With 124 commercial 5G agreements and 79 live networks announced to date, Ericsson is the leading 5G vendor in terms of contract wins and is leveraging its early market lead to benefit from the absence of Chinese rivals. Under CEO Börje Ekholm, Ericsson has executed a dramatic turnaround during the last three years. Key to this success has been sustained investment in R&D coupled with the drive to increase scale by increasing market share and the company’s focus on investing heavily in key strategic contracts.

Early Success, Challenges Ahead

Ericsson has clearly benefited from the early availability of a cost-competitive and feature-full 5G portfolio of products. In particularly its massive MIMO AIR antenna products, custom silicon basebands, software upgradeable radios and advanced RAN software solutions have enabled its MNO customers to rapidly and efficiently introduce 5G alongside 4G services.

Despite its early success, however, Ericsson will face a raft of challenges during the next few years driven primarily by the mobile industry’s transition to an increasingly open and cloud-native network architecture, resulting in a changing ecosystem of competitors and partners. In addition, Ericsson needs to diversify away from a reliance on network sales while at the same time maintaining its lead in 5G.

Network Disaggregation

With the onset of cloud RAN and network disaggregation, there will also be a trend away from the single vendor, pre-integrated proprietary systems of today towards multi-vendor networks. "Although this transition will take place over several years,  we think that incumbents such as Ericsson will play a key role in open RAN deployment, particularly if it can position itself as a trusted systems integrator and offer a choice of proven and integrated open/proprietary solutions," said Gareth Owen, Associate Director at Counterpoint Research.

"Although Ericsson’s open RAN product portfolio is perhaps not quite as extensive as some of its incumbent rivals, we think that it can quickly close the gap when it needs to," he added. Nevertheless, incumbents will face fierce competition in this space from traditional systems integrators and webscalers, while some of the bigger MNOs may prefer to do systems integration in-house.

Network-as-a-Service Offerings

In the 5G world, Counterpoint Research believes that mobile vendors will generate value primarily from silicon, software and service-based businesses.  In collaboration with partners, Ericsson is developing a range of vertical-specific Network-as-a Service (NaaS) solutions targeting the enterprise market and offered primarily via its MNO customers. These include various network slicing, private networks and wireless WAN type services as well as managed services platforms such as the Ericsson IoT Accelerator.

Although NaaS could be a game changer for MNOs, enabling them to better compete with public cloud providers, these types of services are still in the early stages of adoption and a number of challenges remain. Network slicing, for example, is very much an emerging technology. "With the launch of its RAN Slicing software this week, Ericsson becomes one of the first vendors to offer a complete "RAN to core" slicing solution" said Owen. "This will  enable MNOs to offer their enterprise customers end-to-end slicing with guaranteed service level agreements for the first time" he added. However, although a lot of the technical issues (such as interoperability between different vendors' RAN/core products, etc.) may have been sorted out, the bigger challenge now will be to turn slicing from a network capability into a seamless service that can be monetized.

Best-of-Breed, Multi-Vendor Solutions

Ericsson will have to compete against many other players, all of whom will be keen to grab a slice of the NaaS cake. In particular, it will not be easy to compete against the webscalers with their global presence, tried and tested platforms and increasingly close relationships with telcos - as Ericsson’s recent experience with Edge Gravity shows.

To succeed, Ericsson must offer "best-of-breed" solutions which will mean partnering with leading global operators and the best vertical-specific solution providers, which inevitably will also include webscalers.

Maintaining Control

Despite stiff competition from webscalers and others, Counterpoint Research believes that Ericsson can thrive in the new open cloud-native world providing it can leverage its expertise across multiple domains, including access, transport, cloud and core and offer high-performing and reliable end-to-end solutions.

"In particular, we think that Ericsson should strive to excel and maintain control of strategic elements in the 5G architecture," said Peter Richardson, Director at Counterpoint Research. "These key elements include mMIMO radio antennas, the RAN Controller, dual-mode 5GC core, emerging technologies such as network slicing and multi-cloud service orchestration software, as well as AI, analytics and automation technologies. By doing this, Ericsson should be able to keep rivals at bay while generating new revenue streams to minimise any market share loss due to open RAN," he added.

Report: Ericsson – Ready for an Open, Cloud-Native 5G World?

A telecoms vendor since 1876, Ericsson and has gone through many transformations during its lifetime with the latest starting three years ago in 2017 when newly arrived CEO Börje Ekholm sold off non-core business and focused the company on 5G. At present, the company is reaping the benefits of that strategy and its future looks promising in the short to medium term buoyed by a number of macro-economic tailwinds.

This 40-page report from Counterpoint Research provides an overview of Ericsson’s business units and provides a strategic assessment of its prospects as the mobile industry transitions from traditional proprietary infrastructure to open and cloud-based architectures.