Nokia, who seems to have struggled a bit more with 5G than rival Ericsson, may be taking the “open” way out, and it might also turn out to be the “easy” way. As TelecomTV reports HERE, Nokia has established an Open RAN development relationship with all three of the public cloud giants. You’ll recall that these cloud players have already made announcements in the 5G public cloud area, and the deals open a lot of interesting points.
Despite all the glowing stories about 5G benefits, the fact is that there have been no credible opportunities for major revenue growth generated so far. Speculations, yes, but no opportunities. As a result of this, the 5G operators have been facing the risk that 5G would reduce their profit per bit further, when it’s already in danger of falling too low to sustain infrastructure investment. If ROI is the problem and the “R” or revenue part is nailed to the floor, the all that’s left is reducing investment, the “I”. Capex reduction is an obvious target, which means forcing vendor discounts and promoting open-model networking.
Ericsson and Huawei are the market-share leaders in mobile network infrastructure, with Nokia third. Traditional competitive moves like aggressive marketing and discounts aren’t attractive when you’re behind and at risk to disappointing shareholders, so you need to rock the boat on the market game, which Nokia has done with its more aggressive Open RAN approach, part of a broader commitment to an open model for 5G, and even for networking.
There may be a relationship or two here, between Nokia’s open-model networking approach and its recent announcement it was cutting 11% of its staff. If you are going to embrace community-developed resources, you don’t have to have as large a development team on staff, and your overall marketing burden could be lessened by the general popularity of the open approach. Whether staff cuts were enabled by the open approach, the open approach was dictated by the need to have a less people-intensive product development model, or what, we may never really know.
We do know that an open-model decision has an impact beyond product development. If you raise chickens for eggs, you’re part of the egg ecosystem. If you decide to raise cattle for milk instead, you’ve got to accept that you need to cultivate a new set of relationships. Who are the players in the open-model network ecosystem? Other players that operators or enterprises would likely turn to if they decided to embrace the model-model approach. Enter the public cloud providers.
Many of the potential operator buyers of open-model 5G would prefer 5G as a service for the same reason they wanted open-model 5G—lower cost and no vendor lock-in with escalating costs. Nearly every enterprise who might consider private 5G would prefer it as a service too. Given that the major public cloud providers have all announced some form of hosted 5G, Nokia has to realize that if it wants to promote its own flavor of an open-model network, it had better get a footprint with those public cloud providers, particularly Google and Microsoft.
Google is the master of cloud-native thinking. They invented Kubernetes and Istio, and their Anthos multi-everything orchestration maestro for Kubernetes is becoming the go-to strategy for organizations who need to run multiple clouds along with their own data centers. If you want a development partner for open-model 5G that’s right up to speed with the cloud, you want Google in your corner.
Microsoft is the cloud pragmatist. They know more about hybrid cloud than anyone because they saw it as the winning concept from the first. As a result, they’re growing faster among enterprises than leader Amazon. If you want 5G wins in the enterprise space, Microsoft’s nose is well into that tent. In the 5G technology space, they’ve gone out and acquired technology to provide 5GaaS, which makes them a direct threat to any 5G vendor. If Nokia wants their cloud enemies closer, it’s cuddle time with Microsoft.
Sitting at the feet of Google-the-cloud-master or cuddling with Microsoft are a pair of great tactics for Nokia, but they need a strategy too, and that may well be the hardest thing for them to find. Differentiation in the open-model, open-source, world has typically come through professional services, support, and integration credibility. Nokia has that with operators but less so (if at all) with enterprises. Even operators might find the Google piece of a Nokia/Google partnership more compelling than the Nokia piece.
Any strategic position Nokia might want will also have to be defended against other open-model players, including VMware, IBM/Red Hat, and HPE, to name a major few. All of these companies have strong enterprise positions and credible engagement with the network operators too. Any of them could jump out with powerful differentiators of their own, or even jump on a Nokia differentiator that wasn’t presented decisively enough.
AI may be a differentiator Nokia has in mind. They just signed a big self-organizing- (or optimizing-) network (SON) deal with Orange, and while almost everyone claims to have AI these days, a big part of a strong AI strategy is an inventory of subject-matter experts who can be tapped to set up the environment. Nokia has that for networking, and most of their potential competitors, and even their cloud provider partners, do not.
The risk for Nokia here is that the cloud providers may be their most formidable long-term competitors for 5G infrastructure. All that stands in the way is cloud provider exploitation of the Achilles heel of 5G for network equipment vendors, which is the notion of control-plane separation. 5G generally divides itself into a control plane and a user plane, which is essentially IP. 5G’s control plane could easily be cloud-hosted, which would leave the user plane as the only box-specific component. Router vendors, a group Nokia is among but not the leader, might partner with cloud providers and present a whole-network solution.
That might not be all, either. If we separate IP’s software from its hardware, and in particular the IP control plane from the forwarding plane, how much of the resulting software could be hosted in the cloud? We might have nothing left but commodity white boxes for carrier network equipment vendors to fight over.
There is a major transformation in network thinking underway. It’s not really far along at this point, but it’s clearly gaining momentum because the new-think has already empowered players like the cloud providers, who tell time in Internet years (about a calendar quarter) and not telco years (half a decade). Nokia may have to change its watch, and not just its alliances.