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Publisher's Outlook
February 2002

Rich Tehrani

Adapt. Evolve.


I recently saw a great special on the Discovery Channel (www.discovery.com) entitled Walking With Prehistoric Beasts that detailed the time in history from the end of the Dinosaur age until the present day. The program amazed me with its special effects, and the animation that was needed to create a world that existed long before any recording devices was superb. Of course not having been around five million years ago, I can only assume that the animals looked realistic, but I leave such matters of accuracy to the paleontologists and anthropologists who were no doubt in close consultation throughout the making of the Discovery Channel special.

The underlying theme of the three-hour special is that species adapt to their surroundings. As new species emerge, all living things must respond to the pressure of their ever-changing environment as it evolves. The environment shapes the landscape for the success of creatures that are able to genetically transform so that they remain compatible with changing environments. The cycle repeats infinitely.

One aspect of life in the past 65 million years that I found incredibly interesting was the portrayal of Neanderthals as a very robust group that had strong bones, used tools, and seemed purpose built for their environment. According to the program, Neanderthal man perished due to an inability to change whereas Homo sapiens flourished in a changing environment. Even though their brain cavities were smaller than Neanderthals and even though they were relatively fragile compared to Neanderthals, it seems Homo sapiens greatest strength was in their adaptability.

The subject of Walking With Prehistoric Beasts came up recently in a staff meeting regarding the future of the communications market. It seems this discussion presented some parallels to what is happening to the landscape of our current Internet telephony market. Regardless of whether you think that there is a huge opportunity for CLECs (I still do) one must accept that something akin to a virtual meteor has hit the globe of the capital markets.

Many CLECs now risk extinction (many more have already vanished) just as the dinosaurs did and to some degree, for many of the same reasons. Dinosaurs had become tremendous due to the competitive pressures of daily life. Once the environment changed, and was unable to provide adequate food, it spelled disaster for such colossal beasts. Many CLECs (as well as some who provided equipment to them) in turn spent time growing and growing and when the capital markets became difficult or downright impossible (unable to provide sustenance), the CLECs began to starve. Granted, hindsight is 20/20, but why many of these CLECs didnt focus on a single region, generating as much revenue from a single county as possible before expanding, is beyond me. It was the dotcom syndrome of growth with no profit that warped the minds of once intelligent businessmen. And inasmuch as VCs were rewarding them for rapid expansion (at any cost), they too should shoulder some of the blame.

Regardless, we are where we are and there are fewer CLECs than we expected there would be. Yet there are still lots and lots of companies (large and small) vying to supply equipment to this reduced pool of service providers. Note to those companies relying exclusively on service providers as a channel for their products: You must adapt and find new revenue sources. Now.

And heres some more free advice: Based on my 20 years of experience in this industry, I can tell you that what you should not do is focus exclusively on ILECs. With sales cycles stretching as long as four years, these providers will bankrupt you before they seriously deploy anything. The incumbents dont do anything quickly unless they have to. And even then, you should double or triple any estimated time of deployment they quote you.

So what is left? The enterprise of course! Those companies that have put both feet planted firmly in the service provider market will have to lift one foot up and put it toe-first in to the corporate space. The migration is inevitable. In fact its already underway. As service providers continue to slough their way through excess inventories, the enterprise market is primed for recovery.

As far as I am concerned, the enterprise market is the place to be. Im faithful to the idea that the service provider market will come back strong in the next few years, but for the moment, today, right now, the money is in the enterprise. And, anyone with plans to provide solutions exclusively to service providers had better respond and respond quickly if they want to avoid being featured on a program called Walking With Prehistoric Service Provider Equipment Vendors.

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