By Michael Soper, Analyst
Ericsson is navigating its transformation into an ICT provider while continuing to cater to its core customer base
Ericsson is making headway in its ambition to transform into an ICT provider through acquisitions and internal investment in technologies such as SDN and cloud, but the company’s revenue remains driven by communications infrastructure and the services around these products. Ericsson delivered 8.8% revenue growth — its highest since 3Q11 — due to LTE investment in China, new spending on infrastructure and services in India, and 3G investment in the Middle East.
Ericsson’s biggest challenge is the slow adoption rate of its customer base to technologies such as cloud, SDN and NFV. Most operators will be hesitant to implement virtualization across their networks, and it will be difficult to educate operators on how new architectures will lower costs and boost revenue. Operators are most likely to virtualize parts of their networks rather than entire environments.
Ericsson’s TV-related acquisitions are coalescing to transform the company’s video portfolio
Ericsson is focused on becoming an end-to-end video technology provider. Ericsson is positioning itself not as a content provider, but as a content enabler. This will lead to additional consulting, system integration and managed service opportunities as operators purchase the Ericsson software stack. Ericsson notes that video will comprise 50% of network traffic by 2019. To help operators with this new reality, Ericsson is creating more efficient video delivery systems, such as LTE Broadcast, to ensure operators can provide services such as multiscreen. Ericsson is taking a “video-centric” approach to building networks as video becomes an ever-larger driver of traffic. Ericsson is also leveraging its services organization to optimize networks to enhance the video experience with, for example, lower latency and buffering.
TBR believes that Ericsson is well-positioned in video and has strong assets following its string of acquisitions in the space. Ericsson is taking a leading role in advising operators on how to optimize their infrastructures to better deliver video and to deliver value through video to compete against the over-the-top (OTT) threat. However, the trend of traditional video being disintermediated by OTT is alive and well, and it will be increasingly difficult for incumbent operators to monetize their video assets. Multiscreen helps deliver value, but OTT can also provide these experiences to customers. For operators to keep their hold on the market, they will need to exploit live programming and deliver it in a high-value way to multiple screens. This brings to bear Ericsson’s LTE Broadcast and TV Anywhere solutions.
Ericsson leans on cloud integrity to drive market share
Ericsson’s “one-cloud” strategy aims to overcome gaps in the current cloud market, particularly around integrity. The company’s PaaS leans on a neutral delivery model that targets the typical service provider environment, which often includes a variety of infrastructure and delivery elements. For example, a service provider might be using cloud resources on Amazon and Azure, along with virtualization through VMware, and bare-metal resources, all spread across dozens of countries. Ericsson’s cloud technology enables customers to continue using all of these elements on a streamlined PaaS solution.
TBR believes Ericsson’s success in targeting telco cloud, IT cloud and commercial cloud environments hinges on integrity. Ericsson’s early efforts to ensure trustworthy data-led engagements exhibit valuable differentiation for the company. Service providers delivering cloud to enterprises will hear similar messages from Ericsson’s competitors, but Ericsson’s early experience in helping clients deliver secure, reliable data transactions will help it further penetrate the service provider market.