Lucent takes care of business in Asia - Craig Dower of Lucent Technologies

Business Asia, May 19, 2000

Lucent Technologies wants to help build the next wave of the Internet. CAMERON COOPER speaks to one of the architects of that strategy

For a marketing man who wants to sell the virtues of Lucent Technologies to the huge Asian market, Craig Dower has a curious admission to make - he can't identify many of his customers.

Dower is no fool. It's just that his client base is developing as quickly as the e-commerce wave that is driving the "new economy".

As Dower notes, "Many of the customers that we will have in three years don't exist today."

He cites Hong Kong tycoon Richard Li's aggressive Internet start-up, Pacific Century Cyber Works (PCCW). Now entrusted with running Hong Kong's ambitious Cyberport project and fresh from deals with Cable & Wireless HKT and Telstra, it's easy to forget that PCCW did not exist 18 months ago.

Dower is the Asia-Pacific director of Lucent's professional services entity, NetworkCare, which plans, designs and operates complex business networks. It is a stand-alone business unit within Lucent, one of the largest telecommunications equipment makers in the world. Since the acquisition of US company International Network Services (INS) in 1999, NetworkCare has emerged as a world-leading provider of network solutions. Its mission: to "build and support tomorrow's converged networks, today" by incorporating voice and data traffic.

In short, Lucent wants to help build the next wave of the Internet and "wire the planet".

As Dower sees it, the global market for professional services is "growing ballistically" - and demand in the Asia-Pacific region is dynamic.

At the heart of such growth is a profound change in Asia's business mentality in the wake of the region's crippling financial crisis.

Some business sectors in Asia were once regarded by the West as a closed shop, but deregulation is now in full stride as corporate and political leaders strive to restructure and increase competitiveness.

Dower contends that this mood shift has dragged the Asia-Pacific market forward five to 10 years, albeit kicking and screaming in some cases.

He highlights telecom giants such as NTT in Japan and Telstra in Australia as examples of monopolies that are breaking the shackles of government ownership. As they privatise, "teams of employees" are being replaced by lean, intelligent outsourcers.

Enter Lucent and NetworkCare.

Dower says companies are getting "further and further away from government controls" and "at some point even the PTTs(*) look at what skills they have as core and what areas they look at for outsourcing".

The pay-off for companies such as Lucent is significant.

Michael Butcher, head of international sales and marketing for Lucent Technologies, expects revenues to grow at least 30 per cent in the region this year.

He told Reuters recently the company would invest "well over US$100 million" in the region in the next three years, adding that Asia-Pacific returns accounted for more than 10 per cent of Lucent's 1999 revenues of US$38 billion.

"The number one reason for the growth is clearly economic recovery in the region," he said. "Number two is we invested during the downturn and we're very well placed in relationships and in people to make the most of our new investments and new projects."

Butcher points out that the compound annual growth rate for the communications systems and support services market for Asia-Pacific and China will be 14.4 per cent from 1997 to the year 2001. The same market will be worth about US$180 billion by 2001 - a significant increase from US$100 billion in 1997.

Frustrating restrictions remain in Asia that hamper the convergence of net works. However, the low teledensity in some nations represents an enormous opportunity, and Lucent expects China to eventually lift a suspension on the rollout of CDMA, the US standard mobile phone network that Lucent provides (Asia is dominated by the GSM network).

In addition, Taiwan is expected to soon announce its first private fixed-line telephone network providers, while Thailand should complete the liberalisation of its telecommunications market by 2006.

Such developments paint a bright picture for Dower's NetworkCare division which, "admittedly from a low base", is counting on business doubling this year - "and this will continue over the next two to three years".

Says Dower: "We are absolutely not constrained by opportunities."

Of the Asia-Pacific market, he identifies Australia, New Zealand and Japan as being "at the top". Then follows countries with developed manufacturing bases such as Singapore and South Korea, after which Lucent adopts a customer-by-customer approach.

The litmus test is simple.

"If a country has a high GDP per capita and a high cost of labour, it demonstrates to us that they value people and they will, therefore, pay for services," Dower says.

By contrast, in countries with low labour costs it is hard to convince company bosses to use expensive outsiders. Their logic: "I can hire a hundred people a day for that."

Despite its low labour costs, China is one country that breaks the Dower rule because of its sheer size and market potential. For that reason, NetworkCare doesn't write off China but notes that it's a tough market.