Nokia has launched a new strategy, including a new logo, and the latter has gotten more attention than the former. That’s too bad because Nokia’s numbers have been good, as opposed to those of some of its major competitors. Why would they want a “refreshed company strategy to deliver sustained long-term growth” at this point? Let’s dissect their comments and offer a few besides.
CEO Lundmark said “Today we share our updated company and technology strategy with a focus on unleashing the exponential potential of networks – pioneering a future where networks meet cloud. To signal this ambition we are refreshing our brand to reflect who we are today – a B2B technology innovation leader. This is Nokia, but not as the world has seen us before.” This is obviously an example of not-uncommon CEO platitudes, but they also offer what they say is acceleration across six pillar principles. They are 1) grow market share through technology leadership, 2) expand their enterprise business, 3) manage product activity to ensure leadership where they elect to compete, 4) exploit opportunities outside the mobile services sector, 5) implement new business models like as-a-service, and 6) turn sustainability into a competitive advantage.
On the surface, many of these pillars sound like platitudes too, but I think it would be a major mistake for Nokia to tout a rebranding so obviously and do a whimper instead of a bang. They surely know that, so they are in fact about to do something radical. Where among these six points might we find a hint of what it is.
The first and most obvious of the points is expanding their enterprise business. Rivals Cisco and Juniper have proved that the service and cloud provider space is under a lot of profit pressure, and thus can’t be relied upon to expand spending. If a buyer sector doesn’t spend, then sellers there can’t gain revenue and profits. Enterprise has been stronger for network vendors, and so it makes sense for Nokia to attack the space.
That “providers” are under considerable cost pressure is well-documented. EU operators have asked for subsidies from Big Tech, and Nokia rival Ericsson just commented that operators in the EU needed to consolidate if they wanted to improve their profitability. You can’t sell consumers network equipment, so if providers aren’t viable targets for revenue growth, then the enterprise is the only answer.
A focus on the enterprise means a refocusing of product strategies, which leads us to exploiting opportunities outside the mobile space. Media hype notwithstanding, there’s simply no significant opportunity for private wireless. It’s a pimple on Nokia’s bottom-line opportunity, but chasing it might be why Nokia realized that there are opportunities in enterprise networking that they would be able to address.
That will surely require implementing new business models. One specific technology point they make in their press release is that they’re strategy “details how networks will need to evolve to meet the demands of the metaverse era”, and it may be here that they signal why they believe a radical refocusing of their brand is essential. As always, we have to be careful of the “may be” qualifier.
Anyone who’s followed my view of the metaverse knows I believe it’s a general approach to modeling the real world through a combination of compute and network services, not a social-media-limited service. The thing that characterizes it is the need for a “digital twin” of some organized real-world system, to collect information to populate a model and then to use that model to make decisions about the system and exercise control over it. In short, it’s a shift of focus more toward the point of activity, something I’ve said is the next frontier of opportunity.
The obvious question is how this technology shift squares with the top point of expanding Nokia’s enterprise business. I think the answer to that is clear, and related in a sense to the whole private-5G craze that Nokia and others have been pushing. Real-time is edge-focused, and right now the “edge” is all the way out on the customer premises. Unlike 5G, which is really a public service that can perhaps be exploited in limited enterprise verticals, real-time edge is almost universal and almost exclusively premises-focused in the near term.
Nokia isn’t an incumbent in computing or networking for enterprises, which leaves them free to perhaps adopt a more radical approach. Cisco and Juniper both address edge computing in both a product and positioning way, but neither is big on digital twinning or metaverse. If the next big thing in computing is real-time, digital-twin, metaverse, then Nokia might be able to stake out a claim for the space before any of the current incumbents are willing to be that radical. That could give them an immediate point of leverage with enterprises.
Any attempt by Nokia to jump into the enterprise space would pressure companies already established there, especially those like Cisco and Juniper who are switch/router vendors. Nokia’s fastest means of transitioning to a greater enterprise focus would be in product areas where the service providers were already consumers. Security would be more difficult for Nokia to address, unless they decided on M&A, and that could violate their principle of being a technology leader on their own.
I think the most interesting near-term question is what Nokia might decide to do in virtual networking. Their Nuage offering is one of the most mature virtual networking product sets, and one of the best. They expanded it to SD-WAN, and they offer a managed SD-WAN service, which plays to their goal of an as-a-service shift. Again, I believe virtual networks and NaaS is a frontier of networking. Might Nokia be more aggressive there too, and steal some opportunity from enterprise incumbents who have been shy about pushing the topic with enterprises?
There is a lot of potential here, and perhaps the best part is that the key issue of edge computing and digital twinning is one Nokia could also leverage in the service and cloud provider spaces. The enterprise is a good incubator for this opportunity, but its maturation would certainly transform both service provider and cloud. In other words, this could work.
It might also be a bad sign, of course. 5G isn’t what vendors hoped it would be, and even what it is has started to wind down. There are no major budgeted service provider initiatives on the horizon for at least four years. The cloud’s growth is slowing. It could be that Nokia sees the handwriting on the wall with respect to the provider side, and it could be that the conservative, glacial-paced, mindset of the service provider space has permeated Nokia management. It could be that they won’t be doing any of the aggressive things I’ve noted here, in which case they may be the leading edge of a major problem for vendors that depend on service provider opportunities. You can’t just say “enterprise” and win there, and until we know whether Nokia has anything tangible in mind, we won’t know whether they can succeed with their transformation. A logo isn’t enough, gang.