By implementing a virtual enterprise concept internally, Nortel has reduced annual IT budgets by 70% over the past three years - even as network traffic has increased by around 60% - and increased employee productivity by 2 to 3%.

By integrating various internal systems and making them available online to partners, Nortel has reduced the costs of order processing by over two thirds and cut order times from weeks to 24-48 hours on all its products. Over 95% of partners in EMEA now use the system.

The move to outsourced manufacturing is leading to zero-inventory and scaleable manufacturing capabilities that allow Nortel to respond rapidly to changes in market demand, to which its cost base is now tightly linked. It has also lowered the overall costs for manufacture with, for example, no capital expenditure associated with testing.

The creation of joint ventures, in Turkey and Korea, have provided greater market access and new channels to market. This has resulted in a 75% reduction in local area network (LAN) cabling, eliminating the costs associated with 'moves, adds and changes'. By moving public network voice calls to VoIP, Nortel has made savings of about 42% on its salesforce, 57% for executives and an incredible 90% on teleworkers. Nortel is now taking the virtual enterprise concept to market. From the research and feedback we have received, we believe the next 12 months will be a major growth period for the virtual enterprise. There are a different trends that have been developing, a 'perfect storm' of forces - political, economic, social and technological - that make virtualisation inevitable.

We know this because we have developed the virtual enterprise based on the feedback we have been getting from our customers, the CIO community and independent sources such as Forrester and IDC.



Q: What is the virtual enterprise?

A: Nortel defines the Virtual Enterprise as a 'human Internet' where customers, employees, partners and suppliers have access to information - and each other - from wherever they are and on whatever device. It breaks down the traditional boundaries of work being restricted to a physical location.

The virtual enterprise provides a robust network that allows an organisation to conduct business and communicate with suppliers, customers and partners as efficiently as it does with its own employees, thereby allowing a more responsive enterprise. All of this with the knowledge that sensitive information is secure and restricted for those with authorisation.

A virtual enterprise can focus on core competencies and mission-critical operations, while everything else is done by an effective alliance, which can result in outsourcing. Partners and resources are found as needed and the process changes to respond to market forces.



Q: What are the business benefits?

A: Virtualisation is increasingly becoming the buzzword for businesses wanting to enhance business agility, streamline processes and business units, save money and accelerate product and services diversification.



Q: What are the implications of not virtualising the enterprise?

A. If there is no virtualisation of the enterprise the organisation may become an anachronism. Traditional notions of 'vertical integration' - in which a single company provides a complete customer offering - are rapidly proving irrelevant in the modern age.

We truly believe it is a case of virtualise or die as the business landscape changes beyond recognition. Global companies are becoming ever more geographically dispersed networks of capabilities, resources and partners. To survive - and thrive - in this environment, virtualisation is critical.



Q: Are particular industries more suitable for virtualisation than others?

A: No. Regardless of the industry, external organisations now need to be considered to include partners, partly owned subsidiaries (including joint ventures), providers of outsourced services (including application providers for functions such as ERP or supply chain management), and potentially, e-business affiliate organisations that act as channel, brand owner or cross seller of services. In modern business, market segments continue to blur, making virtualisation equally beneficial to all industries. However, not all aspects of the virtual enterprise will affect all sectors equally.



Q: What makes Nortel an authority on the virtual enterprise?

A: The key to the virtual enterprise is the network and how to evolve it - in a secure, managed way - to take advantage of new technologies. Nortel has expertise in this area and is a pioneer of the virtual enterprise. Our information systems support approximately 30 000 employees across five continents, 12 400 users from the supplier community and around 500 000 registered online customers. We recognised that we had a business need to virtualise and marshalled our expertise and experience in networking to realise real benefits.



Q: What technology is supporting the virtual enterprise?

A: The virtual enterprise demands an unprecedented level of integration between disparate applications, processes and people and consequently presents a number of key technology challenges, as does achieving security and compliance within increasingly open environments. Broadly speaking, the four solution sets that enable the virtual enterprise are secure mobility; secure access; collaboration and convergence; and contact centre.

Nortel is pioneering wireless technologies that will bring wire speed throughput to the wireless world, and extend the more bandwidth hungry aspects of the virtual enterprise to the mobile user. It is driving the integration of cellular voice and voice over WLAN to further drive down costs and ease integration. It is leading the way to merge technologies such as SIP (session initiation protocol) with IMS (IP multimedia sub-systems) to extend multimedia communications capabilities across any device in any network. It is working with the world's leading security vendor to solve the problems of identity management.



Q: Have companies not always worked across borders and with partners - why is the virtual enterprise happening now?

A: 2006/7 are set to be the years in which the virtual enterprise become a critical success factor for the enterprise. This is because of this merging confluence of different factors:



Political factors

Changes in global trade have made it possible for organisations to build new products and services in one location to be delivered in almost any other. The deregulation in world markets has led to increased levels of opportunity, but this global competition has put pressure on margins, which is leading to a focus on core competencies to reduce costs.



Economic factors

The 1990s and 2000s have shown rapid increase in low-cost competition in the Far East from India with the provision of services such as highly educated research and development engineers and contact centre agents and China with low cost manufacturing. Organisations need a presence in these fast growth markets in order to compete on a global scale. In order to exploit these markets, and to address increased competition, joint ventures and strategic partnerships are being formed.



Social factors

Today's young people - tomorrow's consumers and employees - are communicating by using technologies in different and more holistic ways compared to previous generations. They demand fast, ubiquitous, multichannel communication.

The second social trend is the change in organisations from multilayer, hierarchical structures to flatter, more dynamic models. A survey in The Economist asserted that the way people work has changed dramatically, but the way their companies are organised lags far behind.



Technology factors

The virtualisation of the enterprise is both driven by technology and enabled by it. Technology has lowered the barriers to competition and communications technology has increased in speed and reach to the point where computers, people and mobile devices can be interconnected using bandwidth hungry applications. In the first phase this showed itself in the form of the Internet, providing a platform for data storage and search as well as consumer e-commerce. We are now seeing this move into the information phase which is all about people. New collaborations technologies based upon SIP, and the breaking down of perimeters with Secure VPN technologies has provided a platform for knowledge management.



Q: Is virtualisation not a security risk?

A: The virtual enterprise is enabled by the latest communication and collaboration technology which raises the issue of securing the network infrastructure and information assets. Nortel's approach has been to keep its information technology assets safe with a joined up approach to every aspect of networking, from infrastructure and applications to policies, processes, people and partnerships.

The Layered Defence security architecture has enabled us to deliver defence in depth and eliminate single points of security failure. It covers endpoint security for devices attached to the network, secure communications of data in transit, network perimeter security and core network security. Nortel also has a commitment to open standards and partnerships with innovative security companies to deliver complementary and future proof solutions that minimise integration costs.



Q: What is the cost of virtualising a company?

A: The cost of implementing the virtual enterprise will vary from enterprise to enterprise, as the priority list for virtualisation will necessarily differ.

The cost will be affected by the fact that it may not be necessary to virtualise all aspects of your business or to virtualise key areas 100%. For example, at Nortel we understood the benefits of virtualising employee access, but only for the one third of the workforce that was mobile.

As already mentioned, by virtualising key areas of the business, there is impressive ROI potential. $28-million in annual savings have been realised by Nortel through reduced real estate, communications and technical support costs. Of that, there has been a reduction of $22,4-million in the real estate required for our 2600 full-time teleworkers.



Q: Who has virtualised their enterprise? What benefits have they seen?

A: We are supporting a number of our clients as they virtualise. Examples include:



Local government: Arendal Municipality, Norway

Norway's Arendal municipality deployed a virtual access solution from Nortel that used both IP voice and unified messaging running over a wireless LAN to create a hot-desking environment for its 235 staff. This reduced connectivity costs by almost 90% with a further 100 000 Euro to be saved annually.



Manufacturing: Coca-Cola, Turkey

Coca-Cola Turkey is responsible for 10 sales and distribution centres, five manufacturing facilities throughout Turkey and a fleet of over 1000 vehicles. The company also has a large number of network users: 500 distributors and 250 000 sales points. With its new communications infrastructure Coca-Cola Turkey (CCI) is now able to integrate the supply chain management system directly into its resellers and control 84% of total sales in a secure environment.

This added security afforded by an SSL VPN means that CCI can make a larger quantity of data available to a wider range of people, and can now have the details of all the customers and outlets in each distribution territory.



Communications: BT, UK

BT utilised Nortel's IP telephony and contact centre solutions to upgrade its contact centre infrastructure, which serves more than 500 business units across 124 sites in the UK.

The contract represents one of the largest scale deployments of a VoIP based virtual contact centre across EMEA. BT is applying the technology to streamline interaction across its operating businesses, helping almost 10 000 virtual agents to ensure calls are answered quickly and are efficiently directed to the appropriate part of the business to achieve higher levels of customer satisfaction.



Manufacturing: Salins du Midi, France and Belgium

Salins du Midi utilised Nortel's Multimedia Communications Server (MCS) 5100 virtual enterprise solution to ensure managers at its new headquarters in Brussels, Belgium could communicate and collaborate on high security projects anywhere at anytime, with employees either at branch offices throughout Europe or out-of-office locations. This has delivered real benefits in terms of better collaboration between employees, reduced time to decision and lower communication costs.