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Ericsson embraces openness and standardization for SDN and cloud but must address commoditization

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  • 1. TBR T E C H N O L O G Y B U S I N E S S R ES E AR C H , I N C . TBR EVENT PERSPECTIVE Ericsson embraces openness and standardization for SDN and cloud but must address commoditization Ericsson North American Industry Analyst Forum Silicon Valley, Calif. Sept. 25–27, 2013 Author: Chris Antlitz (chris.antlitz@tbri.com), Analyst, Networking & Mobility Practice Michael Soper (michael.soper@tbri.com), Analyst, Networking & Mobility Practice TBR Perspective Ericsson demonstrated that it is a leader in small cells and a credible contender in SDN and cloud by showcasing a variety of unique innovations related to these product areas, such as the Radio Dot System, at the annual Ericsson North American Industry Analyst Forum in Silicon Valley, Calif. Ericsson stressed that the key to success in the industry hinges on openness and flexibility toward innovation rather than the traditional siloed, proprietary approach. TBR believes that Ericsson’s decision to play an active role in the shaping of open standards in the ICT realm is necessary for the company to stay relevant in the rapidly changing marketplace, despite the fact that open standards make product differentiation more challenging and may impact profits. The industry is heading toward open standards to foster innovation and accelerate implementations of new technologies, and those vendors that embrace this shift and adapt their business models accordingly will stay competitive. Ericsson is covering all its bases through its association with OpenDaylight (SDN), ONF (OpenFlow), OpenStack (Cloud) and NFV (Virtualization) as well as other industry organizations. Ericsson’s Radio Dot System was well received and, though there is a long time to market and some limitations in feature set, the device provides Ericsson a much needed gateway into the indoor access market. However, the Dot will go up against strong competition, such as Alcatel-Lucent’s lightRadio, SpiderCloud Wireless and other
  • 2. TBR alternative in-building solutions, all of which are commercially available today. Ericsson’s decision to passively gain exposure to the enterprise by leveraging its service provider customers as resellers is wise because it will avoid conflicts of interest with its customers while still increasing its addressable market. Ericsson is also focused on SDN and cloud exclusively for operators, indicating that the vendor will remain dedicated to its traditional customer base rather than make a big move directly into the enterprise market. Though Ericsson is making marked progress preparing for these industry shifts and has some products available for commercial deployment this year, such as its SDN controller, the biggest wildcards remain what operators will invest in and how these technologies will ultimately impact their business models and those of their suppliers. Event Overview An assortment of Ericsson executives and experts, including some members of senior management from corporate headquarters in Sweden, took the stage at the company’s annual North American Industry Analyst Forum, which was held at the Hyatt Regency Hotel in Santa Clara, Calif., and Ericsson’s Silicon Valley campus. The event aimed to educate the analyst community on innovations being created in Ericsson’s R&D labs and to provide Ericsson’s take on where the telecommunications industry is headed and how the company will play an integral role in the rapidly evolving mobile ecosystem. Key topics covered included innovations in radio, which featured the new Radio Dot System, how to use OSS/BSS and media to monetize network infrastructure, and how SDN and cloud are creating a paradigm shift in core and IP networks. Enhancements within many product domains were also covered, including radio access, mobile core and edge, but the interdependence of technology domains was an underlying theme, which speaks to the increasing convergence between network and IT. For example, Ericsson demonstrated how using SDN and cloud functionality within a heterogeneous network can enable huge gains in efficiency and flexibility. Impact and Opportunities Ericsson’s ultimate goal is to make the entire network programmable Taking networks to the next level in flexibility and scalability, and enabling them to maximize limited spectrum resources requires a new approach to architecture. Ericsson’s engineering teams are rallying around this cause and embedding programmability to features the company is virtualizing, and to its Service Provider SDN and cloud core solutions. Ericsson can differentiate in “open source everything” by leveraging its services business With hardware and now software, due to increased incidence of standardization and open source, becoming increasingly commoditized, Ericsson can soften the blow and thrive by leveraging its services organization. Specifically, Ericsson can leverage its growing consulting & systems integration arm and layer in its managed services expertise to help operators design, plan, optimize and manage new network architectures. Ericsson can also play an integral role in helping operators migrate networks and manage legacy assets while customers make these technology transitions. www.tbri.com pg. 2
  • 3. TBR Ericsson will pursue enterprise opportunities through service providers Ericsson underscored that it will remain focused on supporting its traditional market, which is telecom service providers, and the company did not provide any indication that it will branch out and sell network gear directly to the enterprise. Ericsson is actively pursuing opportunities in the enterprise market, highlighted by the recent introduction of the Radio Dot System; however, these products and related solutions will be sold into this market by using service providers as resellers. For instance, an operator will engage with an enterprise customer and pull through Ericsson’s solution for implementation. This channel strategy will help Ericsson expand its addressable market and gain much-needed exposure to enterprise, but it will limit its ability to play a bigger role in the broader IT space. Dot lets Ericsson play indoors TBR attendees had a unique opportunity to see and hold the Dot and were surprised by its innovativeness. It was apparent that Ericsson spared no expense to ensure the Dot fulfilled most of the key requirements of operators and enterprise customers looking for the ideal small cell. Roughly the size and shape of a smoke detector, the Dot is versatile and is “out of the box” capable of coordinating with other access elements in the network to attain optimal coverage and capacity. The removable “disk” feature, whereby disks can be easily swapped out to change the radio frequency, speaks to the flexibility and future proofing of the system. The Dot is also cost-effective due to its plug-and-play nature and because it uses LAN cables, which tend to be readily available within enterprise environments and or can be installed relatively inexpensively, for power and backhaul. Despite the numerous pros to the Dot, there are some cons. The first iteration of the Dot will lack Wi-Fi and is not multicarrier or multistandard, which are limiting factors that may cause operators to wait for feature-rich models to come to market before investing. Also, the Dot is not slated to come to market until 2H14, which will give competitors such as Alcatel-Lucent and Cisco more time to build on their recent momentum in the small cell space. Technology Business Research, Inc. is a leading independent technology market research and consulting firm specializing in the business and financial analyses of hardware, software, professional services, telecom and enterprise network vendors, and operators. Serving a global clientele, TBR provides timely and actionable market research and business intelligence in a format that is uniquely tailored to clients’ needs. Our analysts are available to further address client-specific issues or information needs on an inquiry or proprietary consulting basis. TBR has been empowering corporate decision makers since 1996. For more information please visit www.tbri.com. ©2013 Technology Business Research Inc. This report is based on information made available to the public by the vendor and other public sources. No representation is made that this information is accurate or complete. Technology Business Research will not be held liable or responsible for any decisions that are made based on this information. The information contained in this report and all other TBR products is not and should not be construed to be investment advice. TBR does not make any recommendations or provide any advice regarding the value, purchase, sale or retention of securities. This report is copyright-protected and supplied for the sole use of the recipient. Contact Technology Business Research, Inc. for permission to reproduce. www.tbri.com pg. 3

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