Nokia Siemens Networks or Nokia Siemens Solutions?

By Kris Szaniawski

One of my colleagues has already blogged about NSN’s new “solutions & services” recently unveiled marketing pitch. It’s always healthy to be sceptical about repositioning exercises of this type but nevertheless I reckon that some interesting and dare I say it genuinely transformational developments are happening at NSN.

NSN in line with other major network equipment vendors (NEVs) like Ericsson and Alcatel-Lucent has been looking to the telecoms IT sector for additional revenues and to strengthen its market positioning. But what is interesting is how quickly this has become a major point of focus for NSN, at least in terms of marketing and research, if not yet in terms of overall revenues.

R&D spend is a good indicator of where a company hopes to go next and according to COO Mika Vevhviläinen, NSN is now “relentlessly” focusing on targeted areas such as real-time charging, service management and network management capabilities.

NSN sees its software business as a strong asset and at the analyst event made much of its large software portfolio. This seemed to go well beyond just identifying a strong upsell opportunity for a new range of products to its large installed base of telecoms infrastructure customers.

According to head of strategy and business development Michael Matthews, NSN wants to drive into the service layer and “improve the experience of how our customer’s customers consume those services”. Traditionally NSN has focused on infrastructure, network build, operations and maintenance but it now increasingly sees opportunities in areas such as business support and is looking to pursue a strategy of creating subscriber-centric networks.

NSN has clearly been inspired by the fast-growing subscriber-data management (SDM) market and the boost NSN was given by its acquisition of subscriber-data specialist Apertio in early 2008. NSN says it now has 74 SDM customers, with 30 of these having signed up over the past 12 months and new customers now arriving at the rate of almost one a week. Over the past year, NSN has also seen 35 partner applications deployed which it claims shows that its SDM approach is becoming a de facto standard.

This is a success that NSN would clearly like to repeat in other areas. But it’s not just a case of expanding its software portfolio, it’s as much about becoming a one-stop shop for a full range of services. This is something IT service companies have long been doing or attempting to do with their offerings in the enterprise space.

It wouldn’t be surprising if NSN now paired up with an IT service company in order to strengthen this new focus. The next quarter or two is likely to prove interesting from this point of view.

There were hints at the analyst event that NSN needs to strengthen its position with partners although it wasn’t made clear if this might be software vendors or service companies. One of the members of the management team said that NSN wasn’t interested in ad hoc partnerships and would rather have two or three significant relationships with industry leaders. This was later echoed by head of care services Volker Griesbach’s assertion that NSN needs to build a strong partner strategy that is more sustainable than the ad hoc partnering going on until now.

NSN claims that NEVs are better positioned than IT service vendors to make inroads in the fast growing services space, arguing that telecoms vendors are more of a trusted partner because of their traditional concentration on ‘triple nine’ reliability. It claims that it’s easier to add IT competencies on top of these fundamental telecoms skills than it is to do it the other way round. There may or may not be something to this argument but what is clear is neither party can go it alone, it’s unlikely that neither one nor the other can deliver without some form of partnering.

Alcatel-Lucent for one seems to have decided that ad hoc arrangements aren’t a good basis for offering end-to-end services. In June Alcatel-Lucent and HP announced a 10-year global alliance to integrate and jointly market IT and communications technologies to both service provider and enterprise customers.

At the analyst event NSN chief market operations officer Bosco Novak pointed out that within service providers the role of the CIO was growing, particularly from the CRM perspective and that the role of both CIOs and CTOs was changing under the impact of convergence. IT departments already typically play a big role in influencing enterprise service contracts and as telecoms moves in an all-IP direction these departments are likely to have a greater influence over buying decisions in the enterprise space. It doesn’t take a lot of imagination to see that this will also impact service providers.

According to the NSN management team their increased confidence in the software and services space also has a basis in their own IT services transformation following the consolidation of Nokia and Siemens business in NSN: “We looked at our own consumption of IT services and learned from our own relationships with communication providers. Enterprises are changing their behaviour faster than service providers can deliver solutions. We believe [NSN] could do more in this value chain”.

The timing may be right for a new push in some of these IT and service business areas given that NSN may be losing market share in some product segments and is coming under increasing pressure in the mobile infrastructure space from the likes of Huawei.

If you were cynical you might think the current focus on IT and services might be a useful smokescreen for a company that is facing stiff competition in the mobile infrastructure space and recently lost out to Ericsson in its bid to acquire Nortel’s CDMA and LTE assets. But NSN argues that its LTE positioning won’t be impacted by the failed acquisition because of redeployment of R&D resource from WiMAX to LTE and there are some early indications that NSN may be becoming more aggressive on price.

I’m inclined not to be cynical and think that NSN genuinely believes it has identified the way the wind is blowing and has committed to reinventing itself as a service and solutions company. In his opening address at the analyst event Matthews mentioned he was currently reading Pattern Recognition a science fiction novel by William Gibson and drew analogies with the impact of technology on customer relationships. The novel deals with suitably futuristic themes and the plot itself revolves around the risks of finding patterns in meaningless data. Let’s hope NSN has recognised a genuine pattern and is betting on the right version of the future.