Nortel Brings Muscle To Value-Added Services

Having staged a widely successful turn around over the past two years, Nortel Networks continues to push the envelope. The company has recently put its muscle behind a number of initiatives to bring value-added services to carrier networks.

Following its acquisition of Shasta last spring, Nortel now claims 85 percent market share in the IP services routers space. Now Nortel is aiming to build that IP services business unit, which now accounts for less than $100 million in sales, into a multibillion-dollar business.

Carriers originally thought of IP routers as simple traffic aggregators, but Nortel positioned its Shasta box as a way to offer value-added services, according to Joe Hickey, vice president and general manager of IP services. "In 1999, when we went on customer meetings, customers looked at us with blank stares when we talked about value added because they were worried about footprint not services. In September 1999 we revisited customers not talking about services up front, but starting with aggregation but also mentioning always-on DSL requires security so our secure DSL is based on our firewall in the Shasta box. So that got us notice but not a big interest in services yet," he says.

"Then we won a key account - Qwest (Communications International Inc.) (www.qwest.com)- which was validation of value-added services," he adds. "Qwest provides VPN to small to medium enterprises connected via DSL or leased line access. In the first quarter of 2000 everyone realized it was a services-based business -- it was a wholesale change in the market."

In light of that trend, Nortel is scaling up its IP services business. As of the end of June the IP services business unit, which started out with 55 employees, included 600 people. The company is also investing significant research and development resources in its Optera packet core and Shasta 5000 products, he adds. And because the company's Versaler 15000 router (acquired from Bay), which it was using to target the leased line aggregation market was not as successful as the company had hoped for and the introduction of its Versaler 22000 had been delayed, Nortel recently decided to resell Juniper's router, he adds.

Meanwhile, the company working to "couple" its value-added IP services efforts with Nortel's two other major thrusts - optics and wireless.

According to Hickey, the company is combining its metropolitan SDH (synchronous digital hierarchy, the Europe version of SONET) and DWDM products with its Shasta products to allow service providers with optical metro network to offer IP services over that infrastructure. He would not elaborate on specific product plans or timelines.

Hickey notes that Nortel has won recent contracts from companies such as BT CellNet for 3G (third generation, or those that support data) wireless networks that include the Shasta 5000 subscriber service platform. This product is the point in a broadband network at which the subscriber hits the IP network.

"We're deploying PPP aggregation in the broadband network. After we authenticate the user we can provide services to that subscriber, who could be a consumer downloading streaming video or a business that wants to connect multiple offices into a secure IP VPN. It's that point of subscriber awareness where we provide all these services from," says Hickey. "The price of connectivity is tending to be very low so our service provider customers … are looking for providing value added service to those customers." So when a wireless broadband/3G customer comes on network carriers need to be able to aggregate and terminate customer and provide security, VPNs and content delivery on future wireless access devices, he says, adding that IP-based VPNs are a key service offering of the Shasta platform.

Offering applications is another way carriers can add value to their networks. And Nortel has a variety of software applications that carriers can offer on an outsourced basis to customers, says Hickey, referring to an ASP carrier model. That includes software, which Nortel has added to its portfolio through various acquisitions. Its purchase of Architel gave it tools to provide flow through provisioning, front end provisioning via the web. Clarify is a tool for customer relationship management . Preside is an end to end network management provisioning system. And Nortel's Periphonics buy enabled it to offer an integrated voice response offering to the mix.

"It's not just about the pipe, it's about money on the top," says Glenn Ricketts, chief marketing executive for Nortel's enterprise solutions group. Ricketts says Nortel is ideally positioned to help carriers offer value-added services. Much more so, he adds, than other major equipment suppliers. Lucent Technologies Inc. (www.lucent.com), he says, still hasn't integrated its acquisitions well, is still focused on its Class 4 and wireless play, and just spun off enterprise business. "They don't have much in the way of an application story," he says. Cisco is still struggling to get in the application space as well, according to Ricketts, noting that Cisco doesn't have billion dollar CRM business as Nortel does with Clarify.

"Nortel's old silo-based biz is no longer," adds Ricketts. "We've built a technology-agnostic sales force. The salesperson really has to sell the high-level vision of what we sell."

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