Ericsson and Nokia announced new CSP software offerings this week
This week, incumbent network equipment vendors Ericsson and Nokia made major service provider software announcements, the former around service management and orchestration and the latter on a multi-faceted SaaS offering. . These launches are indicative of the shift from hardware-based revenue to software-based revenue, which both companies indicated just over a year ago.
Back to the third quarter of 2020. Ericsson CEO Börje Ekholm, speaking on an earnings call in October last year, said: “We believe the industry will be more of a software industry longer term, so it’s critical for us to position ourselves in that.” His counterpart at Nokia, CEO Pekka Lundmark, also speaking on an earnings call late last year, said said, “We see the value moving from embedded systems to cloud-native software systems.” He spoke of the “broad opportunity for Nokia to deliver reliable, software-based, cloud-based networking capability that can be quickly integrated, deployed and self-managed as a complete service”.
from Ericsson Intelligent Automation Platform for Service Management and Orchestration is intended to help communications service providers “optimize network performance, enable operational efficiency, and deliver an improved customer experience.” Ericsson described the new platform as “compliant with Open RAN principles, advancing automation with support for diverse vendors and multiple radio access network technologies.”
With a view to commercial availability early next year, Nokia has announced a SaaS Product covering analysis, security and data management. Nokia, Cloud and Network Services President Raghav Sahgal said in a statement:The convergence of 5G, cloud-native software and SaaS creates a tremendous, fast-growing opportunity for Nokia. With the groundwork we’ve already laid, our SaaS delivery framework is in a very strong competitive position. It combines rapid return on investment with on-demand access to Nokia SaaS applications and low cost of ownership, based on a pay-as-you-go/pay-as-you-go business model.
Among the big three NEPs, Huawei is also moving towards software, although it is based more on geopolitical challenges than an adoption of open network principles. CEO Ren Zhengfei, in an internal presentation earlier this year, broached the subject with employees.
Analyst Monica Paolini, Founder and President of Senza Fili Company, summarized Zhengfei’s talking points in a August blog post“The first topic – the one that grabbed the headlines – was the need to shift the focus from R&D, product development and eventually value creation and revenue from hardware to software. This will free Huawei from some of the restrictions imposed by the United States and other countries, which mainly target hardware Software can run on third-party hardware, which will make it more difficult to prevent Huawei from entering a market.
When it comes to Open RAN, carriers are pushing for vendor diversity. Add to that a move towards RAN virtualization, and software specialists like Altiostar, Mavenir and Parallel Wireless are poised to take shares from the incumbents. Another driver of market disruption is the shift to cloud-native and the growing role of hyperscalers in the telecom industry. Also relevant is hardware commoditization, in which general-purpose server infrastructure running specialized software replaces purpose-built embedded systems.
In his mark “Why software is eating the world2011 essay, investor and software engineer Marc Andreessen wrote: “More and more large companies and industries are run on software and delivered as online services – from movies to agriculture to National Defense. Many of the winners are entrepreneurial Silicon Valley-style technology companies that are invading and overthrowing established industry structures.
Whether we see the natural evolution of incumbent CSP vendor portfolios or the disruption of “entrepreneurial tech companies” is up to the market to decide, but either way, software services will be essential to hold the line. promise of a digital transformation compatible with 5G. .