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An engineer's perspective on why Cisco and not Lucent:

There's an old saw in the industry that it's easier to teach a data guy to do voice than to teach a voice guy to do data.

Irrespective of the validity of the above (chauvinistic) statement, for Lucent to overcome its voice switch heritage and compete successfully with Cisco in the IP arena it has to lose several "old world" practices and tendancies. To wit:

Agility: Voice engineers for the major carriers are used to submitting requests for new technology or features to the switch vendor and then waiting six months (or a year!) for the result. This mindset extends to bug fixes as well as enhancements (of course they fix it if the switch is down!). Cisco has made a history of turning around minor fixes in days, features in weeks. In the data world time-to-market makes or breaks a product. It is not clear that even with the influence of the Ascend'ers Lucent is agile enough to compete with Cisco. The upside for Lucent is in product stability. Their challenge is to convince their "Internet Empowered" customers that it's OK to wait while the customer's competition moves forward. Advantage Cisco.

Legacy: Lucent has a HUGE installed base of central office switches (like the 5ESS). They also have an even larger base of PBX/customer premises equipment. And all that stuff has to be maintained and supported. Lucent cannot divorce itself from the "old world" voice switching market by simply waving a wand. These products are revenue-producing (though as sales of this stuff fall the stream trickles), but they are also draining. Every engineer, coder, and tester supporting the installed base is NOT moving the company toward the "new world" network. Cisco's installed base is IP data routing/switching equipment. Their voice-over-IP solutions are built on -- that's right! -- IP routing and switching technology. Every engineer, coder, and tester supporting their existing product base is also, by definition, supporting the "new world" VoIP product line. Advantage Cisco.

Strategy: Lucent has to develop (hopefully incremental, evolutionary) migration strategies and "bridging" technology to move customers off of their existing 5ESS and/or PBX solutions and onto the converged voice and data network. They have the tricky sales proposition of telling a customer that their $5M voice switch is a sound investment and hurry up and get off of it and onto the IP network. Cisco has been preaching the gospel of IP packet switching since its inception. Advantage Cisco.

FUD: Lucent owns the central office. It rules the call centers. Lucent's is the voice of 100 years of Bell Telephone experience and when they speak, telecom managers listen. Cisco has been limited to the web-heads in the data center. Those guys motto is, "Just reboot the sucker!" When it comes to reliability, fault-tolerance, and availability Lucent has a good story to tell. Cisco has to overcome its "newness" to the telecom market place, the deservedly poor reputation of the Internet in terms of reliability and user response (why do you think they call it the World Wide Wait?) and of course the recent spate of network attacks in the news. The FUD-factor goes to Lucent.

In the end Lucent will overcome its financial difficulties and eventually produce actual VoIP products. I have not gone into any of the financial reasons why I believe Cisco will ultimately prevail. There are some excellent posts on TMF that discuss Lucent's revenue problems, receivables, and inventory surpluses and contrast them with Cisco's balance sheet.

FUD (Fear, Uncertainty, and Doubt) only goes so far before you have to put up or shut up. I think the agility (time-to-market), legacy, and strategy arguments -- especially the incremental approach Chambers is preaching to the carriers and Fortune 100 enterprises -- will win out.

But hey, I'm just a bit-flipper, not an analyst. And of course, this posting is worth every red cent you paid for it!
-Tic
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