Industry's eyes on the 'enterprize'

TRENDS

By KATHLEEN RICHARDS

The depressed economic condition of the telecommunications environment is causing vendors and venture capitalists to look to the enterprise for more revenues.

Network equipment companies that play in both arenas, such as Cisco Systems and Nortel Networks, are promoting systems to large corporate users for optical connectivity of WANs and storage. In March, Nortel announced a lower-cost, coarse WDM (CWDM) system as part of its OPTera series that the company is now positioning as a storage connectivity solution for enterprise users. The equipment company has also partnered with SAN company Brocade Communications Systems (San Jose, CA) to offer SAN equipment that will enable enterprise customers to connect their storage networks across wide-area and metro networks. Nortel's OPTera Metro 5100 and 5200 Multi-Service DWDM platforms interoperate with Brocade's Silkworm family of intelligent fabric switches within such applications.

Alcatel (Paris) is another telecom giant that is focusing considerable effort on enterprise equipment sales. In May at Networld + Interop, keynote speaker Serge Tchuruk, chairman and CEO of Alcatel, discussed technology solutions designed to link the LAN to the WAN, allowing enterprise users to exchange voice, data, and video in real time. This integrated infrastructure, based on open standards-based technology that Alcatel calls "IP Communications," creates what Tchuruk terms the "borderless enterprise." These evolutionary offerings rely on IP but retain other protocols like TDM to ensure quality voice services.

Service providers must also transition from selling bandwidth to providing value-added services, according to Tchuruk. The enterprise market represents about half of all service providers' revenue worldwide, and it is the fastest-growing segment at about $500 billion.

Alcatel's first partner in its efforts to deliver such convergent equipment to enterprise customers is Verizon Communications (New York City). Verizon Enterprise Solutions Group will market Alcatel's voice and data network products to Fortune 1000, government, education, and healthcare customers in the United States, in effect becoming the vendor's largest North American distributor.

Reaching critical mass
The current business climate aside, recent technology advances, especially in data communications, may better position some optical equipment vendors in the enterprise market. "A lot of our focus over the last year has been in telecom design wins, and we are actually seeing more opportunities in the last quarter than we have seen in the last six months as people design more multishelf and multirack systems," says Robert Nalesnik, vice president of marketing at parallel optics startup Alvesta (Sunnyvale, CA).

Alvesta offers four-channel, 10-Gbit/sec optical transceivers; the 3100 series supports SONET and InfiniBand applications, and the 3200 series is designed for 10-Gbit/sec Ethernet and Fibre Channel applications. "On the datacom side, we are starting to see opportunities in InfiniBand where companies are looking at building InfiniBand switches and they want to add optical ports into those switches," says Nalesnik. "Over time, we think that datacom may actually be a larger part of our business than the telecom side. And a lot of that is being driven by how 10 Gbits/sec is emerging. You've got Fibre Channel at 1 and 2 Gbits/sec today, and they are looking at the next step of going to 10-Gbit/sec. InfiniBand, due to a lot of technology and infrastructure reasons, is now getting to the point that it is hitting critical mass, and the 10-Gigabit Ethernet standard obviously has finally gotten to the point of getting ratified and reasonably mature to where people are starting to design around it." Nalesnik expects the design-in windows to open during the second half of this year and next year, with volume deliveries in 2004 or 2005.

Ringing in long-distance data
As some vendors look for more revenues from opportunities in the enterprise market, several incumbent carriers and service providers are also moving swiftly to win a larger piece of the corporate pie. As former RBOCs Verizon, SBC Communications, and BellSouth continue to gain regulatory approval to sell long-distance services in their local markets, all are moving ahead with plans to provide managed services to corporate customers. BellSouth (Atlanta) finally was granted 271 relief in two of its states in May, allowing the carrier to sell long-distance services in Louisiana and Georgia. The general reasoning is that business customers want providers that can offer long-distance services.

In March, SBC (San Antonio, TX) announced its entry into the long-distance data and IP markets. The carrier is building a national backbone based on its regional networks and links with out-of-region facilities in Seattle, New York, Miami, Boston, and Herndon, VA. The backbone will support national data services at rates of up to OC-12 as soon as long-distance regulatory relief is granted in the seven states where SBC still needs approvals: California, Nevada, Illinois, Ohio, Michigan, Indiana, and Wisconsin. SBC's plan is "to control the electronics of the network from end-to-end, because customers want elimination of the number handoffs," says Abha Divine, vice president of national data services.

In May, SBC announced three different managed IP virtual-private-network offerings: one software-based, a premises-based service using Cisco equipment, and plans for an SBC network-based service. Other data services include dedicated Internet access and managed hosting. SBC plans to offer standardized national products or services with service-level agreements.

Finally, what money venture capitalists are spending is leaning heavily toward enterprise technologies in areas such as real-time connectivity and security, because a faster return on investment is likely. "Consolidation of the carriers will take a long time, which backs up the suppliers-and the suppliers to those suppliers," says Kevin Fong, a managing partner at Mayfield, a venture-capitalist firm in Menlo Park, CA. The worst-case scenario for the shakeout in the telecom industry is five years in his view. Are venture capitalists investing in the enterprise markets rather than technologies targeted at service providers? "Yes," says Fong. "You just follow the money."

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