, be any different from past restructurings, which have all come up short since the merger back in 2006.

The general feeling among the handful of analysts I spoke with was that this time was different and the company’s CEO Michel Combes’ story was credible – the firm finally has a clear focus and new confidence.

Combes said its Shift Plan — which he noted is just in the beginning — is aimed at matching the company’s key strengths with two key transformations the industry is facing: the intersection of network and cloud infrastructure and the global move to ultra broadband.

“A part of the network is migrating into cloud facilities, with many network functions such as voice, packets, video delivery controls being virtualized and ported to servers in the cloud. These changes — the economics on how networks are built and how services are monetized – are happening now,” he said.

Indicating the extent that reality has set in, he said the rules of the game have drastically changed for the vendor community, with the value moving to the cloud network. “So vendors’ relevance not only resides in a different setting, but also in software and application sharing.”

Combes mentioned the need to grow with an open strategy of partnerships. “The time to do things on our own has ended.”

Heavy Reading’s Caroline Chappell told Telecomasia.net that the firm seems to have changed from having an incumbent mentality to a challenger mentality. “It has some strengths – such as cloud and SDN — and is focusing on these, which are the technologies of the future.”

The company is in the process of tightening its portfolio, but Combes admitted there is a lot to be done in that space. “We are now focusing on high-value technologies. We haven’t been so good at that and will scale up in next few quarters.”

Chappell said it has always been a company with excellent ideas, but needed to focus on execution. “Seems they needed a kick in the pants. Before, the streamlining really never happened. People believe it this restructuring, which brings new energy.”

She said Cloudband together with SDN is its big bet, noting the company was early in the market to virtualization and has a two-year head start. “And its SDN/Nuage story is strong, with the Telus announcement in May. It is the only company with product anywhere near commercialization.”

There is much excitement around SDN and NFV, which she said gives new insight into running an infrastructure business. “These open up new realms of possibilities. ALU has many parts of the network and is in prime position to take advantage of virtualization.”

Only time will tell if this three-year plan will be enough to turn the giant ship around, but this time does seem to be different with many analysts, and crucially middle management, onboard. Now it needs to convince its customers.

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