Nortel Confidential Information
Peter CarboneVP – NortelVice Chair - ITACMay, 2008
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Disruptions & Opportunities
in the ICT Industry
Copyright Nortel May 2008Copyright Nortel May 2008
Wireline
ApplicationWireless
Enterprise
Infrastructure
Carrier
Nortel – Innovation in Canada• R&D Investment (2006)
• 40% of Nortel’s R&D investment• 10% of all private-sector R&D in Canada• 85% of all telecom R&D in Canada
• Intellectual Property and Commercialization• Canadian inventors named on 5000+ active Nortel patents• IPR underpins all of our business initiatives
• Internal and External Research• R&D HQ in Ottawa – half of our new patents each year• 20 key research partners: Waterloo, Toronto, Carleton,
TRLabs, CRC• Engaging with Government to enhance commercialization
initiatives
• Extended Impact • 200 tech companies trace roots back to Nortel• $7.2M and 25,000 volunteer hours for charities
in 2007
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Copyright Nortel May 2008Copyright Nortel May 2008
A New Era for ICT
• Our industry is at a series of inflection points – disruptive in many dimensions
• We are in the middle of transformation to capitalize on inflection points
• Global competition has never been fiercer – need for agility, scale, cost effectiveness, innovation
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Copyright Nortel May 2008Copyright Nortel May 2008
New Era of Disruptive Changes
Telegraph Connecting sites
Short, importantbusiness data
Changed speed of business
Telephony Connecting paths
Conversations + voice and socialization
Internet Connecting endpoints
Broadband data transactions
+ commerce
New Era Manage dataVirtual world
Socialization + proxy for face-to-face
New Motivation, Problem Set, Skills, and Culture
Copyright Nortel May 2008Copyright Nortel May 2008
Change Agents Impacting Future
Today TomorrowInnovation from the Enterprise Innovation from the End User
Carrier Walled Garden Google, Yahoo, Apple
Wireline dominates Wireless dominates
Information Interaction
Hollywood You Tube
Product reliability System reliability
Independent point products Capabilities
Copyright Nortel May 2008Copyright Nortel May 2008
A Changing Industry LandscapeDisruptions & Transformations
IndustryFocus/Era
1996-2000 2001-2007
Intelligence& Mobility
2008-2013
On-DemandPervasiveBroadband
Connectivity
1990-1995
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Facilities centric Information centric
Information Interaction
Nodal/Product System/Service
NetworkBuild-out
New Players, Business Models and Values
Copyright Nortel May 2008Copyright Nortel May 2008
New Era CharacteristicsServices -> Experience
It’s About Networking…Not Networks
Bridging Real and Virtual Worlds
Rapid evolution, competition and innovation
Social Networking Virtual Worlds Online Gaming
MySpace.com
Cyworld.com
Reunion.com
EverQuest
Warhammer
World of WarcraftSecondLife
WebkinsGaia
Habbo Hotel
Ultima
Copyright Nortel May 2008Copyright Nortel May 2008
Disruptive Business EnvironmentA challenge for status quo
Network Infrastructure - SolutionsAlcatel-Lucent Cisco Ericsson Nokia Nortel
MySpace.com
FacebookCyworld.com
Reunion.com
EverQuest
Warhammer
World of WarcraftSecondLife
Webkins Gaia
Habbo Hotel
Ultima
Pure Play – Application• SAP• Oracle
Device/ConsumerElectronics
• RIM, Nokia• Apple• Nintendo, Sony
S/W Infrastructure/ Solutions• IBM• Microsoft• Nortel
Service Provider - Portal• Verisign• Google • Yahoo
Copyright Nortel May 2008Copyright Nortel May 2008
Next-Generation NetworkResearch Focus
Including 3rd-Party Apps
MediaVoiceServicesEdge
Access
Applications
Service Core
Security
QoS
IP VPN
SubscriberControl
Mobility
Packet-Optical (LAN/WAN)
Aggregation,Distribution
InteractiveMedia (MCS)
Wire
less
Pack
et-O
ptic
al
IVRPolicy Contact Center
ApplicationSwitching
CPE
Security
Operations, Administration, and Maintenance
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2
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Copyright Nortel May 2008Copyright Nortel May 2008
Copyright Nortel May 2008Copyright Nortel May 2008
The Evolution of Wireless
Today Tomorrow2G/3G/WiFiGSM, UMTS, CDMA, HSDPA, .11
4G/Unwired EnterpriseWiMAX, LTE, .11n
• Mobilized Internet• High capacity
• Lower cost• Open
• Voice centric• Low speed
• High cost• Closed
Copyright Nortel May 2008Copyright Nortel May 2008
The Evolution of Wireless
Tomorrow
4G/Unwired Enterprise WiMAX, LTE, .11n
Multi-Carrier Systems
dBm0
-10
-20
-30
-40
-50
-60
-70
-80
-90
-100
Carrier at 45W
2 GSM Carriers
dBm0
-10
-20
-30
-40
-50
-60
-70
-80
-90
-100
OFDM
dBm0
-10
-20
-30
-40
-50
-60
-70
-80
-90
-100
Carrier at 45W
2 GSM Carriers
dBm0
-10
-20
-30
-40
-50
-60
-70
-80
-90
-100
OFDM
OFDM-OFDMA
Multi-Hop Relay
MIMO
BS only BS +RS
BS – Base StationRS – Relay Station
Copyright Nortel May 2008Copyright Nortel May 2008
Need to Advance LTE to Support True Broadband
OFDM/MIMO
+Flat IP
Network
2G2G 3G3G
2008 2009 20102007
Trials RolloutWiMAXRolloutEarly AdoptersLTE Demos Trials
3GPP2CDMA
3GPPUMTS
3GPPGSM WiMAX
LTE
1xEV-DO Rev A
1xEV-DORel 0
CDMA20001X
GPRS/EDGE
HSDPA/HSUPA
Evolved EDGE
Greenfield Licenses, New Entrants, Attackers
4G4G
Opportunity for 4G leadership
R99
Copyright Nortel May 2008Copyright Nortel May 2008
Copyright Nortel May 2008Copyright Nortel May 2008
The Evolution of Wireline
Ethernet, Advanced Optics, PBT/IPIP, MPLS, Routing, SONET
Today Tomorrow
• Greater than 10-Gbit/s
• Simplified
• Lower cost• Dynamic, more
intelligent
• Sub 10-Gbit/s• Complex
• Costly• Static
Copyright Nortel May 2008Copyright Nortel May 2008
The Evolution of Wireline
Ethernet, Advanced Optics, PBT/IP
QPSK
PBT/PLSB
eDCO
40G/100GTomorrow
Copyright Nortel May 2008Copyright Nortel May 2008
Optical Optical
MPLSPacket
Agile Optical
Carrier Ethernet
Long-Haul TransportAccess MetroPBB –Encapsulates 1000s of addresses into single address
Ethernet
PBT – Makes Ethernet Carrier Grade
Key Changes in Ethernet & Optical
Lambda
• Data leaving the enterprise will grow 3-5X between 2007-2012
• Ethernet is link layer of choice – everywhere• Power consumption is increasingly important
Copyright Nortel May 2008Copyright Nortel May 2008
Communications Enabled Applications
User Initiated
Event Initiated
BusinessProductivity
Simplicity &Effectiveness
Unified Communications(SIP)
Consistent Experience
MultimediaApplications
Person/GroupProductivity
AnywhereAnytime
Any Device
Evolution of CommunicationFrom infrastructure to application
Business Optimized Communications
CommunicationsConvergence
IP Telephony
VoIP
Network Consolidation
TCO &Virtualization
ConvergedData Network
Business Optimized Network
NetworkConvergence
Business ApplicationConvergence
Value
Copyright Nortel May 2008Copyright Nortel May 2008
The Evolution of Applications
SOA, Web ServicesMonolithic Software
Tools of Communications
Sources of Information
• Network aware• Personalized
• Rapid creation• Infinite options
• Network oblivious• Homogeneous
• Long cycles • Few options
Today Tomorrow
Copyright Nortel May 2008Copyright Nortel May 2008
New Technology: Telecom Web Services
The applications possibilities are endless!
Service broker
SOAP
i
f(x)
Service requester
UDDI
WSDL WSDL
Service provider
Session and network control Applications space
Nor
mal
izat
ion
and
expo
sure
Application servers
HSS
Call server
Call server
CSCF
SIP
Web Services
Account admin.
Service provisioning
Subscriber charging
Identity
User location
User status
User interface
Session control
Bind
Find Deploy
Technology model Telecom services
Telecom-Enhanced Web Services
Copyright Nortel May 2008Copyright Nortel May 2008
Evolution of the Communications Service
• Service as a vertical slice
• Specialist programmers
• Tightly-coupled, embedded environment
• Development time measured in months
Some Form of LayeredArchitecture
Service 1
Layers
Orchestration of higher level service
Lower LevelServices
subscriber consumer
• Service as a orchestration of component services
• IT programmers
• Loosely-coupled, orchestration environment
• Development time measured in days or hours
Layers
Copyright Nortel May 2008Copyright Nortel May 2008
The Evolution of Applications
SOA, Web Services
Tools of Communications
Sources of Information
3D spatial audio collaboration
Click to Connect/Collaborate
Intelligent AgentsTomorrow
Copyright Nortel May 2008Copyright Nortel May 2008
Communications + ITGreater than the Sum of the Parts
Communications Building Blocks
IT Applications
Billing
Location
Video
Presence
Voice
SubscriberProfile
Sharing WebComms
CallHistory
Click-to-Call
Conf-erencing Text-Chat
Purchasing E-Mail Fulfillment
OrderEntry SAPImaging
Healthcare Energy Mgmt
AnyVertical
This is where it gets interesting
Copyright Nortel May 2008Copyright Nortel May 2008
The Next Value Plane Communications Enablement
Customer Satisfaction
Quality Healthcare
Safety and
Security
Customer Service
Communications Enabled Application
• Integrated set of IT and Communications technology components
• Provides communications capability to an IT application
• Reliant upon communications technology to accomplish objectives
Copyright Nortel May 2008Copyright Nortel May 2008
Web 2.0 “Mashup”: Vulnerable Worker>With Vulnerable Worker, I can:
>As the worker, securely record my entry & exit into client meetings>As the operator, view the live location/meeting status of my
vulnerable worker team, click to call them on demand >Define automated actions – reminder, first alert, … emergency
Hosted
Operator view• Administration• Browser Based• Configure
alerts/alarms
Service Provider
Communication• Rich presence• IM• Click 2 Call
Rules
Map• By latitude /
longitude• Geocoding
Network
ip2locationLocation• From address/#• From connection
GPS
Meeting Manager
Calendar• Plan of day
GoogleEarth
VulnerableWorker
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Copyright Nortel May 2008Copyright Nortel May 2008
The Next Value Plane Example: Team Formation
Team Time Tools Place Efficiency Safety Survival
Orchestrationvia
CEA/Web Services
Static – Pre-defined
Environment
Context
PolicyPermissions
Network Info –ie. location,
presence, identity
tools, assets
Context
situational response
Interaction -negotiation
Dynamic/Engaging
IntelligentDecisionMaking
Ad Hoc/Best Effort Precision/just in time
Copyright Nortel May 2008Copyright Nortel May 2008
Communications Enabled Business Processes (CEBP)
Stock Market Notification Contact Management System
Delivery Notification GPS Location Based Services
Copyright Nortel May 2008Copyright Nortel May 2008
Session ControlIdentity Management
User Status / PresenceDevice Location
Subscriber ChargingService Provisioning
Account Administration
Bandwidth policy / SLASecurity Policy
Network performance dataRoaming Policy
Skills based routingMedia Conferencing
Network Infrastructure
Domain and Vendor Agnostic
NormalizationWeb ServicesNortel
Agile Communication
Environment
WSDL (XML)
ConsumableWeb Services Social Applications
Mobile Applications
Collaborative Applications
Business Process
Communications Enabling Eco Systems
OracleSun
Copyright Nortel May 2008Copyright Nortel May 2008
Leveraging Real + Virtual Future for Enhanced Experience
Copyright Nortel May 2008Copyright Nortel May 2008
Canada’s Challenge - Commercialization
Domestic/US Global
Create value Appropriate Value
Supply chain mgmt Business ecosystems
Control Value Delivery
Achieve scale, agility, cost-effectiveness & broad innovation
….new tools and techniques for commercialization
Motivation = To Be Competitive
Consequences• Global competitors disruptive market
entry• Faster commoditization of
products/solutions• Difficulty in attracting new investment• Scale increasingly important
Switzerland 1
Finland 2
Sweden 3
Denmark 4
Singapore 5
USA 6
Japan 7
Germany 8
Netherlands… 9
Canada 16
United States 77.4
Japan 72.7
South Korea 67.2
United Kingdom 67.1
Australia 66.5
Taiwan 65.8
Sweden 65.4
Denmark 64.9
Canada 64.6
Switzerland 63.5
Economy B (11)
Innovation D (14)
Environment D (14)
Education & Skills A (3)
Health B (8)
Society B (10)
World Economic Forum (GC Index)
Economist (2007 ICT Index Score)
Conference Board(report card)
…
Copyright Nortel May 2008Copyright Nortel May 2008
Copyright Nortel May 2008Copyright Nortel May 2008
Value Chain Driving CommercializationRequires System Approach to Maximize Flow from Idea to Cash
Supply Nurture Grow Scale
Create Qualify Invest Manage
PolicyLever
ImplementationLever
Copyright Nortel May 2008Copyright Nortel May 2008
Eco-System Based Commercialization
Challenge is to address need for scale, agility, cost effectiveness and innovation
Challenged (cost effectiveness)
• Commercialization competencies
• Market pull
• Go-to-market
• Focus on research
• Invest to transition
Technology Transfer
Challenged (scale and agility)
• Static (relationships)
• Difficult to scale
• Each component must succeed
• Pick a domain (& winner)
• Invest to grow
Network Clusters
New model
• Self – adjusting
• Strength from scale, diversity
• Independent of component instance
• Create dominant design
• Invest in health & manage relationships
Eco-System
Cost vs innovation
• Dominant player
• Commoditization
• Cost based
• Focus on gaps
• Invest to Manage dependencies
Supply Chain
Copyright Nortel May 2008Copyright Nortel May 2008
Collaboration: A Business Eco System
NOAA Technical Memorandum
A Business Eco-System Model
Resilience
Res
ista
nce
Dominator• block change• absorb innovation
• agile• innovative
NicheUnstable
Stable
Keystone
• Productivity• Stability• Create niches
• Slow• Static
Low
High
Environmental Condition
Copyright Nortel May 2008Copyright Nortel May 2008
Copyright Nortel May 2008Copyright Nortel May 2008
Industry Innovation: Connect & Develop*
+60%1R&D Productivity
35% from outside
45% have external components
15% from outsideSource of Innovation
7500+ 1.5M7500Researchers
3.4%4.8%R&D Spend
$114$52 (down from $118)
Share price
>70%>100 new products 04-05
35%Innovation Success rate
Circa 2005Circa 2000Metric
* HBR March 2006
Copyright Nortel May 2008Copyright Nortel May 2008
Strategic Use of Open Source
Carbone FOSS Maturity Model Apr 2006
Copyright Nortel May 2008Copyright Nortel May 2008
Some Areas for Industry Focus
Key ITAC Recommendations• Create an implementation plan to close
competitive gap• Skills/talent/human resources: need a
national strategy and coordination• Access to and cost of capital: need a
holistic lifecycle strategy• Leverage new business ecosystem tools
• Taxation:• Ontario PST; personal income tax• fix SR&ED for Innovation, R&D &
Technology
• Healthcare: raise technology advancement to world class levels
• Productivity: close SME adoption gap
Goals• Grow global champions• Participate in Global Value Chains• Sustaining High-Value Jobs• Addressing Canadian Priorities
• Health / Education /Government Services / Security
• Building a 21st Century Knowledge Economy for Canada