Article from internet week re integration of Bay and Nortel
internetwk.com
Monday, October 5, 1998, 5:10 p.m. ET.
Integration Fuels
Agenda At Nortel
By SAROJA GIRISHANKAR
Toronto -- The ink is barely dry on the
agreement, but Nortel Networks, the
union of Northern Telecom and Bay
Networks, is humming along with several
product and business integration efforts.
Topping the to-do list at Nortel are
high-end routers to fill holes in service
provider and large enterprise offerings;
cross-pollinating key technologies from
both companies to add new functionality
to existing products; and combining
separate e-commerce initiatives.
"We are quickly integrating the two
companies' products and the
e-commerce sites while letting Bay stay
as a separate business unit for greater
flexibility," said Nortel CEO and vice
chairman John Roth.
On the product front, trials will begin
shortly for a terabit IP router and a
high-end WAN concentrator with edge
routing for service providers. Voice over
IP and key call setup and control
functions critical for switching
voice-over-IP networks are being ported
across all Bay and Nortel data products.
And both companies' network
management suites are being
integrated.
Most of the new and integrated products
will be generally available beginning in
the first or second quarter of next year.
Klaus Buechner, Nortel's senior vice
president for corporate strategy and
alliances, said the upcoming terabit
router combines Bay's routing
technology with hardware and ASICs
from Avici Systems. Nortel has a 23
percent equity investment in Avici, which
entitles Nortel to exclusive rights to the
finished products.
Avici CEO Surya Panditi confirmed that
early trials of the Terabit Switch Router
will start later this quarter and product is
set to ship in the first half of 1999. The
router handles only IP routing and will
support 1.4 terabits per second of data
traffic in its first version. Unspecified
subsequent versions will handle traffic up
to 5.6 terabits per second, according to
Panditi.
Buechner also said that Bay's Versalar
15000, an edge aggregation switch with
the ability to support thousands of T1s
and some edge routing, is also ready for
trials.
Roth and Buechner said Nortel will add
broadband wireless capabilities to all
Bay routers and switches while the
company scouts the market for firewall
technology. Meantime, Nortel is working
on voice over IP and call control
functionalities for all of its products.
On the network management front, Roth
said Bay's popular Optivity SNMP
system is being integrated with Nortel's
CMIP-based INM system so that service
providers can feed information from their
customer sites into their own backend
network management systems. Several
unspecified applications from Optivity
are being ported to INM while policy
management is being added to both
systems.
At the same time, Bay's e-commerce
site, which opened for business just last
month, and Nortel's existing site, which
mostly sells low-end products, are being
melded into a single site requiring one
registration. Further integration leading
to unified cost and scheduling is under
construction.
Roth said he expects Web-based orders
on Nortel's site to triple on the combined
site, to around $4.5 billion in 15 months,
while generating $600 million in annual
savings. Competitor Cisco is currently
on track to move more than $5 billion per
year over the Web.
Nortel and Bay move product mostly
through reseller channels, which makes
e-commerce more complicated than
selling direct, as other technology
suppliers do.
"The good news is that Nortel and Bay
have gotten their backend systems
integrated with the value chain, which is
where everyone is going, because that
will give inventory and sales-cycle
reductions," said David Mason,
president of Northeast Consulting
Resources Inc., a consultancy.
The current integration efforts with the
e-commerce sites focus more on the
front-end integration. According to Keith
Powell, Nortel's senior vice president of
information services and its chief
information officer, the e-commerce
teams at Bay and Nortel are working on
creating a single front end and
registration. Nortel is using Bay's
one-to-one server from BroadVision Inc.
to personalize information for all
customers.
For now, the e-commerce servers,
configurators and backend systems of
the two companies will remain separate.
Greg Powell, vice president of Nortel's
e-business group, said Bay uses
configurators and e-commerce systems
from Trilogy Development Group Inc.
and PCOrder.com, whereas Nortel is
using Connect Inc.'s commerce servers
and is working with Calico Technology
Inc. on configurators.
Roth noted, however, that interfaces are
being built between Nortel's global
supply-chain management system from
The Baan Co. with Bay's SAP R/3
implementation. This will allow for
consolidated costing and scheduling for
customers that want both Bay and Nortel
products.
The consolidated site is expected to be
ready by the end of the year.
Roth pointed out that Nortel initially will
take orders only for low-end systems
and components over the Web, then
move slowly to more complex systems.
He said high-end systems like central
office switches require customization
and cannot be configured over the Web.
Wall Street was less than enthusiastic
about Nortel last week after company
executives lowered their growth forecast
for the third quarter. Following the
disclosure, Nortel stock slipped nearly 9
points in 24 hours, to $32.
Users and industry analysts were
cautiously upbeat about Nortel's product
and e-commerce initiatives, despite
Wall Street's bearish outlook.
"This merger has moved quickly, and I
am optimistic about their product
integration and order-taking over the
Web," said Jeff Fritz, the principal
network engineer at West Virginia
University's network services group. "But
they will have to be able to provide
integrated network management for
LANs, WANs and also MANs
[metropolitan networks], and as long as
they have the same ease of use of Cisco
Systems, I think they are not too late with
e-commerce."
According to Jim Wade, an analyst at
Alex Brown & Sons, "The stock drop had
little to do with the long-term strategy and
integration of Bay and Nortel but was a
reaction to the reduced growth
forecasts, combined with some
reference to slowing down of the capital
expenditures by carriers."
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