Comments on: Alcatel-Lucent’s R&D centers on sale?

By: Ravi

Ravi — Thu, 18 Feb 2010 02:47:11 +0000

But Alcatel is closing R & D in chennai.All Business units are now sold with other companies.(wipro,TCS,Tech Mahindra)

By: Manoj

Manoj — Mon, 30 Nov 2009 09:28:23 +0000

Rajesh,
Good analysis. I would like to make one point here about your comparison to Bharti. That if you look at Bharti and ALu business, Marketing & Operations become key to a service provider like Bharti, while Marketing & R&D become key to a Telecom R&D co like Alu. However in former case, Marketing can be very be well separated out from operations and focus on marketing bring better effeciency in the co. In the latter case I believe Marketing and R&D are both inclusive and cannot be separated. Here I dont mean sales by the term marketing, rather more text book meaning of identifying the need and satisfying (developing it)…so in the case marketing is inclusive of the research part as what Bell labs is doing and Development is what ALu is doing. So in my opinion it may not be fair to assume that Telecom R&D cos have to follow their customers in terms of strategic outsourcing. However I agree to your point of outsourcing legacy and maintenance work which was well explored to the core by every possible software co from last dotcom burst.

However these are just my views and I may not have understood any finer details that may have lead to R&D cos (I am including other cos) thinking in these lines.

Manoj

By: Rajesh

Rajesh — Fri, 09 Oct 2009 11:50:43 +0000

@Harish Yes. It is just that what motivated "make" decision over the years has been evolving. From conglomerates of the 60s to outsourcing of "core" these days.

By: Harish

Harish — Wed, 07 Oct 2009 19:40:05 +0000

@Rajesh Well in a way this is classic make vs buy decision. The difference is that the company picked "make" but is now turning towards "buy" because of other (may be financial) considerations.

By: Rajesh

Rajesh — Wed, 07 Oct 2009 17:12:45 +0000

@Harish
Thanks Harish for reading and for the comment.

It is an interesting point that you bring up. The risk of being held hostage due to a critical component being outsourced. It may still be very early in the game to say whether Bharti got it fully right either!

However, given a scenario where efficiency is paramount even for survival, getting it right may be the only option for some companies.

By: Harish

Harish — Wed, 07 Oct 2009 16:58:06 +0000

What you said works great in theory but success relies on execution. Bharathi, as you pointed out, succeed in getting it right. But most companies dont! Boeing did something that is far more drastic back in the day (1). They got the theory mostly right but one of their suppliers (equivalent to service companies in your writeup) held Boeing hostage. The supplier was owned by Carlyle group at that point and they figured there is money to be made off this setup. Getting the execution, i.e. the structure and incentives part, can be tricky when there are lots of moving parts. Boeing thought it was getting its suppliers attain economies of scale by supplying to both Boeing and Airbus (noble goal of doing away with wastage). Boeing also thought that suppliers will take part of the capital risks and let them have proportional returns (including IP). And to Boeing’s credit, they got most of it right too. But getting most right is not good enough in most industries today. Boeing was lucky that airline industry was in a downturn and most of its customers (who had paid upfront for dreamliner) did not demand delivery right away. More over Airbus did not have anything similar to offer. So Boeing got away scotfree. Do you think Lucent has a similar luxury in its industry space?

1 – http://www.businessweek.com/magazine/content/06_05/b3969417.htm

By: Rajesh

Rajesh — Wed, 07 Oct 2009 15:21:38 +0000

Hi Kishore,

Thanks for reading and for your comment.

I’m not sure if the current quarter-to-quarter climate is suitable for long term open ended research that bell-labs once conducted. Given that, I am not sure if your Nobel prize reference is relevant to this discussion.

Further, I am not sure if you can acquire your way to efficiency, if that is what you meant.

By: annam thyagaraja kishore

annam thyagaraja kishore — Wed, 07 Oct 2009 15:16:37 +0000

Dear All,

This is sheer impossible; if Alcatel-Lucent desires, it can acquire small companies which are agile and lean; not hurt it self into its core skills of Reseach especially when we read about 2009 Nobel for Physics