Helena Norman, CMO and CCO at Ericsson, talks about the telecom behemoth’s transformation plans and changing dynamics of the mobile industry.
Ericsson has been talking about the company transformation and transition to a software and services company. So what are you trying to achieve – to become more of an IT player than a telecom one?
Well actually, the lines are blurring between the two. A lot of things have changed in the industry. Sectors such as IT, telecoms and media are coming together to create big things. Having said that, that doesn’t mean that everyone will play the same role and that will take some time to hash out. Maybe we’ll also find different names for different parts of this growth, but I don’t think that the existing boundaries between IT and telecom will be relevant.
Also, what we sell and what customers buy is no longer following the old logics.
Almost one third of your revenue still comes from hardware. How do you actually plan to transition to a software and services company, given that you do not have an IP in that space?
I think that if you go back 15 years, 70 percent of our sales were hardware and today it’s just the opposite. Now, 70 percent of our revenue is from services, so the transition is definitely happening. We started our service offerings 10 years ago, which today contributes over 40 percent of the total revenues. The hardware aspect is still important, especially on the mobile side for the simple reason that no one has figured out a way to create a performance that is needed unless we have a propriety hardware. As long as that is the case we still need to focus on hardware.
If you talk about the thought leaders in the mobile world, the main ones that come to mind are Google, Apple and Facebook. How do you plan to take on competition from these players?
The first time we came to the Consumer Electronic Show five years ago, the entire thing was all about connecting stuff. But no one talked about connectivity so we started to go around asking people ‘how is this going to work?’ Then they just responded “it’s going to have to work”, but it doesn’t really work that way – it requires a lot of systematic thinking, standards, technologies and so on, otherwise it will fail. Although we are not as strong as the Google and Apple brands, we have had a lot of interactions with them and we are now very much present with the discussions in Silicon Valley. For instance, we have a lot of collaborations with Facebook.
Internally, how has the transformation been? You have announced around 2,000 job cuts. Why is that?
If we look at last year, we have had 19,000 people coming in to the company globally and 15,000 are leaving, that’s a normal year. That’s the transformation in action from a competence perspective. The force of the change that we have now has never been this fast. Yes, there are lay-offs but these are of course part of divesting. We both insource and outsource employees. Back in November we announced a cost and efficiency programme because we saw an opportunity to grow margins and reduce costs, all because of the transformation.
You are planning to go beyond your traditional telecom market and branch out into other areas. Is this because the global telecom spending on infrastructure is declining?
First of all we don’t see global spending on telecom going down. We see it growing at a slower pace, so if we look at our traditional core of mobile infrastructure related services we see that growing with a couple of percentage points per year and we have a high market share. And we know from experience that holding on to what you’re strong at right now in a rapidly developing market over time is not going to do the trick.
Then we said that we have these five key areas that we would invest into – IP networks, cloud, TV & media, OSS/BSS. These were selected because of the high degree of professional services, software, recurring business and higher growth. That’s the reason why we chose this. If you look at M&A we do a lot of that in these areas. We do organic R&D here as well but we complement that with acquisitions and partnerships, like the Intel agreement, MetraTech acquisition and others.