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Rich Tehrani’s Executive Suite is a monthly feature in which leading executives in the VoIP/IP Communications industry discuss their company’s latest developments with TMC president Rich Tehrani, as well as providing analysis on industry news and trends.


Rich recently had occasion to speak to Tom Zimmerman, president of Siemens Communications’ enterprise systems group, who explained Siemens’ approach to unified communications and how it will play out in the coming years.

Tom Zimmerman
 

Tom Zimmerman

 
 
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Tom Zimmerman, president of
Siemens Communications’



Unified Communications has been the focus of many conversations, many articles, and many presentations — it should be, as it is widely purported to be the future of the business communications environment. Unified Communications also means vastly different things to different people and different organizations, and for many of them, unified communications is a new foray. Siemens, however, has been preaching and preparing for it for several years now, and believes the time is now right for Unified Communications to become the dominant solution in the communications landscape.
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RT: Can you provide an overview of Siemens’ view on unified communications?

TZ: We think we have to combine our key domain, the mobile domain, and the voice domain, so that the customer gains the benefit of these converged worlds. We also think that unified communications should be based on open standards.

One key is that unified communication applications have to be embedded into the IT application landscape and, therefore, this open unified communication. So, “open communication” is our unique position, and it is deeply based on our software oriented architecture with our two main products, the 8000 softswitch and the OpenScape applications around it.

The last thing is that, with the tools we have to help the customer enter the unified communications area, we have to offer a migration path from the traditional world into the unified communications world.

RT: You’ve been preaching unified communications for quite some time. Can you give me some history of Siemens’ view on the market?

TZ: We started talking about unified communications about three years ago, and also talking about integrating our applications, not only into key applications, but into the business processes. We also began closely working with some of the industry leaders in the software world, like Microsoft ( News - Alert) . As you know, our first product, OpenScape, is now about two years in the market and it’s been a leading unified communications application. This is something we want to build on.

We really thank some of our competitors for embracing this decision now that we made three years ago — this shows that this is the right strategy. We now have a three-year product development lead and we are very committed to transforming this into market success — we think the market is starting to pick up in this area and we’re still leveraging our alliance with Microsoft.

We also will enter alliances with other big software vendors, like IBM and SAP (News - Alert) , and are working very closely with them to reach similar integrated solutions as we have in the unified communication area with Microsoft today.


RT: Has all of the activity surrounding the term “unified communications” been good or bad for your business?

TZ: We are committed to open standards, so we’ve also had some challenges, because some part of the value chain will be with some of our potential partners. As we move from the telecommunications industry into the IT industry, it is clear we have to focus on our value chain, just as we are focusing on the software business now. Our goal is to be a leading software provider for a focused unified communications portfolio.

The second thing that we will build upon is service. Besides the software business, we will build on our huge sales and service delivery business that we have, which, today, is about a €1.5 billion business. We will look to transform it more and more to a solution house, offering value-added integration services for our products. Our journey is very clear: We want to be a leader in the software business and in the value-added services business.

On the product side, that means that we will give up some part of the value chain. As you know, in the past, we had our own telephone systems with proprietary hardware and software. In the future, we will build on open platforms, open servers, and focus on the software we deliver. This is a change in the entire market, but we prefer to lead this change and this transformation.

RT: What are your thoughts on separating the service provider communications business?

TZ: We think the market will come more and more together. Business customers, service providers, and also carriers will have a bigger presence in our market, as well as some new players like IBM (News - Alert) , Microsoft, and even Accenture, and others. We believe our strategy places us as the leading open software solution provider, and having service integration capability will be a good asset in creating additional partnerships with software vendors as well as carriers.

We can also leverage our relationships with our carrier colleagues now, with Nokia (News - Alert) Siemens Networks, in order to work together with carriers, helping them enter the enterprise business space. Voice is becoming just another application on the network, but for now, it is still the most complex one — and it’s still one for which customers have the highest expectations. They want to pick up their handset and hear a dial tone, and they want to hear it all the time.


So, reliability is the key, and that’s why I think, when we combine what we know on the telecom side with our new knowledge on the IT side, we are well positioned to carve out a huge chunk of this service business.

RT: Competitively speaking, whom do you see as the company on which you’re most focused?

TZ: This will change over time, but at the moment, of course, it’s still the traditional competitors. I expect that, within the next, let’s say 12 to 18 months, the new entrants in our market — and I mentioned some with Microsoft, Cisco, and also some of the service providers — will be our largest competitors.

Being a software provider and a system integrator, we expect that our competitors will change with the market, and we do everything to transform our company to remain competitive. This means really working with some of the leading software companies and carriers, on the one hand, and with some of the leading integration companies on the other. This new ecosystem will be a very complex landscape and we will have competitors and partnerships at the same time.

But we believe we are well prepared for playing in this very competitive, but also very fantastic, environment.

RT: From an open systems standpoint, do you think your old competitors, such as Avaya (News - Alert) and Cisco, will evolve to be more similar to you? Or do you think that they’re going to continue with their traditional approach?

TZ: I think some of them will adopt our approach and build on open standards and SOA and similar things. But others, if they have a huge installed base on a proprietary architecture, they may not want to go to open standards. That’s why I think we can offer a clear alternative based on an open standard. We have different deployment models and a more decentralized approach, and putting it all together, we offer quite a unique value proposition.

RT: What are customers saying about it so far?

TZ: Customers really appreciate it. As you know, we introduced the 8000 product last year and, at the beginning, we had some challenges with the new architecture and new product coming out of the carrier space. We have spent much of the year-and-a-half catching up with features and additional requirements and have transformed a lot of R&D from our traditional product to the 8000. So, after two software upgrades this year, our customers realize that the product is not only unique in its architecture and leading in its technology, but also now is much more developed. And the feedback is very good. We are winning a new 8000 customer nearly every week now.

Our Microsoft alliance is also very much appreciated, because our customers want to integrate our applications into the Microsoft desktop, so I'm convinced that we are on the right strategic path.

RT: If you’re beginning to make more money from systems integration, IBM showed that they were able to generate much higher margins on systems integration and consulting. Is that similar to what you’re doing? Wouldn’t you make higher margins and more money by going into that business?

TZ: That is the plan. As you know, in the past, proprietary systems were a profitable business, but this is changing now and there are huge price pressures in many markets. Our goal is to balance this with higher margins in the value-added service business — both professional services and managed services and more.

RT: How do you see service oriented architecture as coming into play in this business?

TZ: I think this is prerequisite to integrating our solutions and our applications into a broader IT landscape. Not everyone can do everything on his own in the unified communication area, but we think we can build our market share. However, we cannot offer everything in this application landscape and we have to work together with other leading software companies. And this can also only be based on a service oriented architecture, and we do not want to have relationships with only one or two players. Instead, we really want to have the possibility to integrate our applications in most of the other leading systems.

RT: What do you think open source is going to do to the market?

TZ: We do not expect, at least not for our large global customers, a big impact. Most customers still see that open standards and open communications are important, but they should be managed. Our customers are telling us, “open but managed.” This is especially true if these applications are to be integrated into the broader IT landscape of these customers, where security and availability become increasingly important.

RT: Are you implying that managed or open source can’t be managed?

TZ: I think that there are still a lot of issues around security and other things and, up to now, my feeling, based on feedback from the market, is that customers, especially large customers, are not ready for it. So, for a movement like Asterisk (News - Alert) and others, I do not expect a huge impact, not in the next couple of years. We are watching it closely, and we do not want to underestimate it, but, up to now, the reaction of our large global customers tells us we don’t have to be very concerned.

RT: How do you see the communications industry changing over the next five years or so?

TZ: I think that unified communication will start to grow dramatically now. We’ve talked about this for a couple of years, but I think the time has come, and customers are ready for it, partly because of customized solutions available for different verticals. I think this will be a huge growth area.

I think that open standards will become the industry standard, and enterprise communication will become more and more SIP-based — our competitors are also following this assumption. And I think unified communications will fundamentally change the way we communicate. Our customers are really integrating communications into business processes and achieving greater productivity and effectiveness. This will be the next big thing.

For the industry, this means a consolidation in the marketplace for some of the big vendors, like we’re seeing in the carrier world.

Rich Tehrani is President and Editor in Chief at TMC.

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