Practice makes perfect at Ericsson

Quite a number of my analyst colleagues were in sunny Cape Town for the AfricaCom conference this week. I on the other hand have just returned from more northerly climes, from an Ericsson industry analyst forum held in a decidedly chillier Stockholm.

I was struck by a number of things at this event, the first and foremost being how thoroughly Ericsson is seeking to reposition itself. The first morning in Ericsson’s Kista HQ focused on consumer research, OSS/BSS, Services and opportunities in new industry verticals – in other words everything except for its historical network infrastructure business. This oversight was addressed later on but I think there’s a lot to be deduced from the pecking order at such events.

Ericsson is certainly placing a great deal of emphasis on its reinvention as an ICT solution provider. One of the topics that generated most heat at the event – both from Ericsson executives and analysts – was a presentation on Ericsson’s ‘go to market’ strategy and how the company is proposing to make the transition from product supplier to ICT solution provider.

One executive went so far as to say that Ericsson was looking to make a similar transformation to the one Amdocs has made over the past decade. That struck me as a dramatic statement of intent, although presumably it won’t also involve relocating to Chesterfield, Missouri.

Ericsson says this strategic change of emphasis is being backed up by investment in new capabilities, including new categories of staff, although no doubt the changing mix of skill sets will also be helped along by the latest round of redundancies.

Ericsson is expecting support solutions to grow at compound annual growth rate of 9-11 per cent between 2012 and 2015 and for telecoms services to grow by 5-7 per cent over the same period compared to a mere 3-5 per cent for the network equipment market, so some restructuring is inevitable. However, the changes Ericsson is implementing go beyond what you would expect just because one business line is set to grow faster than another.

Over the past years as Ericsson has grown its services business it has brought in people with services skills from telecom operators but it is now also increasingly recruiting people with strong consulting and SI competencies from companies such as Amdocs and Accenture. Practice leaders appear to have been high up on the recruitment wish list in order to reinforce a ‘go to market’ strategy that combines Ericsson’s traditional technology capabilities with customer-facing practices.

Ericsson has created seven formal customer-facing engagement practices: Communications services, Mobile broadband, Broadband and convergence, Managed services, Operation and business support systems, Television and media management, and Consumer and business applications. These in turn are bolstered by competence centres – such as BSS, OSS or RAN – that leverage their skills across the seven practices. All of which makes for a remarkably similar structure to consulting and technology services companies such as Accenture.

Presumably there is also an expectation that much of the value of future engagements will come from the increasing focus on knowledge-based customer relationships rather than just the technology itself. Ericsson aims to create more centralized delivery models in order to make complex projects more manageable and I noticed that ‘automation’ and ‘industrialization’ were key words that kept cropping up during the course of the event. With 12,000+ ICT consulting and Systems Integration staff Ericsson is convinced that it will have the E2E capability to handle everything from signalling to CRM not just from a technology but also a business transformation perspective.

Ericsson’s repositioning is a logical shift in emphasis for a vendor seeking to differentiate itself from the Chinese competition but at the same time it puts it in conflict with a whole set of new competitors such as Amdocs, Accenture, HP and IBM or for that matter Tech Mahindra or Infosys. Ericsson counters this criticism by saying that in order to remain market leader and to flourish in a rapidly-changing environment it needs to reposition itself as an ICT solution provider.

A logical shift it may be, but it’s a crowded market and Ericsson will need to make good use of its strong network and telecoms heritage to differentiate itself against other solution providers and global technology services companies.