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In the
technology business, there are sometimes better ways
to evaluate global opportunities than market size.
For proof, look no further than Alcatel and its
heavy investment in Australia – a country that is
not only home to one of Alcatel’s most important
customers, but is also a vital source of management
talent, research skills and engineering prowess.
With 1,600 staff and revenue of
$650 million a year, Alcatel’s Australian unit is
one of the largest information technology and
telecommunications players in the country. It is
also one of its largest high-tech exporters and
research groups. The company exports goods and
services worth about $200 million each year,
particularly undersea fibre-optic cabling
manufactured in Sydney, and spends 9 per cent of its
sales revenue on local research and development.
Given that Alcatel generates
annual revenue of more than $US29 billion each year
worldwide, Australia ranks as a small market. But
its contribution to the company rests on more than
sales.
The key reason for Alcatel’s
scale in Australia is that it is home to one of the
multinational’s top ten clients, Telstra
Corporation, the largest telecommunications company
in South East Asia. Alcatel has provided much of the
equipment for Telstra’s 12 million-line Australian
phone network and continues to play a major part in
rolling out Telstra’s ADSL broadband Internet
services as well as very high speed intercity fibre
links, ATM and intelligent networking systems
software. Alcatel also supports other carriers in
Australia such as Cable & Wireless Optus and
Vodafone.
“Australia from
a size point of view is not a critical market for
Alcatel, by any measure,” says Ross Fowler, the
chief executive officer of Alcatel Australia.
“However it’s a very good bellwether for their
other markets. And if you’re successful in
Australia, and in particular with Telstra, then you
have a world-beating product.
“If you break
into Telstra, you’ve got a first class reference
– that’s why Alcatel treats Australia extremely
seriously.”
Alcatel Australia
employs 550 skilled engineers, of which 170 people
work within its Network Management Solutions
Development group. This is the largest such group
within Alcatel worldwide and, according to Fowler,
was placed in Australia in part because of the
ability of the country’s engineers to think
laterally.
“We are very
good generalists,” comments Fowler, saying that
this was important in network management technology
which must work across multiple equipment types and
territories. “[Australians have] an ability to
look at a bigger picture and question the status
quo.”
It may be this
ability to take a step back that also has seen two
Australians, Ron Spithill and Mike Quigley, become
part of the nine-person Executive Committee at the
top of the company. Quigley heads up Alcatel’s
operations in the USA while Spithill is president of
Alcatel Asia Pacific. Both graduated from the
University of New South Wales in Sydney, which is
located near Alcatel’s Australian headquarters and
today works with the company on a range of research
and
“Two out of the
nine most senior people in the Alcatel Corporation
are Aussies – so we’ve got to have something
going for us,” says Fowler, adding that the head
of Alcatel in Taiwan is also an Australian and that
the company’s Asia Pacific operations under
Spithill continue to draw heavily on the company’s
100 year old Sydney office for support in sales,
promotion, market analysis and strategy development
activities.
Why are Australian
managers helping to lead Alcatel worldwide?
“We are as good
as anyone but more easy going and not political,”
says Paul Budde, Australia’s best-known telecoms
analyst. “It’s not like having a problem with
one country if you install somebody from another –
so we have the clear advantage of being
non-aligned.”
Those within
Alcatel point to other factors, too – like
Australia’s strong education sector and depth of
management skill.
Australia is also
proving its worth to Alcatel in research and
development. The country’s combination of
relatively modest wages, low dollar and high quality
education has made it a cost-competitive centre for
R&D. This was recently borne out by Alcatel’s
decision to locate its new primary switching
products research facility in Australia, after
finding the country offered the lowest cost in the
world when the full range of required skills were
taken into account.
“In our
switching business, the lowest cost centre for
R&D in the Alcatel world is here in
Australia,” says Fowler. “If you look at the
straight labour costs it isn’t the cheapest but
it’s the mix of labour cost and skills that gives
you that sweet spot.
“If you look at
pure labour costs, there are some development
centres in India that are cheaper but to do that
they have people in Germany doing all the detailed
specifications... If they do it in Australia, they
don’t need that step.”
In Australia as in
many other parts of the world, the Paris-based
company is shifting from the production of hardware
to more intellectually based products and services.
For instance, with a major network modernisation
contract project with Telstra coming to an end in
1998, the company decided to sell its local
switching equipment operations to Bluegum
Technology, now owned by US contract manufacturing
giant Solectron, as part of a three year, $250
million outsourcing deal that also saved 400 jobs.
In addition to its
local R&D operations, Alcatel Australia has also
gained a role in around-the-clock global customer
support operations. The company is also investing
heavily to create complex, multi-million dollar
models of telecommunications networks in Australia
that it regards as just as much a capital investment
as new factories.
“The bulk of our
capital investment now is in model equipment,”
says Fowler. “Equipment that simulates the live
network so when we’re developing software and
testing it we can make sure that it functions
adequately.”
www.alcatel.com.au

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