Ovum, the U.K. consulting firm, recent met with Nortel CEO Mike Zafirovski, chief strategy office George Riedel and Dietmar Wendt, president of global services, about Nortel’s strategic direction and its growing focus on expanding its services business. Ovum analyst Peter Hall said Nortel has ambitious plans for its services unit, which already employs 10,000 people and accounts for 20% of revenue. He said Nortel wants to double the size of the business over the next three to five years, and make it 50% of overall revenue. “It’s not surprising that a network vendor such as Nortel wants to shift the revenue balance from equipment towards services,” Hall said in a research note. “Services are perceived as more profitable going forward, being less subject to commoditisation and competition from Far Eastern vendors. However, network-based services is also becoming a highly competitive market, especially in the enterprise segment, as both IT services companies and leading telcos vie for the growing trend for enterprises to out-task or outsource their networks.” Despite Nortel’s plans, Hall said Ovum remains unconvinced Nortel can change its strategic stripes in such a short period of time and it questions “whether the company is placing too much reliance on its future as more of a services company.“
Ovum Unconvinced of Nortel Strategy
Ovum, the U.K. consulting firm, recent met with Nortel CEO Mike Zafirovski, chief strategy office George Riedel and Dietmar Wendt, president of global services, about Nortel’s strategic direction and its growing focus on expanding its services business. Ovum analyst Peter Hall said Nortel has ambitious plans for its services unit, which already employs 10,000 people and accounts for 20% of revenue. He said Nortel wants to double the size of the business over the next three to five years, and make it 50% of overall revenue. “It’s not surprising that a network vendor such as Nortel wants to shift the revenue balance from equipment towards services,” Hall said in a research note. “Services are perceived as more profitable going forward, being less subject to commoditisation and competition from Far Eastern vendors. However, network-based services is also becoming a highly competitive market, especially in the enterprise segment, as both IT services companies and leading telcos vie for the growing trend for enterprises to out-task or outsource their networks.” Despite Nortel’s plans, Hall said Ovum remains unconvinced Nortel can change its strategic stripes in such a short period of time and it questions “whether the company is placing too much reliance on its future as more of a services company.“