Transformation of Sweden's Ericsson showing signs of success

Recent announcements point to a very different future for one of Sweden’s best-known ICT brands

Solid financial results and a suite of recent announcements point to a very different future for one of Sweden’s best known ICT brands. Ericsson’s transformation from mobile handset maker to software and services company is well underway but the likely major challenge from a combined Nokia and Alcatel-Lucent business means the journey is a long way from complete.

In the first quarter of 2015, Ericsson grew its revenue by 13% despite core customers in the US restricting capital spend to focus on acquisitions. Accelerated LTE rollouts in China boosted sales in the networks division, while increased demand in Europe and Asia helped managed services revenue jump by 30%.

"Our customers need to innovate to grow their revenues; they need to transform their IT systems to capture efficiency gains and enhance the user experience; and they need to evolve their networks to meet current and coming requirements, and the introduction of new services and applications,” said Ericsson CEO Hans Vestberg at the firm's annual general meeting.

"In this transforming industry we need to stay ahead of the curve and lead the change to capture the opportunities this brings for us as an ICT partner,” added Vestberg, who today leads a very different company from the one he inherited as CEO in 2010.

At Mobile World Congress 2015 in Barcelona, Ericsson announced a suite of plans that clearly defines the future direction of the company. The new look certainly made an impact in Barcelona, where the firm's 6,000-square-metre space was the biggest brand experience in the entire show.

"The overarching announcement was our new approach to cloud and the entire portfolio, offering network computing under a single operational economic understanding," said Ericsson head of cloud Jason Hoffman. 

"We believe there are no more silos. The future is a distributed microsystems architecture, which will lead to further industrialisation,” he added. 

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  • Ericsson has announced the closure of its Katrineholm operation in Sweden, with the loss of almost 500 jobs
  • Sweden-based multinational telecommunications company Ericsson is investing 7bn Swedish Krona (£682m) in the next five years to build three datacentre facilities to help the company provide cloud-powered services as well as to boost its research and development efforts
  • Communications services giant Ericsson has picked open-source cloud computing platform OpenStack for its $30m (£17.9m) datacentre, cloud and telecommunications infrastructure update

The company’s hyperscale cloud underpins a highly governed platform, which the company said will mitigate concerns about security and governance and improve cloud technology adoption by large enterprises.

It's a plan not without its controversy, such as the recent 2,000 job cuts from the Swedish research and development department that built much of the new technology. 

Despite the job cuts, it seems Ericsson isn’t ready to say goodbye to its homeland just yet. The company has consolidated its network of cloud datacentres across the world to just three, two of which are located in Sweden.

“The security industry is focused on encryption and firewalls, but there's a third element and that’s the guaranteed integrity of these systems. Most major security issues in the news are related to integrity,” said Hoffman, who believes Sweden is the ideal place to host the architecture of the future.

“The fact that all land is available to everybody is the equivalent to having a world with no firewalls. The integrity and safety of personal data and how systems interact with one another is taken much more seriously. It's the default political and cultural philosophy here in Scandinavia.”

It may have been a painful transition but the new-look Ericsson seems well positioned to deal with an uncertain future, against the inevitable challenge from a combined Nokia-Alcatel-Lucent and likely future competition from Asia on the horizon.

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