The recent decision by Ericsson to shut its Edge Gravity unit after only two years might be regarded as a negative for the Swedish vendor, but it’s also a sign the company is sticking with the strategic focus implemented by CEO Börje Ekholm during the past few years (while also showing, at least, that the company is not afraid to take a risk on something new).
And the closure doesn’t mean Ericsson is no longer interested in the telco edge opportunity – it’s just going at it from a more traditional angle that ties in with the vendor’s strategic focus.
When Ekholm took on the CEO role in January 2017, Ericsson’s financials were in a poor state and getting worse following years of acquisitions and investments that weren’t always the result of rigorous financial analysis or discipline. An example was the company’s foray into the world of video and TV technology and services – Ericsson built a sizeable business but one that lacked financial control: Ekholm, who decided the company needed to focus on being the leading company in mobile networks while also being profitable, soon identified that video unit as a burden, slashed its cost base, renamed it as MediaKind and sold a majority stake to One Equity Partners.
That more rigorous, clinical approach, with a focus on “accountability,” has helped put Ericsson on more solid ground: For the full year 2016, before Ekholm took over, Ericsson recorded a significant year-on-year dip in operating profit and operating margin to SEK 6.3 billion and 2.8% respectively; for the full year 2019, operating profits and margins improved year-on-year to SEK 10.6 billion and 5% respectively. So at least improving, but still a long way to go.
But that more “accountable” approach also sent Edge Gravity to the business graveyard, as reported by TelecomTV in mid-June and also acknowledged by the vendor.
Behdad Banian, Chief Marketing Officer for Emerging Tech and New Businesses at Ericsson, says the business culture within Ericsson now is that “we need to be faster to come to a conclusion… faster to decide about whether to continue investments and whether there is enough traction” related to any particular business development: That’s particularly relevant for the vendor’s Emerging Business ‘segment’, which focuses on “new business opportunities, fostering an innovation culture and investing in promising incubation opportunities, while supporting the core business.” (The other segments are Networks, Digital Services and Managed Services.)
Banian told TelecomTV that Ericsson could see there were lots of opportunities related to edge, and that the vendor had identified an opportunity related to content delivery – hence its partnership with Limelight Networks, a CDN (content delivery network) specialist for Edge Gravity. “The opportunity, the idea, was a viable one,” he said, but also acknowledged that the edge market is “fast moving” and that the push in the telco edge market by the hyperscale companies has changed the landscape: “the market is still settling down,” he noted.
So what does the edge now mean for Ericsson?
Although Edge Gravity is no longer part of Ericsson pitch, it’s still hoping to be a player in the telco edge market. And it’s bullish about the role that edge computing will play in 5G: the vendor proclaims on its website that “the majority of the new 5G revenue potential is expected to come from enterprise & IoT services, of which many will rely on edge computing.
And to tie in with its more focused strategy, that role goes hand-in-hand with its 5G relationships with mobile operators, but it seems like it has some work to do to build out its broader proposition.
Lars Mårtensson, Head of Solution Area Cloud and Network Function Virtualization infrastructure and Head of Ericsson Silicon Valley, says the vendor is working to provide network operators with “edge solutions” that are driven by “enterprise use cases,” particularly as they start to roll out their 5G networks and look to make use of the capabilities of 5G radio access network and core capabiloities.
He says the vendor can provide a range of “operator edge” technologies, including hardware, software (including its NFVi and Dynamic Orchestration tools) and services, and that it has already landed a deal to provide such an end-to-end telco edge package with a well-known operator.
This isn’t new: Ericsson has been working in league with operators to identify potential use cases for edge in certain sectors, such as its collaboration with Telstra and the Commonwealth Bank of Australia to “explore 5G edge computing use cases and network capabilities for the financial sector by testing end-to-end banking solutions over 5G.”
Mårtensson says Ericsson “works very closely with CSPs… we are working with the telcos as they figure out how to engage with their enterprise customers, to identify use cases… but we haven’t seen a killer use case just yet.”
He adds: “We can orchestrate what needs to be done in the RAN, core and cloud – we can orchestrate the use cases in a mobile network… we believe this will be a multi-vendor, multi-cloud solution.”
That’s all very well, but surely Ericsson can’t go at this alone? The vendor realizes that while telcos can be a partner to enterprises to develop edge-enabled use cases, the hyperscalers and vertical industry specialist technology firms and/or integrators also have skin in the game and engagement with all of those parties will be necessary.
Mårtensson says Ericsson is “looking at partnerships with the hyperscalers and how our products can be integrated,” but there’s nothing yet to talk about.
And what about building a set of partnerships to that can help provide vertical industry expertise alongside Ericsson’s technology? “That is in development,” but nothing has yet been announced, says Mårtensson.
Is it perhaps involved in initiatives such as the GSMA’s Telco Edge Cloud Platform and associated Operator Platform Group, where the likes of Huawei, Nokia, integrator Altran and edge specialists MobiledgeX and Ori Industries are active? Ericsson says it is monitoring the progress of that initiative and “will continue to evaluate it.” (So that’s a “no” then…)
Ericsson clearly doesn’t want to be left out in the cold should the telco edge market take off as 5G matures, especially now that it doesn’t have Edge Gravity to attract the participation and interest of the network operators, but it looks like it has a way to go before it has the kind of offering that will meet the needs of operators that want to capitalize on any service and relationship opportunities that edge computing can deliver.