RIPE FOR THE TAKING

As CEO of Micromuse, Greg Brown often found his fledgling management-software company competing for contracts with some of the biggest names in business, including IBM and Computer Associates.

And Micromuse won most of those battles, emerging as the market leader.

“One of the best environments you can have is to have a large, heavy, slow-moving competitor to compete against,” Brown said. “We loved — we relished — competing against larger companies with larger framework products that had more levels of management calling on a client than our people.”

Today, the tables have turned. Brown is now president of the government and enterprises mobility solutions business for Motorola, a huge company that is an icon in American business. When Brown arrived less than three years ago, Motorola had fallen victim to some of the pitfalls seen in Micromuse’s large competitors, including an oft-disjointed approach to enterprise customers and an inability to move quickly in the market, largely because of too many management layers and a bureaucratic mindset.

CEO Ed Zander addressed many of the structural issues in December by reorganizing the company, a move that included expanding Brown’s established commercial, government and industrial solutions (CGIS) segment to include all enterprise functions.

Previously, Motorola’s disparate segments each would approach an enterprise customer individually, sometimes with one not knowing what the other was doing. Brown’s restructured group is designed to give each enterprise customer a single sales effort, complete with integrated offerings that leverage synergies between myriad products in Motorola’s vast portfolio.

Zander earned significant plaudits from the financial community during his first year on the job, during which Motorola increased sales by more than 20% without sacrificing margins. And the creation of an enterprise-focused segment also is the right move, according to Ragu Gurumurthy, head of the technology practice at Adventis.

“The intent and spirit behind it are absolutely correct,” Gurumurthy said. “Of course, the proof is in the pudding — they have to execute. Lots of companies have created enterprise groups, and most have not been successful. … But there’s no one better than Ed Zander to inject the enthusiasm into the company needed to make it work.”

Indeed, Brown recognized that a philosophical change also was needed to assure that Motorola will be aggressive enough to compete successfully in a fast-paced, wide-open communications environment driven by the rapid development of IP technologies.

“The ideal is to have a combination of the two: entrepreneurial, lean, super-smart technology and business-oriented product marketing and engineering combined with brand, width and breath of resources, and a larger product portfolio,” Brown said. “Being able to marry those two is the ideal company.

“At the end of the day, we want to live, act and be small. Actually, I don’t want to be small; I just want to act small.”

Focusing resources on the future

Of course, being small is not possible at Motorola. It’s a huge company built on big ideas and forward-thinking technologies, dating back to the early ideas of founder Paul Galvin.

In 2004, Motorola boasted $31.3 billion in sales, more than 68,000 employees worldwide and more than $10 billion in cash reserves. Brown’s CGIS segment accounted for 21% of the company’s sales last year and is the second-largest division at Motorola, behind the high-profile personal communications segment that produces handsets for wireless carriers (see pie chart on page 86).

In addition, the Motorola brand is recognized worldwide, and the company is the only manufacturer to win the coveted Malcolm Baldridge National Quality award twice. But past accomplishments are no guarantee of future success, especially in today’s wide-open communications environment — a reality Brown acknowledges and tries to emphasize to his employees.

“Despite the success we’ve had, I’m very sensitive to having a team of people that has two things: a high level of urgency and healthy discontent for the status quo,” Brown said. “I don’t care about yesterday’s success. It’s less important to me what Motorola was in 1990, 1970 or even two years ago. We must earn our customers every single day and make sure they view us as an innovation leader, in addition to [being a company with] brand equity, resources and wireless domain expertise.”

More important to the company’s future success is Motorola’s scope. Geographically, Motorola’s installed customer base includes loyal customers in countries where competitors have yet to make significant inroads. From a sector standpoint, Motorola is equally comfortable serving governments, corporations or consumers, whether the need is for a private or commercial solution. Technologically, it offers solutions for virtually every wireless protocol in all segments in the market.

“At the end of the day, you have the device, the wireless pipe and you have the stuff running over it,” Brown said. “It’s important to play in those three in an optimized way that serves the customer the best.”

Adventis’ Gurumurthy said this approach will be especially valuable for Motorola.

“Motorola has been a company of warring tribes,” he said. “For the first time, [Zander] is really forcing people to work in a cross-functional manner.”

From a market-share perspective, perhaps Motorola’s greatest success story has been the public-safety communications sector, in which the vendor giant has dominated for decades behind a strategy of providing mission-critical, end-to-end solutions. Zander, former chief operations officer of Sun Microsystems who Brown describes as “an enterprise guy at heart,” decided the same formula would be successful with corporate customers and decided to combine the new enterprise unit with the CGIS group.

It’s a decision Brown supports wholeheartedly, especially as the feature and reliability demands of public safety and enterprises converge.

“When we look at enterprise organizations, they have business-critical applications,” Brown said. “From a device standpoint, from a throughput standpoint, from a reliability standpoint, there are many commonalities between mission-critical and business-critical, and we thought it made sense to put these assets together.”

Chinks in the armor?

Given Motorola’s unquestioned success in the public-safety arena, extending those philosophies to the enterprise certainly would seem worthy of consideration. But some observers believe Motorola’s public-safety formula is not applicable in today’s IP-based world.

In fact, these vulnerabilities already have surfaced in the public-safety sector. Despite its dominant position in the space, Motorola has lost some key contracts in the last couple of years. The most notable of these was the state of New York, where Motorola submitted a bid at least three times higher than the $1 billion proposal submitted by eventual winner M/A-COM, which claims to leverage commercial-off-the-shelf (COTS) products in its IP-based solutions.

“IP has become somewhat of a disruptive technology for LMR,” said Dennis Martinez, M/A-COM’s vice president of technology. “Where there once was a dominant supplier, there are now several choices. The players are changing, and the dynamics are changing.”

Among the more notable landscape shifts in the space is the fact that traditionally, carrier-centric vendors like Lucent Technologies and Nortel Networks have decided to become players in the public-safety space, presumably to chase Homeland Security-funded projects, at least initially. Most analysts believe their presence in the marketplace will create more incentives for standards-based networks architectures in the sector.

One of the most-noted characteristics of Motorola is that its public-safety products have been proprietary. Such solutions are good for a vendor’s margins, but critics claim they can hurt interoperability efforts and competition, which prevents prices from dropping.

“Motorola’s a wonderful company,” Chuck Saffell, president of Nortel’s federal network solutions group, said. “They do great work, and we team with them, but one of the things government is concerned about is that it’s a proprietary solution. … They’re looking for more options.

“We create COTS solutions.”

Perhaps Motorola’s most outspoken critic regarding this aspect is Packet-Hop, a start-up that enables ad hoc mesh networking for standards-based COTS devices. But Motorola’s latest product, Motomesh, includes a proprietary 4.9 GHz solution for a public-safety ad hoc mesh network (see story page 88), according to David Thompson, Packet-Hop’s vice president of marketing.

Although a standards-based radio running PacketHop software can communicate with a Motorola-based radio if both radios are within range of a Motomesh node, the two radios cannot form a direct link if such infrastructure is not present.

“I think they’re creating a smokescreen … and the smokescreen is: If you want to mesh, you’ve got to buy Motorola’s proprietary equipment,” Thompson said. “I think Motorola and MeshNetworks are very radio-centric, hardware-centric companies. … They like doing things their way.”

In addition to the pricing impact, proprietary solutions mean customers are dependent upon Motorola to make innovations instead of evolving as the commercial market does, Thompson said. And, historically, Motorola has not been as quick as the market in delivering innovations for installed products.

“In the enterprise, proprietary is a bad word; solutions have to be standards-based,” Gurumurthy said. “I’m sure Motorola knows that.”

None of these expressed concerns have gone unnoticed at Motorola. Pointing to Motorola’s adherence to the Project 25 standard in the U.S. and the TETRA standard in Europe, “in large part, the proprietary world is history,” Brown said.

While Brown acknowledged the inevitable increase in the number of players vying for market share, he believes Motorola is ready to compete.

“I would say there are more challenges for Motorola than ever before,” he said. “That said, I think we are in a better position to meet those challenges.”

Motorola will be able to differentiate itself from other solutions providers because the vendor giant has a strong reputation for reliability and is a top competitor in virtually every aspect of wireless communications, Brown said. This expertise will be especially valuable as potential customers seek the least painless migration path to an IP-based platform — particularly for public-safety entities requiring backward-compatibility with their existing Motorola solution, which may be 10 to 15 years old.

As for the notion that Motorola is slow to move, Brown offers little resistance but notes that he is working diligently to change the situation.

“I think the perception of us generally being not as nimble as we should be is valid,” he said. “We’re better than we were a year or two ago, but we’re not where we need to be. And I’m not sure we ever will be. … We just need to continually challenge traditional thinking, status quo and established processes.”

And those processes increasingly include talking more with enterprises’ chief information officers instead of radio-communications directors about potential contracts. In the meantime, it’s important for Motorola to explain private radio networks to CIOs while busily becoming fluent in the language of IP.

“We need to infuse new skills in Motorola more along the lines of IT-centric, CIO reference hardware and software architectures where our teams can be more conversational and literate beyond the just the radio, cellular or wireless world,” Brown said.

Filling the gaps

While Motorola does not yet have the expertise its officials believe it needs, the company has demonstrated that it will not hesitate to make an acquisition to remedy the problem — something the vendor did four times in 2004 (see table on page 84).

“One technology is not going to be right for everybody; we all know that,” said Mark Moon, corporate vice president of sales and distribution for Motorola’s Americas group. “So the way that you can bring [multiple technologies] together is what’s going to make you successful. It does sound arrogant, but we believe we really are doing a good job of figuring out how to go do that.”

Of course, making strategic acquisitions is not unique to Motorola, but the ultimate success of such deals often depends on the ability to integrate the new group into the existing company. While the companies Motorola has purchased all fill specific technological needs, Brown also is tapping into the newcomers’ entrepreneurial spirit in an effort to spread this attitude to Motorola’s incumbent employees.

“I said [to former MeshNetworks officials], ‘If you get bureaucratic requests, ignore them. If you get an e-mail you think is stupid, ignore it. If you think a meeting is not worthwhile, don’t go. Escalate, irritate and push back,’” Brown said. “And if you believe you are a victim of Motorola, it’s your fault, not mine, because I’m giving you a free pass.

“Do not let the armies of people — who are well-intended — suffocate the software-content expertise and entrepreneurialism that we bought you for. Don’t let that happen.”

Brown also said he believes Motorola needs to actively encourage “more internal debate and candor without consequence and without politics,” so more ideas can be considered by the top levels of management.

Furthermore, to help his large company move quicker in the market, Brown said he advocates a streamlined decision-making process that doesn’t incorporate quite as much time-consuming study in an effort to reach a “perfect” decision — even if the approach results in occasional mistakes.

“A business that isn’t making mistakes isn’t pushing itself far enough; if we’re not making mistakes, then we’re taking too much of a belt-and-suspenders approach,” he said. “We’re not going to be reckless, but we’re going to push the limits of what we can and should be.”

Rick Rotondo, director of marketing for Motorola’s mesh networking products group, called Brown’s entrepreneur-like philosophy “very, very progressive” and said Motorola’s employees are embracing the concept.

“Sometimes they’ll start off being a little bureaucratic with you, but as soon as they get the green light, I haven’t seen any of the Motorola people resist the aggressive attitude,” Rotondo said. “They’re kind of like entrepreneurs wanting to break out of their shells. … That mindset from the top is really starting to filter down to the troops.

“Between that attitude and Motorola’s resources, that’s a pretty sweet combination.”

Positioned for success

Indeed, for all the flaws noted by naysayers and all the areas of the company that officials want to improve, Brown leaves little doubt that he believes Motorola holds the best cards of any vendor at the enterprise-market poker table.

With its brand, well-developed channels and its wireless expertise — for both private and cellular platform, in the network and device domain — that lets it push the “seamless mobility” concept that resulted in the development of the enterprise phone, Motorola is primed to make a big move in the still-developing enterprise space if it executes properly, Brown said.

“I believe this area is ripe to be taken,” he said. “I think more and more customers are looking for an end-to-end solution, but they’re looking for it from a company that has brand equity, technical acumen and resources behind delivery and implementation, where a client would feel comfortable giving a large award or an end-to-end contract.

“The good news is the space … is still being defined and formed so that, in my view, probably our biggest obstacle will be ourselves.”

Motorola acquisitions in 2004

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