Dec. 10, 2019

Boston got hit by a massive snow storm just before Ericsson’s 2019 Analyst Day began, but the city was cleared up and running smoothly by December 4th. Ericsson reported significant losses 3 years ago and embarked on a very aggressive restructuring program. The new Ericsson is running smoothly now, with improved financial performance in 2019, as shown in the figure below, and the road ahead looks exciting.

Boston 2019

The company is ready to capitalize on its early investments in 5G. Over 4 million Ericsson 4G radios, installed around the world, are software upgradable to support 5G. This certainly helped T-Mobile to launch its nationwide 5G network in the US last week. Many other customers could follow this example, but the timing of 5G upgrades around the world is far from synchronized.

South Korea is well ahead of other countries with 5G coverage, and deployments are accelerating in China, Japan and the U.S., but Europe is lagging behind. Borje Ekholm, Ericsson’s President and CEO, warned European leaders in his recent blog, that “falling behind on 5G as a platform for innovation will jeopardize the European industrial base. With two global telecom vendors based in Europe, the continent has the prerequisite to lead.”

Ericsson is certainly ready to lead. The company’s equipment runs twenty-four live 5G networks across four continents and as of last week has 78 contracts and commercial agreements for future 5G deployments. Both numbers seem to be growing on a daily basis. If only Europe could get its act together, the future would look picture perfect for Ericsson.

Ericsson’s restructuring program reduced the company’s headcount by 18,000, while prioritizing R&D investments. By 2019, close to 25% of the company’s 90,000 remaining employees work in R&D, up from 19% prior to restructuring. This includes several hundred AI experts and data scientists - two areas critical for running 5G networks and developing new use cases.

Sunil Sood, Head of Sales Support CENX Service Assurance, shared more details on progress in enabling programmable, flexible and reliable connectivity in his presentation titled “SD-WAN is an Orchestration Game”. He used Verizon’s network as an example of a truly multi-vendor ecosystem supporting a single deployment of SD-WAN. It is powered by Ericsson’s orchestrator, which was developed with MEF standards in mind to ensure compatibility with NFVs designed by other vendors. Ericson certifies all NFV solutions to deliver service assurance. Taking advantage of such SDN capabilities, Verizon started offering firewall services to generate more revenue.

Ericsson’s strategy is to create an ecosystem of vendors developing VNFs, which can work with the company’s network orchestrator. Ericsson is closely watching the competitive landscape, including open source activities in this emerging networking software market.

LightCounting’s report on the Cloud Strategies of Communication Service Providers (CSPs), scheduled for an update in early January 2020, will summarize the views of many CSPs. Notably the CSPs are very pleased with their suppliers taking a lead on developing SDN and NFV software, often well ahead of open source initiatives. Some openness is good, but a software ecosystem needs a guardian. AT&T is probably the only CSP taking a radically different approach, as discussed in the upcoming report.

LightCounting clients can access full version of the research note at: https://www.lightcounting.com/login.cfm


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