Rich McGinn, chairman and chief executive of Lucent Technologies, has every reason to put his feet up this Christmas and pour himself a large brandy. His company posted $38.3 billion (£23bn) revenues for the 1999 fiscal year - up 20% on 1998 - and claims pole position as a vendor of voice and data kit to service providers, Lucent's main business. Innovation was a particularly satisfying area. At its Bell Laboratories research and development centre, Lucent boasts more than 2,000 engineers who came up with 130 innovations this year. The fruits of these labours were previewed at this month's Bell Labs open day in New Jersey. Yet McGinn's brow furrows. The thing that keeps him awake at night is Lucent's enterprise business. This forms 25% of company revenues, yet growth was essentially unchanged from 1998 - up just five per cent. And Lucent is only number two in the enterprise networking market, behind arch rival Cisco. McGinn's New Year objective is to sort this out. One tactic: better customer service, through enhanced consultancy services. Consultancy reaped £1 billion in revenues for the 1999 fiscal year and is expected to earn £1.5 billion next year. Failure by Lucent to offer enhanced services risks losing customers to Cisco, which announced a $1 billion (£625m) investment in consultancy KPMG International in August. Lucent has already acted. The $3.7 billion (£2.3bn) acquisition of International Network Services in August was followed by a re-organisation that pulled internal consultants together under a revamped NetCare Professional Services. NetCare says it will recruit another 1,500 staff by September 2000. 'People look to this part of Lucent's business to get the job done well. We have taken a page from the IBM model,' says McGinn. The second cause of his insomnia is technology shift. The cream of Lucent's enterprise business is big call centre installations through its Definity Enterprise Communications Server. It supports 250,000 calls an hour and is deployed by giants such as hotel chain Hilton International. Definity scores points through its claimed better scalability and resilience. Analysts attribute this to Definity's in-house pedigree, meaning it lacks the sort of software bugs and scalability problems associated with systems that are the progeny of two merged products. But Definity is a voice-based private branch exchange (PBX) while the future is voice-over-IP data networks. Lucent developed its IP PBX, a voice data server that runs on Microsoft's Windows NT, but IP PBX is not an alternative to Definity in terms of scalability. In response, Nortel, Cisco and Siemens have developed their own IP voice servers. Neil Rickard, GartnerGroup network research director, says Lucent's challenge is to migrate existing customers from Definity to an IP-based switch without losing them to Cisco or Siemens along the way. Technology shift in Lucent's high-end call centre business feeds into a third problem. Lucent needs to woo more non-US enterprise business. Non-European revenues grew 47% for 1999. But the US still accounts for 68% of all sales. Service providers account for a healthy slice of income. At this month's global media day Lucent announced a deal with BT to build the UK's first commercial terabit network. This is typical of its European business, and Lucent signed 100 new service providers this year. To enhance its enterprise business in Europe, Lucent is expected to make one of two decisions in 2000. The first is to simply acquire a smaller enterprise network vendor, such as 3Com, which lags behind Nortel and Cisco in revenues. This is a real possibility, says Rickard, because it provides instant market share for Lucent to exploit. One advantage here is that customers should see some of Lucent's high-speed fibre technologies eventually feed into enterprise network products. David Grieve, telephone services manager at Scottish Widows, oversees three Definity servers with 500 users. He was attracted by the former AT&T telephony equipment maker's CV. 'Lucent comes from a telephony background where the acceptable level of failure is much higher than it is in the data world. Lucent also has a lot of expertise and resources,' says Grieve. The second option is for Lucent to sign new distribution deals across Europe. Target partners are likely to include Hewlett-Packard, IBM, Unisys, and Compaq. 'They will make a move into Europe by signing up more partners,' says Rickard. Next year Lucent must migrate products and grow its enterprise business, but without losing its focus. By moving into the enterprise network space, customers stand to receive increased support thanks to work at Bell Labs. It's a delicate feat to pull off. Says McGinn: 'Ours is the market to lose.' WHAT'S COOKING AT LUCENT'S BELL LABS 360 deg CAMERA How it works Gives all-round view, with zoom features What Lucent did Build software that knits images from six different pod-mounted cameras Where would I use it? Web sites broadcasting live entertainment and sporting events Time scale Six months time MICRO ELECTRIC CONNECTION MACHINES How it works Micron-sized mirrors to deflect light What Lucent did Shrink and automate silicon nitride mirrors Where would I use it? To replace bulky and expensive fibre optic switches Time scale Research level LUCENT COLLABORATIVE VIDEO How it works Video conferencing from different users regardless of bandwidth What lucent did Develop client software to integrate different video streams Where would I use it? At the high end, with colleagues calling in across a range of different line speeds Time scale First quarter 2000.
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