The evolution of communications in Enterprise The Alcatel-Lucent Enterprise communications portfolio strategy

Why Alcatel-Lucent Enterprise chose this strategy 1

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What our strategy delivers

How our strategy is deployed

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1 Why Alcatel-Lucent Enterprise chose this strategy

HOW TRADITIONAL TELEPHONY HAS EVOLVED AND CONTINUES TO EVOLVE

The wave of telephony evolution from time division multiplexing (TDM) to Internet Protocol (IP) dates back 20 years. The evolution has been slow, and the adoption rate of IP has varied greatly by market segments.

Large enterprises, and especially large multinational customers, represent the segment that has evolved most rapidly. The move to IP offered this segment clear cost savings due to the consolidation of the voice and data networks and to optimized voice over IP (VoIP) architecture and centralized network management.

The penetration of IP technology has been significantly less rapid in the mid-market enterprise (approximately 68%, 101-1000 extensions [Source: MZA, 2015 Revenue]) and lower in the small/medium business (SMB) market where the benefits of multi-site and centralized solutions are much lower (only 35%, 2-100 extensions [Source: MZA, 2015

Revenue]). However, over the next five years these markets will begin to see the same benefits that large enterprises have seen, as service providers’ IP trunking services provide cost savings with voice and data convergence over their public network.

In parallel, unified communications (UC) solutions, offering companies rich functionalities (such as instant messaging, unified messaging, and video) have experienced a low adoption rate at most enterprises due to functional and operational deployment complexity.

Ultimately, the traditional telephony market, with the evolution from TDM to IP, followed by UC as a service (UCaaS), has not created value for the entire ecosystem.

This has led to a market that has been decreasing by 4 percent to 13 percent yearly. (Source: MZA, Q2’16 forecast).

A HYBRID CLOUD APPROACH, COMBINING THE BEST OF BOTH WORLDS

The advent of the cloud brings new possibilities. In particular, it allows the enterprise to extend beyond its borders and provide more flexibility to its mobile users and intercompany collaborators. However, IT managers who have invested in robust, reliable and secure on-site communication systems want to make sure things stay that way for their employees.

Alcatel-Lucent Enterprise believes the hybrid cloud, where the platforms connect to the cloud to offer more flexible unified communications, is the future for this market and its ecosystem.

This is the direction Alcatel-Lucent Enterprise is taking today and will be taking in the future.

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A VERTICAL APPROACH UNIQUE IN ITS SIMPLICITY

We believe that a vertical approach is best to address the needs of the communications market. Until now, UC has not materially changed the nature of the communications application, which continues to exist largely as a standalone application, requiring individuals to leave the application in order to perform their jobs using their industry-specific apps. This is one reason for the low adoption of traditional UC.

New communications platform as a service (CPaaS) capabilities are creating a paradigm shift, accelerating the ability for software developers to integrate communications APIs directly into industry-specific applications and customer business workflows.

For example, in a hospital where processes are critical, nurses and doctors need to be accessible and need to be notified to handle emergencies.

Moreover, patients need to be reminded when to take their medicine, even after discharge. This requires integrated communications with the hospital’s business processes and the patient’s electronic medical record (EMR). The same challenges can arise, for example, at airports and industrial sites, where notifying a large number of individuals can be critical. A vertical approach to business processes can provide real added value. This is a key differentiator of the Alcatel-Lucent Enterprise solution.

NEW MARKET OPPORTUNITIES ENABLED BY ALCATEL-LUCENT ENTERPRISE SOLUTIONS

Our cloud services integrate with the enterprise’s business processes and platforms, whether they are Alcatel-Lucent Enterprise platforms or third-party platforms. This ensures that investments made in previous infrastructures are not lost.

Beyond the IP-based services, our cloud offer provides interconnection to the public switched telephone network (PSTN). This extends collaboration capabilities with traffic-based services, directly accessible from the user interface, to provide ease of use from end to end. These services are not at the expense of our service provider partners, but rather they are delivered with them, as we “hand them back” the traffic that is generated, enriched with value-added services such as conferencing.

The second hybrid cloud differentiator is simplicity, both in deployment and usage. Simplified interfaces enable rapid adoption and ensure robust interactions between users.

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A WIN-WIN SCENARIO FOR ALL

In fact, the Alcatel-Lucent Enterprise solution delivers value for all:

• For users it provides simplicity.

• For customers it allows them to leverage existing investments while developing new applications integrated with existing business processes.

• For partners, it shows that Alcatel-Lucent Enterprise is committed to sharing the end-to-end value of its solutions (revenue, traffic, etc.) with service providers and resellers.

It’s a win-win for our customers, our partners, and for us.

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THE BEST OF THE ENTERPRISE COMMUNICATIONS PLATFORM AND THE CLOUD

We have chosen a hybrid strategy of connected platforms that combines the best of both enterprise platforms and the cloud.

Enterprise platforms offer a security advantage as they enable IT services to control usage and costs and avoid shadow IT. They are also reliable, robust and suited to enterprise tasks and processes. Unfortunately, while suited to the enterprise environment, communications takes place more and more outside the corporate borders. Many systems are too complex and inflexible for support of today’s on-the-go workforce.

2 What our strategy delivers

In contrast, the cloud world is much more open. It allows for the addition of more flexible communications services, particularly in mobile situations outside of the company. It is also more intuitive as these solutions are optimized for the end user. However, the cloud presents risks when deployed outside of any IT department’s policy (for example, lack of a consistent back-up policy, lack of data access control when an employee leaves the company, etc.).

Our solution combines cost control, quality and security from the already deployed enterprise equipment as well as flexibility and simplified usage with access to the cloud services.

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EVOLUTION OF OUR PORTFOLIO IN A NUTSHELL

• From a private branch exchange (PBX) provider to connected platform provider

• From cloud solution provider to cloud services provider

• A differentiating vertical-specific approach

Figure 1. Alcatel-Lucent Enterprise portfolio direction Connected platforms

Cloud services

Vertical sectors

SMB market/OXO Connect: cost reduction, Rainbow

ready through Cloud Connect agent

MLE market/OXE, OTECand OTEC-S convergence:

mid-market, Rainbow ready through Cloud Connect agent, vertical openness (CEBP)

Terminals: Expand premium desk phones/

handsets range - multivendor SIPcapabilities, UCaaS, openness

Rainbow OTT/Q4’16 PBX connectivity/Q2’17

PSTN conferencing/Q3’17

Building a global overlay hybrid cloud service provider platform

Freemium/Subscription business model

Vert

icals Rainbow

Connected platform

s

Hospitality: digital hotel, mobile guest experiences, smart guest applications, notification services,occupancy-based model

Healthcare: optimize the care path, appointments/CRM, notification services, video/post discharge

Toward Rainbow as a CPaaS, integrating with vertical- specific apps and processes

PORTFOLIODIRECTIONS

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RAINBOW: NEW CLOUD SERVICES

The second major strategy element is based on our new services available through the Alcatel-Lucent Rainbow™ cloud platform. The primary objective of Rainbow is to connect people, processes, and things inside and outside the enterprise’s borders. It can be a business community of people having a discussion in a chat session. It can be systems notifying individuals (such as in the hospital example noted earlier). It can be a machine sending an alarm to a maintenance system.

Figure 2. Connecting people and things

IDENTITIES | RELATIONS | SERVICES

Rainbow services are available in a freemium model (free usage with premium features). The goal is to offer enterprise-grade services to a large community of business users, and thereby unleash their collaboration power with their ecosystem. The freemium version of Rainbow provides presence, contact management, chat, and file-sharing services, as well as peer-to-peer VoIP, and video over IP.

The premium subscription-based model allows IT directors to access enhanced management features such as backup and company directory integration, and to connect Rainbow to the enterprise communications platforms. This gives the users new services such as call management and voice mail, leveraging the high quality audio services delivered from desk phones and communications platforms, especially beneficial during long collaboration and conferencing sessions.

Finally, Rainbow integrates additional subscription options for traffic-based services such as audio and video conferencing to extend service capabilities and optimize costs.

A VERTICAL APPROACH TO ADDRESS INDUSTRY-SPECIFIC NEEDS

Our strategy is based on a vertical approach.

For example, in the hospitality sector, our solution leverages on-site equipment in the hotel to deliver in-room automation services (including temperature and light control, television control, and voice on-demand lighting).

In the healthcare sector, our on-site equipment and integration with the Rainbow platform can manage critical real-time communications, provide essential notification services and alarms to doctors and nurses, and offer the ability to use video to follow up on discharged patients who are able to recuperate at home.

Hospitality and healthcare are just two examples of how hybrid enterprise and cloud platforms can deliver sector-specific solutions with high added value to provide differentiated offers to our customers.

This vertical approach is made possible with the Rainbow open architecture and set of APIs that enable integration with business applications. As another example, in the banking sector, applications used by advisers in agencies are evolving toward remote banking. Rainbow can enable advisers to interact with customers using services integrated into their banking applications.

Our solutions also help to create the digital hotel by providing “mobile guests” with a wide range of services (including voice, video, check-in and concierge) using a smartphone application, and leveraging Rainbow’s simplified API integration capabilities to bridge the mobile guest app with the hotel’s front-office systems.

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OUR LONG-TERM STRATEGY

Rainbow will be launched using innovative business models.

The freemium offer ensures access to the free solution by all users of the community.

The premium subscription-based version allows enterprises to take control of their corporate environment with additional management features such as back-up, corporate directory integration, and to connect Rainbow to the enterprise communications system. At the same time, it brings value to system integrators by enabling them to interact with IT departments and connect applications to the cloud, deliver integration services and earn new recurring revenue through the new cloud services. Specifically for service providers, additional traffic-based services delivered by Rainbow, such as multi-party conferencing, route back onto their network, thereby providing them with an incremental source of revenue. Other vendors have not opted for this type of partnership with service providers.

Rainbow is a CPaaS. In addition to connecting people, it will also connect objects as part of the Internet of Things (IoT), such as a system notifying a patient to take medicine or a machine sending an alarm to a maintenance system. It will become a true relationship machine, managing information flows, and leveraging artificial intelligence and robots (bots) to enable automated tasks and services (for example, a user could ask a bot to plan a meeting based on calendar availability or to book an airplane ticket based on the company’s booking system). Rainbow will deliver a sustainable business model to the IoT ecosystem.

Our long-term strategy is to create a large community of users around Rainbow, give value to our partners, and integrate the IoT.

Rainbow is part of a long-term strategy differentiating in two ways:

Innovating by the business model (Freemium model)

• Sharing revenue with system integrators

• Giving back traffic to service providers

• Providing new revenue stream for app vendors

IPCloud

serviceprovider

PSTN∙ Cloud telephony∙ Conferencing∙ Multimedia traffic

∙ Unique user experience∙ Contacts and workplace∙ Rich presence

∙ PBX telephony∙ Call control∙ Voice mail

Third-partyPBX

OXO Connect/OXE/OTEC/OTEC-S

Agent

Agent

LAYER 1Rainbow IP

LAYER 2Rainbow connected toon-premise platforms

LAYER 3Rainbow with

PSTN termination

API

THIRD-PARTYAPPS

Becoming a cloud services provider (Global, overlay and hybrid)

• Layer 1 – Rainbow IP/OTT

• Layer 2 – Rainbow connected to CPE (hybrid cloud with our installed base and competition)

• Layer 3 – Rainbow with PSTN termination

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THE SMB MARKET

SMBs often lack an IT department and look for robust, competitively priced communications solutions that are scalable and easy to use. Our goal is to offer a hybrid approach with telephony and UC capabilities with simple systems delivered on the SMB premises and value-added services provided in the cloud.

OXO Connect R2 is our new generation of products for the SMB market that can be connected to our simple and intuitive Rainbow cloud services. This enhanced telephony offer addresses all SMBs. It will support their growth objectives by providing more capacity, increased security, and new Rainbow UC services. The OXO Connect R2 is also integrated with our new operational platform, Cloud Connect. Cloud Connect provides our partners with additional services and revenue opportunities, such as remote deployment, management and advanced analytics.

THE MLE MARKET

The medium/large enterprise (MLE) market can be divided into two categories, mid-market and large market.

The mid-market is seeking simplicity. It has a requirement for UC solutions that are less complex and easier to deploy and manage than what is required by large companies. Our solutions for this market segment combine simplicity and an optimal service level. Our latest communications server software version enables connection to our Rainbow cloud services. New business and marketing programs are available to enable the medium-sized companies to take advantage of the state-of-the-art UC solutions at a market’s second-to-none total cost of ownership (TCO).

Larger MLE customers seek customized services. Large companies want to integrate real-time communications services with their business applications.

This is the case, for example, in the banking and services sector with the advent of instant messaging for customer relationship management (CRM).

There is also often a requirement for a communications server (PABX) federation as most large enterprises have heterogeneous equipment deployed across their multiple sites, often with a mix of IP and TDM technology. We are able to offer federation services both on our Alcatel-Lucent Enterprise communications servers and on third-party platforms. This differentiator is made possible as the OmniPCX® Enterprise and OpenTouch® are integrated with Rainbow.

Our MLE clients who position themselves in the communications as a service space also want to benefit from the flexibility of cloud technologies on the infrastructure that they manage. This is now possible with OpenTouch Enterprise Cloud solutions, available in private and multi-tenant cloud deployments and accompanied by self-service management and provisioning tools for IT departments.

3 How our strategy is deployed

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DESK PHONES AND MOBILE PHONES

Contrary to the prediction that took place a few years ago announcing the death of the desk phone in favor of “PC-only” devices, a continued demand has enabled us to differentiate our phone offering. This includes ease of use and HD audio quality on the fixed desk phones that go beyond telephony, and allow the integration of automation solutions, for example, in hotel rooms and for on-site mobility. For on-site mobility, we have recorded double-digit growth for two years in a row for the DECT Handsets range.

Our SMB and MLE offers are supported by a comprehensive range of desk phones from entry level to industry-leading smart devices. Our product family provides powerful telephony features delivered by our communications servers to better serve the enterprise’s needs.

The trend is toward openness, with the ability to enable these phones to operate with third-party platforms using industry-standard Session Initiation Protocols (SIPs).

Our vertical approach provides a concrete point of differentiation. In hospital environments, nurses use handsets for alarm notifications. In industrial environments, we have specific solutions for sites that require ruggedized handsets to withstand dust and harsh environments.

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VIRAL ADOPTION IS THE GOAL OF THE RAINBOW CLOUD

The cloud, the ease of deployment, and the freemium model were designed to support the success of Rainbow. That was evident during our internal deployment of Rainbow, which attracted 2,600 users in just one day. Typically, other internal cloud applications only reach this type of adoption after several months.

Our objective is to have our partners become ambassadors within their companies, with their end customers, and within the ecosystems of their vendors. Facilitated by the viral adoption effect and the freemium model, our short-term plan is to reach 100,000 users. We will complement this strategy with digital marketing outreach to end customers who can register on the Rainbow platform and have immediate access to free UC services.

Beyond the initial goal of 100,000 users, we have an additional installed base of 40 million users worldwide who can become ambassadors of our solutions by inviting others to join Rainbow.

A HYBRID SOLUTION THAT COMBINES SIMPLICITY, SECURITY AND CONFIDENTIALITY

• Our solution is distinct from other public and private cloud solutions due to its hybrid design. Unlike consumer solutions, our cloud services allow enterprises to preserve and capitalize on the equipment already existing within the company and therefore maintain control.

• The platform is operated by Alcatel-Lucent Enterprise, which guarantees security and economy of scale for our end customers.

• A subscription model delivers recurring revenue for our partners, providing them with the incentive to have their customers adopt the technology.

• Data privacy: The Rainbow cloud offer provides a multi-company solution that allows for the partition of data on a company-by-company basis. This ensures the level of confidentiality and security expected by our clients and required by many countries’ legal requirements.

A UNIQUE APPROACH

There are many new entrants in the communications market. On the one hand, we see consumer cloud offers with a feature-set somewhat similar to the Alcatel-Lucent Enterprise solution, but designed for consumer usage (mobility, ease of use, viral adoption). On the other hand, we see the traditional PBX vendors evolving in this UCaaS/CPaaS market, leveraging robustness, reliability and manageability of corporate offers.

The Alcatel-Lucent Enterprise solution is unique because it combines the advantages of both the consumer and the business world. It delivers the ease of use of consumer solutions while providing the best of the business world. This includes the ability to regain control over usage, manage quality of service, security and associated costs, as well as the ability to integrate within the company’s existing environment.

With Rainbow, Alcatel-Lucent Enterprise is positioned not only as an over-the-top solution, but also as one that connects to the installed base of communications platforms (both from Alcatel-Lucent Enterprise and third-party vendors) and service provider networks.

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WHY WE MUST COMMIT AND INVITE OUR PARTNERS TO ENGAGE

Over the last 20 years, we have adopted an indirect sales model. Our partners resell equipment and complement it with integration and maintenance services. Our goal is to create new opportunities for profitable growth and facilitate success in the digital transformation value chain.

From a technology, product and installation-driven approach, we are now moving toward a business-oriented model for the industry sectors of our customers and a usage-oriented approach for our end users.

We remain committed to assisting our resellers and supporting our entire ecosystem within this evolving market. The Alcatel-Lucent Enterprise hybrid model ensures our partners can preserve their equipment sales income and achieve incremental revenue by offering new cloud services.

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By way of new opportunities

For Alcatel-Lucent Enterprise

For our partners

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ACRONYMS

API application programming interface

CEBP communication-enabled business process

CPaaS communications platform as a service

CPE customer premise equipment

CRM customer relationship management

EMR electronic medical record

HD high definition

IoT Internet of Things

IP Internet Protocol

IT information technology

MLE medium/large enterprise

OTEC OpenTouch Enterprise Cloud

OTEC-S OpenTouch Enterprise Cloud – S

OTT over the top

OXE OmniPCX Enterprise

OXO Connect OXO Connect

PABX private automatic branch exchange

PBX private branch exchange

PSTN public switched telephone network

SIP Session Initiation Protocol

SMB small/medium business

TCO total cost of ownership

TDM time division multiplexing

UC unified communications

UCaaS unified communications as a service

VoIP voice over IP

enterprise.alcatel-lucent.com Alcatel-Lucent and the Alcatel-Lucent Enterprise logo are trademarks of Alcatel-Lucent. To view other trademarks used by affiliated companies of ALE Holding, visit: enterprise.alcatel-lucent.com/trademarks. All other trademarks are the property of their respective owners. The information presented is subject to change without notice. Neither ALE Holding nor any of its affiliates assumes any responsibility for inaccuracies contained herein. (November 2016)