When Networld+Interop pulls into Atlanta this week, thousands of attendees will
search the show for signs of an economic upturn.
It may not be a pleasant trip. The economic slowdown has derailed dozens of
networking companies in recent months. 3Com (4,200 layoffs), Cisco Systems (8,500),
Lucent Technologies (40,000) and Nortel Networks (30,000) all have slashed staff
to restore profits.
Despite stealth networking initiatives from companies like NEC, few industry
pundits expect a quick recovery. Cisco CEO John Chambers says business is finally
starting to stabilize, but 3Com CEO Bruce Claflin is very pessimistic about
a near-term economic rebound.
Time for an exit strategy? Not quite. Although money is tight, customers continue
to embrace initiatives that offer a quantifiable return on investment. "It’s
not as if IT spending has gone from billions of dollars to zero," quips
Janet Perna, general manager of data management software solutions at IBM. So,
what’s selling on the networking front? The answers may surprise you. Leading
network integrators are succeeding with unique Voice-over-IP (VOIP) strategies,
targeted wireless LAN initiatives, new software partnerships, and virtual sales
forces that span multiple companies.
Follow the examples below, and you might get your business back on track long
before the economic slowdown ends.
Much like the dot-com implosion, VOIP networks have generated lots of hype and
little profit. Sources say high schools and colleges in California, New York and
Texas all have scrapped VOIP pilot projects because traditional voice networks
proved far more reliable.
Still, VOIP will get a lot of attention at NetWorld+Interop, and the technology
certainly has a place in corporate America.
Just ask Expanets, an integrator that has worked on several successful—and
rather unique—VOIP projects, notes Christina Allen, a regional marketing
director who works in Expanets’ Amityville, N.Y., office.
"So far, our revenue is roughly flat compared to last year," says
Paul Anthony, VP of sales at Expanets. "July was a great month, and August
came along nicely. I think we’ll see an upturn in Q3 and Q4, because we
have a big pipeline [of work to perform]."
One of Expanets’ current projects, for the State Bank of New York, calls
for a VOIP network spanning 18 offices. Instead of focusing on the desktop,
the bank embraced VOIP for its wide area network (WAN) connections. Using this
approach, the bank won’t need costly point-to-point T1 lines for its interoffice
phone systems. Instead, the VOIP system will consolidate voice traffic onto
the bank’s frame-relay network, says Peter Marquis, regional director of
data solutions at Expanets.
The Bank used CSI Group, an independent consulting firm, to handle the RFP
process. Early options included VOIP systems from Avaya, Cisco and Nortel, but
none of them fits the bill. Avaya proved too costly; Cisco’s Avvid technology
failed on reliability; and Nortel failed to meet the bank’s bandwidth requirements,
according to a source close to the RFP process.
Enter a PBX phone system from NEC, known as the 2000 IVS2. Using NEC trunk
cards, Expanets linked the PBXes with the bank’s Cisco 2600 and 3600 routers.
Six branch offices are on the VOIP system; two to four more sites are expected
to come online within a few months, according to Expanets’ Marquis.
All told, the NEC solution cost about 30 percent less than Avaya’s alternative
and was far more reliable than Cisco’s product line, says one consultant
who took part in the RFP process.
As you seek to master VOIP, be sure to spend some time evaluating your software
partners. The reason is fairly simple: Without applications that crave bandwidth,
network integrators are a useless bunch.
Amir Sohrabi knows that fact well. As executive VP for strategic alliances
at Managed Solutions Planning Xperts (MSPX), Sohrabi is inking partnerships
with niche application developers, which promise to drive demand for MSPX’s
Smart move. The applications market has held up fairly well during the economic
slowdown. Year-over-year sales of IBM’s DB2 database, for instance, have
grown roughly 20 percent in recent quarters, according to IBM’s Perna.
That success can be traced to strong sales of DB2-based apps from PeopleSoft
and Siebel Systems.
"Application developers don’t want to get their hands dirty with
networking stuff," says MSPX’s Sohrabi. "That’s where we
come in. When a developer wins a contract for an application, we’re on
board to provide the network plumbing. The trick is identifying the right developers
with which to partner."
Located in Vienna, Va., MSPX works closely with niche vertical-market software
developers. But MSPX’s alliance strategy doesn’t end there. The company
also has close relationships with Compaq Computer (for servers and storage systems),
Enterasys (network switches, wireless LANs and security), InfoLibria (content
management) and 3ware (storage over IP).
Going forward, MSPX hopes to create a virtual sales team that spans each of
its vendor partners. For instance, MSPX sees natural synergies between 3ware
and Enterasys, because 3ware customers need Gigabit Ethernet pipes for their
storage networks. "Ideally, we can aggregate all three sales forces to
go after new business," says Sohrabi.
In this market, nobody wins alone.
Of all the technologies on display at NetWorld+Interop, wireless LANs will likely
grab the biggest spotlight.
Despite some lingering security concerns, customers are flocking to wireless
LANs because of improved standards like 802.11b, which guarantees basic interoperability
between multivendor products. Sales of wireless networks are expected to grow
from $1 billion last year to more than $3 billion by 2005, according to International
Wireless LAN evangelists include Catalyst International, a supply-chain software
specialist that works closely with Symbol Technologies.
Catalyst isn’t immune to the economic slowdown—Q2 sales fell 30 percent
to $7.8 million—but the company was lining up some promising wireless LAN
contacts as this story went to press.
Catalyst develops warehouse applications that help major retailers move and
track products through their supply chains. SAP holds a 10 percent stake in
"We’re clearly in a slowdown," concedes Jim Treleaven, CEO of
Catalyst. "The quality of prospects in our pipeline remains good, but the
buying cycle is longer."
In order to shorten that cycle, Catalyst is targeting its existing Fortune
500 customer base with new services, rather than minor network upgrades. "If
it’s a minor upgrade, most customers will delay the purchase and make do
with what they have," says Treleaven.
Most of Catalyst’s big customers have large warehouses with open floor
space and no interior walls in which to run network cabling. As a result, 802.11b
wireless networks often are the only way to deploy Catalyst’s supply-chain
software to mobile warehouse workers.
The Latin American market remains particularly strong for Catalyst. CEO Treleaven
says the company won a major 802.11b deal in Latin America a few months ago
and expects to secure an even bigger deal in Q3. Many projects like this involve
Symbol’s wireless LAN hardware, he adds.
Catalyst is working overtime to maintain its close ties to Symbol. Jeff Frailey,
director of enabling technologies at Catalyst, speaks with his Symbol counterpart
two or three times a day.
"On large deals, we’ll solicit sponsorship from Symbol," says
Frailey. "That has helped us win business, particularly with a customer
in Brazil. We’re typically working on several projects with Symbol at any
Catalyst isn’t alone in the wireless market. Integrators like Select Inc.,
Advanced Technology Solutions (ATS) and Luna Communications each report strong
demand for wireless LAN solutions.
ATS, for instance, recently won a contract with a major manufacturing company
that needed mobile network access in one of its plants. "We recommended
a Proxim Harmony 802.11b wireless network infrastructure for the entire facility,"
says Larry Hicks, director of ATS’ network and systems integration practice.
Luna Communications is winning similar
contracts. The San Jose, Calif., integrator works closely with Proxim and Cisco
to target the health care, financial services and enterprise markets.
Given the current economic climate, Luna is keenly focused on its existing
customer base and is aggressively seeking new partners. "But we’re
much more selective when it’s time to ink a formal partnership," says
Luna CEO Gary Moon. "We want to make sure they’ll be around for the
next two years."
In this economy, only the smartest networking partners will stay on track.
- Get certified to install 802.11a or 802.11b wireless LANs. 3Com, Cisco and
Proxim all offer training in this area.
- Partner with niche software developers. Many developers win customer contracts
that require outside network-integration skills.
- Speak with your five closest partners every day; explore new business opportunities
with those partners at least weekly.
- Hedge your data networking bets; explore partnerships with voice veterans
like Avaya, Lucent and NEC.
- Explore potential business in Central America and Latin America, where networking
sales remain strong. For basic advice, attend Comdex Mexico (June 4-7, 2002).
Specialty: Voice and data network integration
Key Partners:Avaya, Cisco, Lucent, NEC
Revenue: US$1.4 billion
Recent Victory: 18-office network for State Bank of New York
Winning Tip: Deploy VOIP on data backbones to eliminate costly T1 lines
Specialty: Cradle-to-grave network solutions provider
Key Partners: 3ware, Compaq, Enterasys
Recent Victory: Wireless 802.11b network for medical customer
Winning Tip: Partner with software developers to network custom apps
Integrator: Catalyst International Inc.
Specialty: Supply-chain solutions provider; software developer
Key Partners: Hewlett-Packard, IBM, Oracle, Sun, Symbol
Revenue: US$42 million
Recent Victory: Wireless 802.11b networks and applications for major
Latin American retail warehouse
Winning Tips: Target Latin America; speak daily with core partners