NSN and Demand-Side Networking

The fate of NSN is now even more unclear than usual as the WSJ reports that talks to sell a stake in the venture to private equity firms has failed.  Nokia and Siemens are said to be looking to restructure the deal, but Nokia has said publicly that several options for the venture remain open.  What happened here?  NSN was, and is, one of the larger players in the space.  The problem, I think, is a combination of market pace and vendor inertia, and NSN is hardly the only player guilty.

Networking used to be a supply-side business.  Operators bought gear that created services, and their plans for forward service evolution set infrastructure needs.  People did two- and three-year plans for releasing new voice switch software, for example, because the pace of service evolution was driven by the operators and was totally predictable.  The thing is, while there are plenty of workers in telcos worldwide who probably still think in glacial terms, the market is now driven by people like Apple and Google, who have planning cycles measured in months and not years.  The pace of market change has become more like an avalanche than a glacier.

About four years ago, network operators worldwide awoke to the problem and began to demand support for new initiatives to capture some of the opportunity that the agile handset and OTT players were getting.  This was at first called “transformation” and then “monetization”, and from the first the network vendors balked at the move.  Operators speculated to us that their vendors were afraid that a rethinking of the operator business model would delay sales, and they pressed on to encourage more spending NOW rather than to build the framework that would have justified MUCH MORE spending later.

The gap between buyer and seller was greatest in the US where market pressures from OTT and handset players was greatest, but it’s spread to most other markets.  As it did, it posed more problems for vendors.  With the exception of Huawei, the strategic influence of EVERY network equipment vendor fell as buyers became frustrated with their lack of monetization support.  NSN wasn’t the worst in strategic interest results; their wireless credentials have kept them a contender.  They actually improved in the spring survey based on wireless strength, in fact.  But NSN is a conservative company, somebody who doesn’t understand marketing or the changes that have come about.  It has the assets but doesn’t promote them.

For example, NSN has a “Service Delivery Framework” architecture for the new operator service layer.  It’s fairly complete, as much as any vendor’s architecture we’ve seen, and it’s positionable and credible.  The problem is that the slides that describe it were, when we got a copy, marked “Confidential”.  We can’t talk about it.  They don’t talk about it.  The reason, we believe, is that NSN is trying to use the framework within a professional services context rather than as a product.  That has resulted in the company’s disengagement from four of the five content monetization deals we’ve seen in detail, simply because they don’t have visible assets to get themselves to bat.

Ericsson has a similar problem, in my view.  They also have a good “SDF” diagram that they don’t seem to share in public.  They also have a strong professional services bend, and they want to make monetization projects and not monetization products as a result.  Thus, they are missing a key opportunity—just like NSN is.

NSN could be a valuable property.  Nokia and Siemens don’t have to sell a stake in it if they can push NSN to take the strategic and marketing steps that it’s capable of taking.  If they don’t do that, then any buffing-up-type “restructuring” isn’t going to help.  Thus, my open letter to both Nokia and Siemens is to make NSN into what it’s capable of being and reap the rewards yourself.  Your alternative isn’t going to be pretty.  With the wireless position NSN has, a service-layer story could make the company a compelling partner.  They have one, but it’s not catching on.

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