February 10, 2017
It's been a busy week for Nokia. Fresh from announcing a €347 million ($369 million) takeover of Comptel, aimed at helping it to realize its software ambitions, the Finnish vendor is getting busy in the managed service provider sector with its launch of what it calls a "worldwide IoT [Internet of Things] network grid." (See Comptel Looks Like the Start of Nokia Software Spending Spree, Nokia's Buying Comptel: What the Analysts Say and Nokia Eyes Bigger Software Role With €347M Comptel Bid.)
Besides giving Nokia Corp. (NYSE: NOK) another catchy acronym (WING), the big idea -- as the name suggests -- is to provide a managed service for customers that want to support IoT applications across numerous countries.
WING appears to bring together an assortment of Nokia's managed-service capabilities, as well as its recently ballyhooed IMPACT (acronym overload) software platform. But the big selling point, according to the company, is simply the lack of a global IoT operator. (See Nokia Aims for Big IMPACT in Enterprise IoT.)
"One thing we discovered in putting together uses cases is the inability for multinationals to offer IoT services because there is no multinational connectivity service that allows this," said Phil Twist, the vice president of portfolio marketing at Nokia Networks, during a press briefing with reporters in London earlier this week. "There are US and European solutions but no one has put something in place that federates all this together as a service."
One wonders what some of the mobile virtual network operator types specializing in IoT would make of that (we'll get back to you on this). The likes of Atlanta-based KORE Wireless Group Inc. would certainly claim to straddle the Atlantic, and support connectivity services in other parts of the world, through wholesale deals with network operators in those markets.
Want to know more about the Internet of Things? Check out our dedicated IoT content channel here on Light Reading.
What's very clear is that Nokia wants to play a much bigger service provider role in the enterprise sector, having identified five key vertical markets it is targeting as part of a new growth strategy announced in November (to run through those again, they are -- deep breath -- energy, transportation, the public sector, "technological extra-large enterprises" and the web-scale players). (See Nokia to Create Standalone Software Biz, Target New Verticals.)
Arguably the more straightforward channel to market is through existing telco customers, which would provide WING as a white label service to enterprises. But Nokia obviously wants to appeal directly to these vertical markets.
The question is whether it can do that without treading on the toes of the telcos, many of which appear keen to play much bigger roles as providers of managed services (especially when it comes to IoT), and not simply be left with the connectivity scraps.
Twist does not see any kind of conflict. "We are trying to offer something that is a worldwide extension to what they do in a country," he says. "There is no worldwide operator and so this is a federation in cooperation with operators that allows them to extend outside their geographic remit."
But are there not instances where Nokia might be targeting a more limited geographical market and find itself in direct competition with the telcos? "I'd be surprised if we put ourselves in that position given that our bread and butter business of working with operators is not something we want to jeopardize," says Twist.
Next page: On a WING and a prayer?
On a WING and a prayer?
If the strategy sounds like it will require some juggling of priorities, the WING launch has received a big endorsement on the analyst side from Alexandra Rehak, who heads up the IoT practice at Ovum Ltd. and who is quoted in Nokia's press release.
"The new offering leverages Nokia's broad portfolio of technologies and strong expertise in network design and management, and should open up business opportunities for operator customers and large enterprises alike," she says.
Clearly, it is still early days for the enterprise strategy and Nokia has already acknowledged that it will require some big shifts, including investment in new sales channels. So far, though, all is going smoothly, says Twist.
"Technological extra-large enterprises are the first set we are targeting and there is a dedicated channel set up to address those, which is delivering the sort of results we said it would," he says. "I can't leak out financial results but we are comfortable the strategy is the right one and that we are addressing the needs of specific groups."
Indeed, Nokia can already boast a few big customer names on the enterprise side, including energy players Oklahoma Gas & Electric, Swissgrid and Washington Gas, as well as mining giant Rio Tinto. Manish Gulyani, a vice president at Nokia's IP and optical networks business, says the company now serves more than 500 enterprise customers in total across the public sector, transportation and utility markets.
It is certainly not hard to see why Nokia attaches such importance to this continued diversification. In November, it predicted that its main addressable market -- worth about €113 billion ($120 billion) last year -- would grow at a compound annual growth rate (or CAGR) of just 1% over the next five years (ouch).
These "adjacent" verticals, by contrast, represent an €18 billion ($19 billion) opportunity forecast to grow at a five-year CAGR of 13%, reckons Nokia.
Even so, if Nokia really is to thrive in the years ahead, it may have to beat the overall market. Igor Leprince, the executive vice president of Nokia's global services business, last September told reporters that only about €1 billion ($1.1 billion) in annual revenues (€26 billion, or $27.7 billion, in 2015) came from enterprise customers. Growing those sales at a 13% CAGR would leave Nokia with about €1.84 billion ($1.96 billion) five years from now on the enterprise side. (See Nokia's Leprince Wants to Be King of Enterprise.)
So if the rest of Nokia's business grew at a 1% CAGR, Nokia would be generating less than 7% of revenues from "adjacent" markets by the end of the five-year plan.
— Iain Morris, , News Editor, Light Reading
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