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Are Traditional IT Companies Mute Spectators?

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VoicenData Bureau
New Update

A Lucent acquires an Ascend. The

share value of Lucent, expectedly, goes up. But so do the shares of 3Com, Tellabs, FORE,

Cienna, and a host of other networking companies in anticipation of possible takeovers.

Even, the share price of Cisco, a direct competitor, expected to be hurt by this

particular acquisition, improves, after an initial drop. Suddenly, the global media is

full of stories on the acquisition, its impact on Cisco and other big and small networking

companies, and also on the likes of Alcatel, Ericsson, Nortel Networks, Siemens, and the

other telco equipment makers. The trade press talks of the future of global communication

networks and the positioning of different technologies and technology suppliers.

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Some otherwise familiar names do

not even figure in these discussions like those of Compaq, HP, IBM, Microsoft, and Sun.

Are these developments too isolated from the territories that these companies operate in?

Do these M&As—Lucent-Ascend, Nortel-Bay, and Ericsson-ACC—have no or little

impact on their future? Relevant questions, these are. But, no one even has the time to

ask them these questions. They have been completely sidelined.

Most IT biggies have decided to

keep mum, with a very uncharacteristic we-are-little-concerned kind of attitude. It is

difficult to believe they are not concerned. It is also difficult to believe that these

smart, market savvy companies are living in a fool’s paradise. What is more likely is

that they have failed to act promptly. And have let a big opportunity almost go out of

their hands. Well almost, because they still have a chance to come to the centre of

battlefield. A few of them may even come up with some startling news—or at least

let’s hope so.

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Telecom business
traditionally is conservative. IT is smart and aggressive. Then, data is winning the

battle between voice and data hands down. The data traffic in global communication

networks has surged ahead of the voice traffic. The telecom network itself is becoming

data-centric. And today, even the big telecom companies like Lucent and Nortel acknowledge

that fact.

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Why then is the fuss about IT

companies losing to telecom equipment companies? There is just one reason. These telecom

companies—at least some of them—have realized and acted on the paradigm shift

much before the IT companies—the otherwise smart guys—have done. And many of

them have not been hesitant to acknowledge that they have actually done that. The Nortel

Networks CEO, for example, says that his company has taken a 90-degree turn. The IT

companies are still in their own world, hardly reacting to the change. As most computer

hardware companies in the Eighties did when they faced the challenge from software

companies. Many of them are yet to recover fully from that jolt.

It is easy to dismiss the M&A

wave as primarily targeted at addressing the needs of the carrier market. That view is

short-sighted. While it may be true that the position of the voice companies vis-a-vis the

data companies will be further strengthened in the carrier market, a more alarming factor

for the computer companies is the impact the telco equipment makers will have on the

enterprise market in the long run.

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The hold over carriers will give

telecom equipment makers a route to the enterprise networks, as the role of carriers in

the corporate networks has increased manifold. Today, many carriers are actively

associated with the building of corporate-wide area networks. A strong relationship with

carriers will be a strength that smart telecom companies can play to their advantage and

get solidly into the enterprise market. Anyway, enterprise is no longer a totally strange

territory for them. The Bays and the Ascends have brought with them not only technologies,

but also the enterprise experience and contacts.

The new telecom companies with a

strong hold over both voice and data technologies will also be able to cater to the needs

of the converged enterprise networks better. Building and helping operate large complex

networks is anyway their forte. No one understands the network design and traffic

management better than them. In this aspect too, the IT companies will find them in a

disadvantageous position.

However, all is not lost for IT

companies. Their hold over large general purpose boxes—popularly known as

computers—means that they can continue to build versatile and more flexible

applications and come up with new things much faster than others. But they cannot afford

to make that fatal mistake. Of not admitting that they need to compromise wherever

necessary.

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For the moment, IT companies are

sidelined. But one thing is for sure—that they cannot take the enterprise market for

granted. The telecom companies will soon offer them tough competition there. IT companies

now have to fully leverage their strengths to fight back. And they have a whole lot of

that. One of them is not telling us time and again that they are much smarter than the

"conservative" telecom companies.

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