However, this law did not prevent behemoth incumbent equipment manufacturers, Nortel and Lucent as examples, from trying to thwart startup equipment suppliers. They did so by acquiring these startups to remove them from competitive contention or by influencing potential customers to “package” (some say “rig”) bid responses to bundle outdated optical transport gear (for which Cerent would be selected in a straight up bid) with digital switching equipment. In many cases this strategy worked and kept Cerent out of some big optical transport deals with Tier 2 service providers early on.
But this strategy would not deter Cerent, the upstart startup, from putting up a good fight during the late 1990s. The sales team’s relentless focus on providing better value won the hearts and minds of decision makers at the regional CLEC, Advanced TelCom Group (ATG). Dave Cesca, picked up the reigns when he joined Cerent, from yours truly, and made sure the class 5 switching bid was decoupled from the optical transport needs of ATG.
Dave added, “What Cerent enabled was fulfilling the business model of the Internet explosion. If you don’t have boxes to deliver on time, you’re hurting the customers’ business. So, what was critical to me and what I was focusing on was, ‘How important is your business to you? I know you like Lucent, and Nortel, and Alcatel equipment, but can they deliver on this bandwidth explosion? How many racks of equipment were deployed in the last twelve months and how many do you see going forward?’”
Dave continued, “Cerent's ability to deliver more revenue per square foot at a higher margin for ATG (given the lower real estate and power requirements), and in a quicker timer to revenue, due to our provisioning capability, all added up to a competitive advantage for ATG.”
Dave was right. Although Lucent secured the class 5 switch orders at ATG, their sales team could not parley that victory into a win for their aging DDM-2000 optical transport platform. Instead, Cerent 454s were deployed across the ATG properties starting in early 1999. This feat in itself was amazing. Lucent could have stopped the Cerent thrust by packaging their switch and optics offerings together with an overall management discount and “bought” the ATG business. Either Lucent’s optical platforms were so bad that ATG refused to consider them or Lucent’s switching sales team and its optical sales team were unable to collaborated. The latter is likely, a problem endemic for large companies like Lucent and Nortel.
But, as Dave pointed out, the longer-term economic benefits of operating better technology paid dividends for ATG (and many other CLECs too).