Ericsson's Services Head Eyes More Growth
Magnus Mandersson, who started his new job as head of Ericsson AB (Nasdaq: ERIC)'s Global Services at 8am today, expects to see further growth in the professional services market in the near term, and is keeping his eye out for local acquisitions that can help boost his business further. (See New Names Join Ericsson's Top Team.)
Talking to Light Reading Monday morning, Mandersson said the services part of Ericsson's business has been growing steadily for the past five or six years, and that the vendor continues to see "healthy growth" across its full range of services, including managed services (where Ericsson operates physical networks on behalf of its carrier customers), and consulting and integration.
In 2008, the vendor generated services revenues of 70.5 billion Swedish Kronor (US$10 billion) -– SEK49 billion (US$7 billion) from Professional Services and SEK21.5 billion (US$3 billion) from network rollout services (reported as part of the networks division) –- up from SEK61.4 billion (US$8.7 billion) in 2007.
Just how much the business grew in 2009 will be revealed on January 25, when Ericsson reports its full year financials. And with his company's earnings announcement imminent, Mandersson was unable to comment on the 2009 performance, or provide an outlook for 2010.
Last year's quarterly earnings reports, though, show that during the first nine months of 2009, Ericsson's Global Services business (Professional Services and network rollout services combined) generated revenues of SEK56.1 billion (US$8 billion).
Mandersson, though, was able to talk about other growth metrics. Ericsson's services staff grew from about 30,000 employees at the close of 2008 to about 40,000 staff by the end of 2009. About 6,000 staff were added in one go, though, as a result of the monster outsourcing deal Ericsson struck with Sprint Corp. (NYSE: S) in July 2009. (See Ericsson, Sprint in $5B Managed Services Deal.)
In addition, Mandersson said that about 350 million subscribers globally are using networks now run by Ericsson's managed services staff.
There's plenty of competition for Mandersson to contend with, though. Ericsson's main infrastructure rivals, including Alcatel-Lucent (NYSE: ALU), Huawei Technologies Co. Ltd. , and most notably Nokia Networks , are all vying for services business, along with the large IT services players, such as IBM Global Services and HP Inc. (NYSE: HPQ), and systems integration companies such as Accenture and Cap Gemini. (See NSN Services Chief: Huawei's Years Behind, Services Now 45% of NSN Revenues, and AlcaLu, Bharti Form Joint Venture.)
The global market for telecom-related services is so fragmented that Ericsson was the leading player in 2008 with a market share of just over 10 per cent, stated Mandersson.
The Ericsson man, then, is looking to stay ahead of his main rivals by growing organically and through targeted acquisitions. The giant Swedish vendor announced such a takeover just last week with the acquisition of Italian systems integrator Pride Spa, which will add another 1,000 staff to the Global Services payroll. (See Ericsson Snaps Up Systems Integrator.)
Mandersson admitted that further such deals are possible "every now and then... as a gap filler. We will always look into [such potential acquisitions]," but "we won't buy any large companies, just local ones."
And Ericsson is looking to expand its worldwide facilities to support its growing services business. Mandersson noted the company currently has five large Global Services Delivery Centers, with that number set to grow, and about 20 "competence pools" to support more local, regional needs. (See Ericsson Opens Romania Center and Ericsson Expands in India.)
— Ray Le Maistre, International Managing Editor, Light Reading