Consultancy purchase continues transformation of Ericsson
Paolo Corella: There is a growing opportunity driving
Ericson’s latest acquisition in the consultancy business is the sixth in little over five years, and is designed to give the group significant advantages in the consolidation of telecoms operators that is about to take place throughout the fixed and mobile business.
The 1,000 staff of Pride, an Italian consulting and systems integration company, joined Ericsson’s 10,000 existing staff in this field at the start of February — adding to a portfolio of Australian, French, Spanish, Swedish and Turkish acquisitions in a process that has continued since September 2004.
“We see an industry that is experiencing a fast pace of transformation,” says Paolo Corella, head of consulting and systems integration at Ericsson in Stockholm.
Top of the list of drivers is consolidation in both mature and emerging markets, he says. “Look at India, where there are 12 mobile operators, but the government is offering four 3G licences. This will drive consolidation there and this change process is happening among all mobile and fixed players.”
Behind this is a change in attitude among operators, which for years added new operations and even businesses without thinking of the extra costs involved.
“During the fast-growing phase of the market operators built separate silos,” says Corella. “For example they added new network operations centres and put on lost of extra cost. But now they’re looking at all the business processes and are simplifying operations in order to reduce costs.”
These silos are “a fundamental obstacle to innovative business models”, he adds. Compare the competitive companies that have taken steps to understand their customer needs, he says: Apple and Google. “They have implemented services that take advantage of network innovations.”
It’s up to operators to get more value from the service chain, he adds. “We see a fundamental opportunity from the business point of view. There is a growing opportunity driving complex projects.”
Which is where, he says, Ericsson can come in, to advise operators. “We have been investing in software, in OSS and BSS. We have hired people from the market and we are growing young talent in the company.”
And Ericsson’s managed services contracts enable the company to bring in talent from operators with which the company has deals — companies such as Sprint in the US and Hutchison in Europe. “They have brought a big injection of IT skills,” he says.
In addition, there have been the acquisitions of systems integrators and consultancies, of which Milan-based Pride, announced in January 2010 and completed in February, was the largest. “It has a very strong focus on OSS/BSS, with multi-vendor expertise,” says Corella. The deal — for no price has been quoted — strengthens Ericsson’s consultancy operations in the Mediterranean region.
“Pride’s core focus is in telecoms, but the company also has interests in energy, utilities and government,” he adds. “That gives us a change to look at those markets.”
But transformation in telecoms is the main driver, though customers vary in their needs. “Some want to run the transformation themselves, and some want a full service from us,” Corella explains. “We are not prescriptive. Some of our customers are keen to retain critical parts of their technology in-house.” Others are happy to let a managed service company run the radio access network or other parts of the system. “We can be a project partner or we can run the full programme as a managed services provider.”
He cites one operator which provides fixed and mobile services as well as broadband, but all in separate silos. “We are working to transfer the whole operation to one network operations centre,” says Corella. “That will release a huge part of the cost.”
Before all that came a “technology and business process assessment” when Ericsson “redesigned the system”, he adds: “It’s very much something we have developed over time, based on our managed services experience. We can improve performance, bring in synergies and methodologies and tools.”
Technologies come from Ericsson’s own portfolio, supported by its research and development, or from the open market, he says. “The customer can choose, especially because there are some very strong and established players and the customer may already have made investments. That’s why we are not prescriptive.”
There has to be an open approach, he emphasises: Ericsson’s own global NOCs are equipped with third-party tools.
This wide portfolio is necessary when companies consolidate, he points out. They will want to create a single portfolio of services, with a single billing system, but typically will have inherited a number of billing and other systems. They have to be consolidated, “otherwise they won’t achieve synergies”.
Even without consolidation of separate companies, there is scope for consolidation of separate units in a company — units that exist because they date back to the profligate days when the business was expanding rapidly into new areas.
“I wouldn’t say it was bad practice,” says Corella. “It was the market dynamics of the time, and the speed the business has evolved over the past 15 years. Then, all that mattered was to get new customers in.” Speed of implementation was the key; efficient re-use of software came second.
Now, the priority is to deliver more to the customer for less cost. The change is starting, he warns. Ericsson, at least, is ensuring it is prepared. GTB