November 11, 2013
Ericsson is well on its way to being a prime driver of transformation in the Networked Society, as Ericsson describes its vision. I do not question the leading position of Ericsson’s core network activities. But compared to last year’s EMEA Analyst Event, Ericsson has made noticeable progress in its ambition to become a network-focused provider of ICT services because it:
- Has a clearer perspective of what it is trying to achieve for its enterprise customers. Ericsson is much more specific about which types of enterprise customers it is catering to with what types of services. It targets sectors that face a high degree of mobile disruption and that rely on secure networks for real-time information transmission. In addition to the public and media sectors, which Ericsson has been focusing on for some time, it serves utilities and transport and logistics companies. At the event, Ericsson showcased its strong capabilities and vertical expertise for the media sector in the form of media delivery networks and broadcasting services.
- Is increasing the presence in the services value-chain through a focus on process. Ericsson stays clear of offering classic IT services like ERP. But it targets customer segments with its services offerings that a) do not have a large number of players in it, b) have a high degree of standardization, and c) are affordable so that Ericsson can use a dedicated sales approach. Ericsson goes for services deals where its premium skills in the networking space set it apart from traditional IT services providers like Wipro or Accenture. Crucially, Ericsson is shifting from a technology-skewed sales approach to one that puts the process perspective and professional services centre-stage. Ericsson calls this the experience-centric managed service.
As much as I welcome the progress of its enterprise and services activities, I see certain areas that Ericsson ought to tackle with greater emphasis. These areas will be important for taking Ericsson to the next level. Ericsson ought to:
- Strengthen its messaging aimed at business-line managers. Marketing managers, portfolio managers, finance officers, and strategists are all increasingly participating in the decision-making process of business technology. To reach them, Ericsson needs to get involved in detailed business process discussions. Importantly, Ericsson needs to link themes that matter to business-line managers to tangible business outcomes that can be attained from business technology. This step is essential in assisting CIOs in their efforts to develop business cases for technology investments.
- Exploit the opportunities of analytics for its customers and customers’ customers more. Ericsson is doing well to use analytics for network management. However, Ericsson should strengthen its analytics capabilities regarding predicting end-user demand, preempting network failure, and anticipating propensity to buy new services. The share of spending on software has already reached 70% of all investment spending. This is an encouraging sign that Ericsson is moving in the right direction to drive network transformation, not least to keep software players like Amdocs at arm’s length.
- Be more proactive in creating bridges between telcos and over-the-top providers. I believe Ericsson can play a role in bringing telcos and OTTs closer by supporting end-to-end network infrastructure solutions that benefit both parties. In effect, Ericsson could play an active role as mediator or neutral party between telcos and OTTs, for instance by offering managed and shared network infrastructure as a platform for services like prioritised traffic.
In my opinion, Ericsson has put some distance between itself and its fiercest competitor, Huawei, both in terms of its enterprise strategy and its vision for future networking. But Ericsson should not rest on its laurels. Yes, Ericsson is on its way to evolve its business model: Ericsson is moving deeper into the software space and strengthening its end-user-focused networking as well as cloud and managed services activities. As part of Ericsson's business model evolution, the competitive landscape is changing. As it moves deeper into the ICT space, Ericsson will encounter IT services providers more often. And compared with the leading IT services providers, Ericsson still needs to sharpen the business-process focus of its strategy and messaging.