& cplSiteName &

Ericsson's Ewaldsson Takes Aim at Telco 'Conservatism'

Iain Morris

Ulf Ewaldsson does not seem like a man facing one of the most daunting tasks in telecom. With his ready smile and lilting Swedish accent, the head of Ericsson's newish digital services business appears unflappably calm. But the company he works for is in turmoil: Following a sequence of earnings setbacks, Ericsson is desperately trying to restore profitability to historical levels without sabotaging its future prospects. That challenge falls heavily on the shoulders of Ewaldsson.

That's partly because of his status within the company. Formerly Ericsson's chief technology officer, Ewaldsson seems to have been instrumental in developing the latest, margin-focused plan, taking charge of strategy back in September. Since March, however, and with Ericsson AB (Nasdaq: ERIC) in plan-implementation mode, Ewaldsson has been leading a new-look digital services business that forms a major part of the IT and cloud division -- one of three big units, the others being networks and media, that Ericsson now operates.

In the Eye of the Storm
Ulf Ewaldsson, the head of Ericsson's digital services business, is calmly trying to engineer a turnaround in 2018.
Ulf Ewaldsson, the head of Ericsson's digital services business, is calmly trying to engineer a turnaround in 2018.

It is the digital services business -- comprising OSS, BSS and core network products -- that mostly interests many of Ericsson's investors. With Ericsson deciding to narrow its focus under the leadership of Börje Ekholm, who became CEO in January, the media business is likely to get sold. Ericsson's commitment to networks, which accounts for about three quarters of company sales, is obviously not in doubt. But analysts have questioned Ericsson's apparent devotion to its OSS and BSS business, which had a torrid 2016. (See Ekholm's Vision of Slimmer Ericsson Lacks Detail & Dazzle.)

Ekholm has effectively ruled out a sale, describing digital services as "strategically important" to the company. Yet a dramatic overhaul is needed, acknowledges Ewaldsson. "In this area we do need to improve the performance a lot," he tells Light Reading during an interview at this week's TM Forum Live event in Nice. "We expect to have a tangible turnaround in 2018 from streamlining the portfolio and investing enough in new systems to make them take off."

It is undoubtedly a big ask. While IT and cloud sales in the recent January-to-March quarter were down just 3% (year-on-year), to about 9.5 billion Swedish krona ($1.1 billion), the revenue decline was about 7% when figures were adjusted for currency effects. Even more troubling was the operating loss, which grew from SEK2 billion ($230 million) in the year-earlier quarter to a startling SEK9 billion ($1 billion). (See Ericsson's Q1 Even Worse Than Feared.)

The overriding problem, according to Ericsson's earnings report, was not an uncommon one in the sector -- the failure of new digital-product sales to offset the decline in so-called "legacy" business activities. Ewaldsson offers a much blunter assessment of what that means in practice. "The telco industry is one of the most profitable in the world and that profitability is safeguarding a certain level of conservatism," he says. "That maintenance of legacy is preventing us from being agile enough to monetize enough."

It is not unusual at trade shows to hear operators criticize the big suppliers for not doing enough to address their needs. If Ewaldsson is having a dig in return at some of Ericsson's own customers, it is not without justification. During a panel discussion at TM Forum Live, Eric Hoving, the chief technology officer of Dutch telco KPN Telecom NV (NYSE: KPN), lambasted operators' billion-dollar investments in billing systems he deems to be unnecessary. Telefónica CIO Phil Jordan echoed Hoving's concerns. "We've made the business complicated and now we need to re-engineer," he said. (See BSS Is BS, Says KPN Tech Boss.)

Want to know more about cloud services? Check out our dedicated cloud services content channel here on Light Reading.

Making that re-engineering as pain-free as possible will be an important starting point for Ericsson. "We are working hard on making simple what is really complex," says Ewaldsson. Beyond this underlying need for simplicity, he is also looking at several opportunities that could be the seed of future growth. The first is around the sort of customer experience management technologies that would allow telcos to function much like over-the-top players. "Customers want an experience that is similar to iTunes. We can see more operators wanting to go there but with so much legacy stopping them."

Ericsson has also been investing in the digital front end-platforms that could eventually provide an alternative to more old-fashioned billing systems for operators such as KPN. With an estimated 2.1 billion subscribers using Ericsson's traditional systems, the Swedish vendor could be in a strong position to help telcos shift customers across. Automation is a further priority for Ericsson as operators continue to look for cost savings.

But if Ericsson really considers OSS and BSS to be "strategic," it needs to think about acquiring some of the innovative digital players entering the market, according to James Crawshaw, a senior analyst with the Heavy Reading market-research business. Takeovers are certainly an option, says Ewaldsson, if they can help Ericsson to be "the partner of choice for customers digitizing their businesses." He is obviously not disclosing details of possible targets, but cites interest in areas including customer experience and revenue management, as well as both analytics and automation. (See Ericsson Eyes Takeovers to Bolster Digital Services Unit and Ericsson Must Hit M&A Trail to Boss B/OSS – Analyst.)

A recently launched "dynamic orchestration" product addresses some of the customer requirements, says Ewaldsson, and provides a taste of what is to come from Ericsson in a 5G-based future. Broadly speaking, it's a service orchestration tool pitched at operators that need to keep managing the old technologies even as they introduce newer virtualized services. Ericsson already has customers, Ewaldsson tells Light Reading, without naming names. "We are using new ways of building systems and it is highly customizable," he says. "We'll see even more of this in future and that's going to change the business model from one-off payments for big upgrades to more of a recurring service model." (See Ericsson Unveils Dynamic Orchestration.)

Next page: Virtualization reality

(1)  | 
Comment  | 
Print  | 
Newest First  |  Oldest First  |  Threaded View        ADD A COMMENT
User Rank: Blogger
5/18/2017 | 12:28:47 AM
If Mr. Ewaldsson can turnaround the digital services division the next stop is probably group CEO, never mind trying to crack the enterprise IT market.
Featured Video
From The Founder
Light Reading is spending much of this year digging into the details of how automation technology will impact the comms market, but let's take a moment to also look at how automation is set to overturn the current world order by the middle of the century.
Flash Poll
Upcoming Live Events
November 1, 2017, The Royal Garden Hotel
November 1, 2017, The Montcalm Marble Arch
November 2, 2017, 8 Northumberland Avenue, London, UK
November 2, 2017, 8 Northumberland Avenue – London
November 10, 2017, The Westin Times Square, New York, NY
November 16, 2017, ExCel Centre, London
November 30, 2017, The Westin Times Square
May 14-17, 2018, Austin Convention Center
All Upcoming Live Events
With the mobile ecosystem becoming increasingly vulnerable to security threats, AdaptiveMobile has laid out some of the key considerations for the wireless community.
Hot Topics
Muni Policies Stymie Edge Computing
Carol Wilson, Editor-at-large, 10/17/2017
Is US Lurching Back to Monopoly Status?
Carol Wilson, Editor-at-large, 10/16/2017
'Brutal' Automation & the Looming Workforce Cull
Iain Morris, News Editor, 10/18/2017
Pai's FCC Raises Alarms at Competitive Carriers
Carol Wilson, Editor-at-large, 10/16/2017
Worried About Bandwidth for 4K? Here Comes 8K!
Aditya Kishore, Practice Leader, Video Transformation, Telco Transformation, 10/17/2017
Animals with Phones
Selfie Game Strong Click Here
Latest Comment
Live Digital Audio

Understanding the full experience of women in technology requires starting at the collegiate level (or sooner) and studying the technologies women are involved with, company cultures they're part of and personal experiences of individuals.

During this WiC radio show, we will talk with Nicole Engelbert, the director of Research & Analysis for Ovum Technology and a 23-year telecom industry veteran, about her experiences and perspectives on women in tech. Engelbert covers infrastructure, applications and industries for Ovum, but she is also involved in the research firm's higher education team and has helped colleges and universities globally leverage technology as a strategy for improving recruitment, retention and graduation performance.

She will share her unique insight into the collegiate level, where women pursuing engineering and STEM-related degrees is dwindling. Engelbert will also reveal new, original Ovum research on the topics of artificial intelligence, the Internet of Things, security and augmented reality, as well as discuss what each of those technologies might mean for women in our field. As always, we'll also leave plenty of time to answer all your questions live on the air and chat board.

Like Us on Facebook
Twitter Feed
Partner Perspectives - content from our sponsors
The Mobile Broadband Road Ahead
By Kevin Taylor, for Huawei
All Partner Perspectives