GRADUATE SCHOOL OF BUSINESS STANFORD UNIVERSITY
CASE NUMBER: GS-02 MAY 2001

LUCENT TECHNOLOGIES: PROVISIONING AND POSTPONEMENT
Carlos Nieva got a phone call in June 1998 from John Heindel, the president of Lucent Technologies, Saudi Arabia. Nieva was the operations director of Lucent’s Spanish factory, which supplied Lucent’s sophisticated digital switching system, the 5ESS® Switch,1 to Europe, Africa, and the Middle East. Heindel explained that an existing network in Saudi Arabia, which had been supplied by a competitor and was capable of several million lines of switching, was not Y2K compliant. The customer had been trying to negotiate for the modification of the existing network, but was now looking for alternatives. Lucent wanted to replace the network with a compliant one, and was preparing to make a formal bid. If Lucent got the order, it would be worth hundreds of millions of dollars. The entire network had to be in place by mid-1999. To do this, the first sites had to be complete and ready for installation within three weeks of receiving the order. Furthermore, Lucent would not know the precise configuration until the order was placed, and some site-specific details might not be known until much later. In each case, Lucent would have to deliver within three weeks of getting the customer’s detailed site information. Heindel knew that the delivery time for the 5ESS® Switch was normally between twenty-three and twenty-five weeks. Was there any way that they could meet the required delivery? If they could, they would almost certainly receive the order. They had only one week before they had to submit their bid. If they chose to go ahead, any changes would have to be implemented quickly, as they expected to receive the order one month after bidding.

1

5ESS is a registered trademark of Lucent Technologies.

Research Associate David Hoyt and Enrique Lopez-Tello of Lucent Technologies prepared this case under the supervision of Professor Hau Lee as