RIYADH, 19 December 2006 — Just a year after Mike Zafirovski became president and CEO of Toronto headquartered Nortel Networks Corporation, he arrived in the capital of Saudi Arabia. These days it is still unusual for CEOs of major North American companies to set foot in the Kingdom, let alone take time to give a presentation to the local business community followed by a non-scripted Q&A. Zafirovski’s visit shows that Cisco’s growth in Saudi Arabia hasn’t gone unnoticed, especially by a competitor who needs to play catch up in a big way.
That said, it must be pointed out that Nortel is not new to the Kingdom. The company has had a presence in this market for 31 years through a regional partner, Baud Telecom Company (BTC) formerly known as Binladin Telecommunications, a subsidiary of the Saudi Binladin Group. Nortel also has direct operations, Nortel Saudi Arabia, set up in January 2000 and led by General Manager Georges Sebaaly.
During his day in Riyadh, Zafirovski held nine meetings with companies and government entities. The theme of Nortel’s discussions was that information and communications technology can accelerate opportunities for both the government and corporate sectors in the Kingdom and this in the end will provide accelerated opportunities for everyone in Saudi Arabia.
Nortel is of course relying on the Saudi government to proceed with planned measures for enhanced network connectivity. In his presentation before the Saudi business community, Zafirovski quoted Dr. Fahad Al-Hoymany, IT adviser to the Ministry of Communications and IT, who stated in a presentation in Dubai that “by 2010 we want everybody in Saudi Arabia to enjoy e-government services.” This would require a massive ramp up of connectivity in the Kingdom coupled with enormously increased hardware penetration and IT literacy in a few short years.
In the Q&A, Zafirovski was badgered by customers concerned about Nortel’s financial stability and nagging legal problems. He quickly and succinctly attempted to put those fears to rest and assured the audience that Nortel is in the process of enhancing services, support and training for the Saudi market.
“Nortel spends the highest R&D to revenues of any one of our competitors,” said Zafirovski in an interview after his presentation to the businessmen. “We are a $10.5 billion company with market capitalization of $10 billion. We have cash in the bank of $2 billion and debts higher than that. Restatements are behind us and the lawsuits with our investors have been resolved. I can assure you that lots of the heavy lifting is over — putting in controls, getting our losses behind us, putting a new management team in place, a new board, new corporate governance — the foundation is very firm and the question of viability no longer applies to Nortel. There is a four-page letter online at nortel.com that includes the new leadership values, the six-point plan discussing our strengths and weaknesses, both significant, but the weaknesses are rather easy to fix. They are black and white, mostly internal operational issues which we are confident we can address and put behind us.”
Nortel is ready to capitalize on its investment in R&D and is counting on interest in its WiMAX and 4G communications solutions from Saudi government and enterprise sectors. Zafirovski explained that Nortel is moving forward aggressively in bringing these solutions to market globally.
“We have a very active lab under our chief technical officer. We have been working on 4G and WiMAX for the last seven years and we have more patents than anybody else in OFDM (orthogonal frequency division modulation) and MIMO (multiple-input multiple-output). These drive the 4G communications technologies including WiMAX,” he said. “I do not have a crystal ball to predict whether WiMAX will be successful or not. I believe it will be. I believe 2007 will be a very significant transformational year and in 2008 we will see a very significant explosion of WiMAX uses by carriers and enterprises — in both a disruptive fashion and also in a complimentary fashion.”
He continued, “I am not a technologist by training but I have a huge appreciation of what technology can do. My questions have been what are the benefits of speed to market? Cost to deploy? New means to address the digital divide and use WiMAX for the less densely populated areas and also how do we use WiMAX in the Mexico Cities of the world? At Nortel, we are putting significant amounts of funds behind those questions. We have five trials right now on five continents, so this is not only Asia, or Europe or Middle East focused, this is globally focused. So I am optimistic and within three or four months we’ll have a much clearer view. We are putting the funds in to find out and to lead, as opposed to being a bystander and hoping things will happen.”
This year, Nortel’s increasing activities with Microsoft in the area of Unified Communications have received a lot of attention. Zafirovski advised that the work with Microsoft is moving forward and that the companies hope to have a “full blown solution ready sometime in mid to late 2007.”
Many businesses aren’t up to date on the promise of Unified Communications and Nortel has made information available at its website to explain the concept. In brief, technologies that aim to unify communications have the goal of organizing multimedia communications into one convenient user experience. However, Nortel’s overall strategy for enterprises is business convergence, which is broader than Unified Communications. This strategy results in increased business effectiveness, employee productivity and customer engagement.
Business convergence requires sophisticated communications solutions as well as advanced integration services. Assessment, installation, monitoring and maintenance services for a business are essential for the full functionality of a converged solution. Nortel plans to offer this enhanced business proposition to the Saudi market and to do that the company will be investing heavily in human resources in the region.
“Nortel plans to bring in more people, both directly and through partners. The reality is that most businesses who sell to enterprise businesses in the communications space depend heavily on partners,” Zafirovski remarked. “There will be much greater advertising and marketing support to get our message out. We also plan to ensure that there is dependable 24/7 support. We want to be elevating the business proposition. This is nothing unique, but in the past we have been more focused on R&D as opposed to being a commercially oriented company. We will change that.”
Nortel intends to develop local professionals to serve enterprises investing in business convergence solutions by establishing training programs in the region.
“We will be starting a Convergence University,” said Zafirovski. “It will begin in the UAE in January 2007 and before the year is over we will have it in a number of other countries. We will get involved here with universities to discover their needs and determine how we can work together. We do not want to be a ‘me too.’ If another company is doing something with universities in Saudi Arabia already, we will find a way to be really relevant and to make the technology convergence degree from Nortel mean something special. This includes hands on training for the students to make the degree truly relevant in real world situations.”
So there you have it. The battle is joined. Although Zafirovski doesn’t say their name, preferring to call them “the other company,” Nortel and Cisco are in a fierce fight for the communication networks of Saudi Arabia. It’s a market struggle that Cisco has been easily winning, mostly because Nortel hasn’t been putting enough resources into the Kingdom. Zafirovski’s message is that those days are over. His personal visit to Saudi Arabia is to send a strong signal that Nortel does see the potential of this market, especially with the recent introduction of the economic cities initiatives. Even so, why should Saudi companies choose Nortel instead of another provider?
“We are the best voice company in the world,” said Zafirovski boldly. “In this field we have the products, solutions and applications that work together and are second to none, much better in fact than the No. 1 player today. We have the broadest capabilities as well. I’ve made a commitment to come back to Saudi Arabia when we double our business. I hope I’ll be able to make that visit in January 2008 or even before. Our plan had been to increase our business here by 60 percent in the coming year, but our partners and customers think that we can do much better. We’ll see. Numbers won’t lie.”
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