Nokia is one of the pioneers of the mobile industry but it has been struggling in recent years. Clearly, the process of transforming Nokia from a mobile-only infrastructure provider into a broader based end-to-end communications infrastructure player has taken longer than expected, according to Counterpoint Research.
Nokia’s mobile access division still dwarfs its other business units and it has yet to fully reap the benefits of the 2016 acquisition of Alcatel-Lucent, says Counterpoint Research.
Nevertheless, Counterpoint Research believes that Nokia now looks broadly on track to execute a turnaround in the short term, although there would also be some risks. In particular, with Huawei banned from several markets, Nokia must demonstrate that it can increase its RAN market share over the next few months in the face of stronger competition from Samsung Networks and a gaggle of open RAN new entrants.
“Although the loss of the Verizon contract in the US was disappointing, the company has won several RAN contracts since then, including a major contract to replace Huawei at BT,” said Gareth Owen, Associate Research Director at Counterpoint Research. “Perhaps just as important, and a pointer to the future, is the fact that it has won several strategic non-RAN contracts from a number of high-profile players this year. I expect this to accelerate over the next year.”
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Increasing R&D Investment
With a strategic review already underway, there will be changes at Nokia in 2021 as new CEO Pekka Lundmark implements his vision to reposition the company for the future. Counterpoint Research believes that Nokia needs to urgently increase R&D investment, especially in 5G, including sorting out any 5G product performance and quality issues.
“Outside its main Networks division, the company should increase focus and investment in its Software and Enterprise divisions to benefit from two major trends – the migration to cloud-native software and the Industry 4.0 automation revolution. This should include acquisitions,” said Peter Richardson, Vice President of Research at Counterpoint Research. “In addition, Nokia should focus strongly on developing new 5G service-based businesses based on emerging technologies such as network slicing and edge computing in partnership with key CSP and enterprise partners.”
However, funding this investment will not be easy, concluded Counterpoint Research. Nokia would need to dispose of some assets as well as consider other funding and strategic options.
Google Cloud Migration
Nokia has just signed a 5-year strategic collaboration with Google Cloud. It will see Nokia migrate its on-premise IT infrastructure onto Google Cloud. Nokia will migrate its data centers and servers around the world, as well as various software applications, onto Google Cloud infrastructure.
The deal would reflect Nokia’s important operational shift to a cloud-first IT strategy and its aggressive efforts to strengthen and transform its digital operations globally in order to expand collaboration and innovation capabilities of Nokia employees and to enhance its delivery to customers.
The agreement is intended to drive operational efficiencies and cost savings over time due to a reduction in real estate footprint, hardware energy consumption, and hardware capacity purchasing needs.
Exit IT Data Centers Quickly
Under the deal, whose terms were not disclosed, Nokia will use a suite of Google Cloud products and professional services. Nokia and Google Cloud have worked together for the past few months to design a highly customized migration approach. This would allow Nokia to exit its IT data centers on a rapid schedule, while minimizing business impact and setting a strong foundation for the future. Google Cloud will deploy strategic systems integrators, solutions specialists, and engineers to ensure a stable migration.
“It’s an honor to work with Nokia to help modernize its infrastructure on Google Cloud,” said Rob Enslin, President at Google Cloud. “We look forward to bringing our leading networking, data analytics, AI/ML, and other technologies to empower Nokia to deliver a cloud-first strategy and better serve its customers. We are excited to help Nokia revamp its IT infrastructure with our backbone network and our approach to data security, using advanced software-defined networking. We look forward to providing the full menu of our capabilities to help Nokia deliver on its cloud-first strategy and reach its performance requirements.”
Nokia’s infrastructure and applications will run in the public cloud or in a Software-as-a-Service model going forward. Deployment of the migration has started and is expected to extend over an 18- to 24-month period.
“Nokia is on a digital transformation path that is about fundamentally changing how we operate and do business,” said Ravi Parmasad, VP Global IT Infrastructure at Nokia. “This is crucial for how our employees collaborate so that we continue to raise the bar on meeting the needs of our customers. We are very pleased that Google Cloud, with its engineering and operational excellence, is joining our transformation work to help us deliver on the many goals we have set. Given Nokia’s digital ambitions and plans, this is an ideal time for Nokia to be taking this step with Google Cloud to accelerate our efforts; and doing all of this in a secure and scalable way.”