Picture credit: Ericsson
Analysis The traditional network infrastructure market is shifting rapidly. Established telecom equipment vendors like Ericsson must reinvent themselves to stay relevant in the evolving digital marketplace. Simply selling routers, towers and hardware boxes will no longer be enough. Network infrastructure providers must leverage their core assets while acquiring new technology skills to align with the demands of the digital economy.
Software-driven and cloud-native capabilities will be essential. Communication service providers (CSPs) will increasingly expect suppliers to deliver end-to-end solutions that enable them to capitalise on opportunities created by 5G, M2M, IoT, cloud services and rich multimedia applications.
Ericsson, the world’s largest wireless equipment manufacturer, has faced significant challenges during this transition. In July 2016 Hans Vestberg stepped down as CEO after several quarters of slowing growth. Competitive pressure from the Nokia–Alcatel Lucent merger and Huawei’s aggressive market posture exacerbated Ericsson’s difficulties. In response, Ericsson implemented extensive cost reductions and reorganised its structure, evolving toward a more centralised global go-to-market strategy designed to meet intense international competition.
Under the new structure, Ericsson is organised into five business units. IT & Cloud Products and IT & Cloud Services concentrate on cloud and digital IT opportunities. Digital Business Systems targets digital market potential in OSS and BSS. Network Products and Network Services focus on Ericsson’s strategic transition from 4G to 5G. The Media unit pursues cross-industry innovation for 5G, IoT and cloud solutions while aligning with Ericsson’s industry and society customer groups.
CSPs increasingly prefer single strategic suppliers that can combine software and services. Ericsson, much like Cisco, has reoriented its business to address larger digital transformations. Infrastructure vendors are now expected to provide a full end-to-end stack that spans virtualised network functions, IT software and cloud data centre capabilities.
But offering new software-based architectures alone is not sufficient. The greater challenge is operationalising and monetising cloud-native technologies such as SDN and NFV. Realising these benefits requires a comprehensive transformation of vertical OSS/BSS stacks into fully automated, horizontal execution environments. Vendors like Ericsson must also help design new operating models, introduce DevOps practices, and align organisational structures across network and IT operations. Development tools, operational guidance and change management support need to be integral parts of the solution so customers can adapt culture, processes and mindsets.
As telecom operators change how they create, manage and deliver digital services, technology suppliers must evolve their own DNA to support digital-native infrastructure. Ericsson’s legacy strengths in networks and OSS remain valuable, particularly as many CSPs will operate hybrid architectures for years before moving to fully virtualised infrastructures. Nonetheless, Ericsson needs to strengthen its credibility and capabilities in cloud, data centre and enterprise domains.
Ericsson has the potential to become one of the few vendors offering a truly comprehensive end-to-end stack. There is substantial market demand for enabling CSPs to integrate architectures and ensure interoperability across a complete digital infrastructure. To capture this opportunity, Ericsson must act as a facilitator bridging business strategy, technology and operational planning. That requires adopting a cultural shift toward modern digital development and operations and engaging with decision-makers beyond traditional CSP contacts — notably CIOs and CMOs — who play key roles in the new digital service delivery models.