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Nortel Confidential Information

Peter CarboneVP – NortelVice Chair - ITACMay, 2008

1

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

2


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

3


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


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


A Changing Industry LandscapeDisruptions & Transformations

IndustryFocus/Era

1996-2000 2001-2007

Intelligence& Mobility

2008-2013

On-DemandPervasiveBroadband

Connectivity

1990-1995

6

Facilities centric Information centric

Information Interaction

Nodal/Product System/Service

NetworkBuild-out

New Players, Business Models and Values


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

Facebook

Cyworld.com

Reunion.com

EverQuest

Warhammer

World of WarcraftSecondLife

WebkinsGaia

Habbo Hotel

Ultima


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


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

1

2

3



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


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


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



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


The Evolution of Wireline

Ethernet, Advanced Optics, PBT/IP

QPSK

PBT/PLSB

eDCO

40G/100GTomorrow


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


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


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


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


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


The Evolution of Applications

SOA, Web Services

Tools of Communications

Sources of Information

3D spatial audio collaboration

Click to Connect/Collaborate

Intelligent AgentsTomorrow


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


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


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



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


Communications Enabled Business Processes (CEBP)

Stock Market Notification Contact Management System

Delivery Notification GPS Location Based Services


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


Leveraging Real + Virtual Future for Enhanced Experience


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)

…



Value Chain Driving CommercializationRequires System Approach to Maximize Flow from Idea to Cash

Supply Nurture Grow Scale

Create Qualify Invest Manage

PolicyLever

ImplementationLever


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


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



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


Strategic Use of Open Source

Carbone FOSS Maturity Model Apr 2006


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

Documents

Disruptions & Opportunities in the ICT Industrymlipsett/ENGM401/PreCarn.pdf · Disruptions & Opportunities in the ICT Industry. ... HSUPA Evolved EDGE Greenfield Licenses, New Entrants,