Vodafone pumps Manchester for 5G ecosystem development

In a few weeks’ time, Vodafone will become the second telco in the UK to switch on its ‘5G’ network, but up in Manchester, the team is focusing on ecosystem development.

At an event dubbed ‘Go Beyond’, the Vodafone team launched its Digital Innovation Hub in an attempt to help the next-generation. This is perhaps one of the important facets of 5G which is missed in general discussions; 5G isn’t just about speed, its about offering new tools to innovators to create services which would not be deemed possible on 4G networks.

“The Digital Innovation Hub is an example of how we are empowering today’s start-ups and small businesses with the expertise and technologies to help turn their blueprints into reality,” said Anne Sheehan, Business Director at Vodafone UK. “Our 5G services can help UK start-ups become global leaders in their fields.”

For the telcos, being first to launch 5G offers a competitive edge in the utilitised world of connectivity, and also bragging rights, but there is a bigger win for the economies and societies which drive forward the fastest; the opportunity and ability to get a jump start to create services which will define the technology world of tomorrow.

This would appear to be one of the objectives behind the innovation hub opened here by Vodafone; put the technology in the hands of start-ups and entrepreneurs.

“Such investment and commitment from the private sector supports our ambition to make Salford one of the world’s most attractive cities for digital enterprises,” said Paul Dennett, City Major of Salford.

“It will also boost the local economy and help attract new jobs and opportunities for the people of Salford, Great Manchester and beyond. This commitment also further strengthens Salford’s Innovation Triangle connecting MediaCityUK with the University of Salford and Salford Royal Foundation Trust, our outstanding and leading hospital in the City.”

Think about the impact which 4G had on yesteryear and today. Many of the countries who were the first to launch 4G networks created some of the most influential technology companies in the industry today. Prior to 4G, Uber, Spotify, Tencent, Alibaba or AirBnB didn’t exist (or did but weren’t anywhere near at full scale), but with the new connectivity buzz, new jobs, wealth and segments were carved out.

Arguably the UK missed out on this craze. It was the 28th country to launch 4G networks, and while it maintains a healthy position in the technology standings today, other nations who were quicker to the finish line reaped greater benefits.

5G isn’t just about going faster, it is about having the opportunity to create services which are not conceivable today. But to do that, the networks need to up and running. With all four of the MNOs planning to launch 5G this year, and each taking a slightly different geographical rollout plan, the UK has an opportunity to capture the new revenue created through the upgraded networks.

The UK currently accounts for around 35% of all European unicorns created over the last few years, while the technology sector has outpaced average GDP growth by 4X since the European referendum. The technology sector is on the up in the UK, but 5G launches and scaled deployment are critical to ensure this position is not eclipsed by other nations.

Apple investors hope short-term pain will lead to long-term gain

16% growth in the steadily growing software and services business seems to be enough to rally investor confidence in the face of declining revenues.

Perhaps this is another lesson Apple can teach the world; how to effectively manage investor expectations. Total revenues are declining faster than the service division is growing, but with a 5.4% jump in share price in overnight trading, Apple investors seem to be buying into the short-term pain, long-term gain message from the technology giant.

For some the earning call might have been a shock to the system, explaining the immediate 1.93% drop in share price before markets closed. Total revenues for the quarter ending March 30 declined to $58 billion, down 5.2% year-on-year, while iPhone revenues dropped to $31 billion, a 17.8% dent in the same shipment figures from 2018. But the services division is the glimmer of hope.

“We had great results in a number of areas across our business,” said CEO Tim Cook during the earnings call. “It was our best quarter ever for Services with revenue reaching $11.5 billion.

“Subscriptions are a powerful driver of our Services business. We reached a new high of over 390 million paid subscriptions at the end of March, an increase of 30 million in the last quarter alone. This was also an incredibly important quarter for our Services moving forward.

“In March, we previewed a game-changing array of new services each of them rooted in principles that are fundamentally Apple. They’re easy to use. They feature unmatched attention to detail. They put a premium on user privacy and security. They’re expertly curated personalized and ready to be shared by everyone in your family.”

Although the Apple DNA is not rooted in the software and services world, this has to be the future. Overarching trends are indicating hardware is becoming increasingly commoditized, refreshment cycles are growing, and consumers are less likely to pay a premium for trusted brands. Apple is a company which defied these trends for a period, though not even the iLeader could deny the inevitable.

This is the critical importance of the software and services division; renewed, recurring and new revenues to replace the increasingly difficult, demanding and diversified hardware world, which is epitomised by the dreary global smartphone market.

Although Apple recently decided against releasing shipment figures during its earnings calls, it is still breaking out the revenues associated with products. The iPhone, the segment which drove growth in recent years, declined by 17.8% year-on-year. Part of this can be pinned on changing consumer behaviour, though you also have to look at the individual markets.

In China, Apple has been struggling. Canalys estimate smartphone shipments in the market have declined 3% year-on-year for Q1, though the locals are turning towards domestic brands. In years gone, Apple was a brand seen as somewhat of a status symbol, though it appears this is a concept which is quickly dissipating as the firm only collected 7.4% of market share over the first three months of 2019, a year-on-year decline of 30%.

Total revenues for China have not declined quite as dramatically, a 21.6% year-on-on-year dip to $10.2 billion, though Apple is not alone. OPPO, Xiaomi and Vivo also saw their year-on-year sales dip, with only Huawei coming out on the up. Here, Huawei managed to grow its shipments by 41%, taking 34% of the Chinese market share for Q1.

Another challenging market for Apple has been India. The story here is more forgiving however, as this is a much more cash-conscious market. Apple will of course want to maintain it position as a premium brand, therefore India, despite all the promise it offers, is not tailor made for its ambitions. Until consumer attitudes shift towards more premium devices, Apple will struggle.

Globally the smartphone market has not been helping either. According to Strategy Analytics, shipments decreased 4% year-on-year for the first quarter, with Apple slipping to third place overall.

Market share Q1 2019 Market share Q1 2018
Samsung 21.7% 22.6%
Huawei 17.9% 11.4%
Apple 13% 15.1%
Xiaomi 8.3% 8.2%
OPPO 7.7% 7%

These figures are not the end of the world, but it is a demonstration of consumer trends. There might still be an appetite for purchasing new devices, though there is seemingly a preference for those brands which might are cheaper. Such is the minimal differentiation between brands these days, why spend a premium when there is little need?

However, there is hope for Apple. Consumers might be getting frustrated over a lack of innovation in the hardware space, leading to longer refreshment cycles and a preference towards cheaper or refurbished devices, but the introduction of 5G might well change this.

With 5G devices being launched consumers will have something different to think about. Although 5G-capable devices are certainly not a necessity, and won’t be for a considerable amount of time, the ability to shout about something genuinely new might reinvigorate consumer appetite for purchasing new, and premium, devices. This could work in Apple’s favour.

That said, with Apple unlikely to release a 5G-capable device until 2020, the next few quarters could also demonstrate similar year-on-year declines. Apple seem to be happy to swallow this decline, sacrificing the ‘first to market’ accolade, but this how Apple traditionally approaches the market; it doesn’t aim to be first, but best.

For the moment, and the long-term health of the company, this does not seem to be the central point however. Apple is seemingly attempting to slightly shift the focus of the business, becoming more reliant on software and services, and it does seem to be working. As you can see from the table below, the ratio is shifting.

Product revenue Services Revenue Ratio
Q2 2019 46,565 11,450 81.3/19.7
Q1 2019 73,435 10,875 88.2/12.8
Q4 2018 52,919 9,981 84.1/15.9
Q3 2018 43,717 9,548 82.1/17.9
Q2 2018 51,947 9,190 85/15
Q1 2018 79,768 8,471 90.4/9.6
Q4 2017 44,078 8,501 85.9/16.1

The results in the table above do look quite confusing, though you have to consider that Q4 is usually the period for Apple’s flagship launch, skewing the figures towards the product segment, while Q1 accounts for Christmas, again tilting the figures. The general trend is looking favourable for the software and services division.

The last couple of months have seen Apple release several new services which will continue to bolster this division also. Whether it’s the content streaming service, news subscriptions, credit cards, iTunes or the App Store, the business is driving more investment and attention to this strange new world of software and recurring revenues. The ratio should continue to balance out, though we strongly suspect it will never get close to parity.

Another factor which you have to consider when it comes to the investors is the monetary gain. Yes, the long-term picture is looking healthier, but the firm has also announced it is increasing the dividend by 5%. This will keep cash-conscious and short-term investors happier, encouraging more to hold onto shares despite the downturn in revenues. The team has also announced a share buy-back scheme, up to $75 billion, which could be viewed as another move to protect share price. Although these could be viewed as short-term measures to cool the market, the overall business is looking healthier.

Apple is recentring the business, with more of a focus on software and services. The firm has defied the global hardware trends for some time, but they do seem to be catching up. What is important however is the management team recognising hardware will not be a suitable floatation device for Apple in the long-run. To continue dominating the technology world, Apple will have to spread its wing further into software, just as it is doing.

And perhaps the most critical factor of this transformation; investors seem to have confidence in the team’s ability to evolve.

Apple announces original content, a credit card and a news subscription service

Apple’s big services event didn’t disappoint, with a bunch of potentially disruptive launches together with new levels of hyperbole and clapping.

The headline service was Apple TV+, which marks Apple’s first major foray into original content. We were treated to an interminable procession of Hollywood types, starting with Stephen Spielberg and culminating with Oprah Winfrey, all taking it in turns to come onto the stage and hype their projects. Judging by the line-up Apple has realised it needs to spend big if it wants to take on the likes of Netflix.

As ever the audience of media and analysts at the live event were about as objective and sceptical as hungry puppies. Every pause in the polished narrative was filled with rapturous applause and ecstatic whoops. So choreographed was it that we wouldn’t be surprised if there were prompts and the tendency to cheer at the mere mention of a new product without waiting to even find out anything about it was especially jarring.

As was Apple CEO Tim Cook’s toe-curling hyperbole. “TV at its best enriches our lives and we can share it with the people we love,” he pronounced at the start of the TV announcement. The original content bit was preceded with the revelation that “great stories can change the world.” This sort of stuff was pretty hard to stomach when Steve Jobs was delivering it, but his messianic zeal just about pulled it off. Cook offers little such salve.

The other potentially disruptive announcement was a new Apple credit card called Apple Card. This had been rumoured for a while and, as expected, it has been create in partnership with Goldman Sachs and MasterCard. In reference to Apple Pay Cook felt compelled to say “Its growth has been literally off the charts,” for some reason. The most intriguing part of the card is the offer of 2% cash back on every purchase, which makes you wonder how much merchants are going to get stung for its use. There’s also a physical card made out of titanium that only offers 1% for some reason.

Apart from that we got a couple of new subscription services. The more significant one is for news and magazines that will set you back a tenner a month and will be positioned as a potential solution to the cash crisis faced by the media, but let’s see. “We believe in the power of journalism,” said Cook. There was also a teaser for a games subscription service that will offer exclusive titles and make it easier to play across platforms.

“We’re honoured that the absolute best line-up of storytellers in the world — both in front of and behind the camera — are coming to Apple TV+,” said Eddy Cue, Apple’s SVP of Internet Software and Services. “We’re thrilled to give viewers a sneak peek of Apple TV+ and cannot wait for them to tune in starting this fall. Apple TV+ will be home to some of the highest quality original storytelling that TV and movie lovers have seen yet.”

“Apple Card builds on the tremendous success of Apple Pay and delivers new experiences only possible with the power of iPhone,” said Jennifer Bailey, VP of Apple Pay. “Apple Card is designed to help customers lead a healthier financial life, which starts with a better understanding of their spending so they can make smarter choices with their money, transparency to help them understand how much it will cost if they want to pay over time and ways to help them pay down their balance.”

“We’re committed to supporting quality journalism, and with Apple News+, we want to celebrate the great work being done by magazines and news outlets,” said Lauren Kern, Editor in Chief of Apple News. “We think the breadth and quality of publications within Apple News+ will encourage more people to discover stories and titles they may never have come across before.”

Note Apple News has an Editor in Chief. Cook made it clear that Apple would only serve up the right kind of news for its subscribers and he has been clear about his willingness to impose a moral filter on everything Apple does. You have to wonder how empowered to interfere with the content published on Apple News this Editor in Chief will be.

“This represents a landmark moment for Apple with a major event solely focussed on services,” said Analyst Paolo Pescatore, who was at the event. “It underlines a growing and strong focus on services as a future source of revenue growth. In essence Apple is seeking to become a Netflix of everything in services; music, news and magazines, video and games.

“Netflix has done a great job to date. However, more content and media owners will pull programming off its offering. This represents a significant opportunity for the likes of Apple who has scale and greater resources. There are too many players chasing too few dollars. The market will evolve towards a handful of players in the future.”

Apple idiosyncrasies aside this felt like a fairly solid  launch event. The company has an amazing track record of disrupting industries and seems likely to do so again with original TV content and consumer finance. The scene is set for a content arms race with only the biggest spenders likely to survive and Apple has a deepest pockets of all. Game on, here are some vids.

 

Weak iPhone sales take bite out of Apple revenues

It might not come as a huge surprise, but the Apple financials are not as glorious and fruitful as the quarterly bonanza of yesteryear.

The devices market is plateauing, China’s economy is slowing, Indian consumers are more interested with other brands, iPhone sales are down, as is revenue and operating income, expenses are up. It doesn’t exactly paint a picture of serenity and profitability, but share price increased more than 5% in overnight trading.

CEO Tim Cook and his team did manage the situation quite effectively with a recent profit warning and have seemingly tabled a plan which has caught the interest of investors but let’s just put this overnight surge into perspective. The last couple of months have not been good for Apple. At the beginning of September, Apple share price was hovering around the $228 mark, while at the time of writing, it has declined more than 30% to $154. Cook should be nervous.

“Last night’s results beg the question, are investors falling out of love with Apple?” said Christopher Dembik, Head of Macro Analysis at Saxo Bank.

“The results of the former favourite stock – Apple was the fifth most traded stock by clients at Saxo Bank, behind Facebook, Amazon, Alibaba and Tesla – signalling a tough climate for traders right now with a gloomy global economy, weak returns across the board and whispers of another recession on the way.”

Apple Topline

Overall revenues were down to $84.3 billion, 5% lower than the same period in 2017, though it was in-line with the revised forecast from a few weeks back. For the next quarter, revenue is expected between $55 billion and $59 billion, with a gross margin between 37-38%.

Looking at the results, the iPhone weighed Apple down heavily. Shipment numbers will no-longer be released by the team, though revenues for the cornerstone product declined an almost inconceivable $9.1 billion, a 15% year-on-year drop, to $51.982 billion. This is still a huge amount of cash, but such a dramatic decline indicates someone got something very wrong somewhere.

The last couple of months of 2018 were a scrap for Apple to justify the pricing of its flagship devices. Cook and his cronies seem to have accepted what many people were telling them; the devices have become too expensive. Moving forward, the team seem to have indicated there will be price reductions.

This is what Apple have specialised in over the last few decades; customer loyalty and sweating the brand. There aren’t many cults out there who can count on their followers as loyally as Apple can count on the iLifers, but when the company was innovating they could justify marking a premium on products and rely on the Apple followers to make purchases. This doesn’t seem to be the case anymore.

If you look through the portfolio, none of the products are particularly mind-blowing. Yes, they might be high-spec and feature the Apple brand, but there has been little innovation in the last few years to justify the increasing prices. Married with consumers becoming more cash conscious, Apple has seemingly pushed its customers over the breaking point of what they are willing to spend.

That said, it isn’t just innovation which is to blame here, Apple is losing out to competitors in key markets. The Americas grew, though Europe, Japan and Greater China all declined. In the European and China markets, Chinese brands such as Huawei and One Plus has been gaining greater traction, with the price much more palatable for consumers. These are good devices which are offering just as technologically advanced features, suggesting Apple is losing the vice-like grip which it has on its customers.

Apple Breakdown

“And so, what we have done in January and in some locations and some products is essentially absorbed part or all of the foreign currency move as compared to last year and therefore get close or perhaps right on the local price from a year ago,” said Cook during the earnings call.

How much of an impact the price reductions will have remains to be seen, but what is worth noting is that there was some good news from the call. iPhone revenues might have plummeted over the period, but all other categories grew, including the much-valued software and services unit.

This is where Cook has been pinning his hopes, and there have been some gains. The software and services unit grew revenues by 19% year-on-year taking the total to $10.8 billion. Apple is attempting to evolve itself into a very different type of business, with recurring revenues as the ambition, though success has to be put into context. Yes, there have been gains, but it seems the dangers of the hardware world are being realised much faster than the benefits of software evolution.

Apple has largely struggled in the world of software and services, perhaps because its traditional business model is not suitable. When you look at where Apple has been successful in software and services, iTunes, AppleCare and iOS for example, these are all areas which tie the customer into the Apple ecosystem. They are products which build on the Steve Jobs mantra of ‘closed is better’. However, Apple will have to embrace a new mentality is it wants to succeed in the new world.

At CES, Apple captured most of the headlines without actually being there as it announced a content-based partnership with Samsung. Beginning in the Spring, new Samsung Smart TV models will offer iTunes Movies & TV Shows and Apple AirPlay 2 support for Apple customers. This is a good move from Apple, embracing the concepts of openness and collaboration which will be critical moving forwards.

Another interesting development, which has remained unconfirmed, is the creation of a Netflix-like gaming platform. Apple would herd developers and gaming content behind a paywall which will offered as a bundle service for customers. The subscription service would take Apple into a potentially profitable segment, which is set to boom over the coming years. However, this cannot be tied exclusively to Apple products and would have to demonstrate openness.

The last few months have shown that Apple is not immune to global trends and the need to evolve as a business is overdue. The reason companies like Google and Amazon never report revenue dips like this is they are constantly searching for the next idea. Apple might have been slow to react, but there is some progress being made. It just needs to be made quicker.

Apple finds the water is warming up in App Store legal battle

Apple has found itself in court once again, but Qualcomm is no-where to be seen. Instead, a few of its loyal iLifers are challenging the firm over whether the App Store is an illegal monopoly.

The case itself dates back to 2012 and will aim to understand whether Apple is operating an unjustified monopoly through the App Store. Right now the case is in front of the Supreme Court, where the nine judges will decide whether or not to allow the antitrust case to be heard by a District Court. The permission from five of the nine judges are needed for the case to proceed, and currently, it looks like only Chief Justice John Roberts is siding with the iGiant.

For Apple, this case could be a disaster. Permission to take the case to one of the District Courts, likely to be in one of the thirty states where the Attorney General is backing the iPhone users’ antitrust claims, and the door could be opened. Essentially anyone who has purchased an app from the App Store could claim grievances against Apple.

The case itself is relatively simple on the surface. As the App Store is the only place to download apps without breaking rules, should the 30% commission charged by Apple be viewed as the company unjustly profiting from a monopoly? One could argue prices are inflated due to the commission received by Apple, though its own counter-argument is based on legal precedent which dictates only those who have a direct billing relationship with a company can sue the firm.

In the Supreme Court’s 1977 decision in Illinois Brick Co. v. Illinois, the court stated only consumers who are direct purchasers of a product can bring a lawsuit seeking damages available for violations of federal antitrust laws. As customer purchase apps from developers, who in turn pay Apple the commission, Apple has argued there is no legal basis for iPhone users to sue the company, with the developers being the only ones who could make such claims. Chief Justice Roberts believes this argument, though spectators of the case have stated five of the judges are leaning the other direction. This could well develop into a very serious headache before too long.

On the other side of the aisle, the iPhone users, led by chief plaintiff Robert Pepper, argue prices would be lower if there were greater choices of app stores. This is a perfectly logical conclusion, though the developers might not like it. As it stands they have a captive audience with all iPhone users in one marketplace. Yes, they do have to pay Apple a premium, but this might well be a pill worth swallowing compared to the complications of working with multiple partners and a disaggregated audience.

As with many lawsuits in the digital economy, this is the first time such arguments are being considered by the courts. Precedent will be set which is what makes this case particularly interesting. Should the courts side with the iPhone users, the doors could be opened for lawsuits against other eCommerce giants such as Amazon or Facebook. Anyone who takes a commission based on a percentage could be viewed as falsely inflating prices in the pursuit of profit, or so the argument would be.

Apple has argued opening this door could stifle the growth of the burgeoning eCommerce sector, which is a negative consequence of course, but not an adequate reason for the case to be dismissed. Just because there is significant consequence does not mean unjust activities should be allowed to continue.

The App Store has started to generate some considerable income for Apple. On the financial side of things, over the last three months the services division, which include the App Store, produced revenues of $9.9 billion, up 17% year-on-year. With smartphone growth slowing globally, and the iPhone not proving the success some might have hoped in emerging markets, the services segment will become ever more important to the iChief.

A decision on whether the case can be heard by one of the District Courts will be made in the near future, though there will be quite a few eye balls on this one. The splash could be quite considerable for Apple, though the ripples through the rest of the digital ecosystem will be just as concerning.

iPhone X drives Apple growth past analyst expectations

Apple has reported its quarterly results for the three months ending June 30, collecting an eye-watering $585 million in revenue a day over the period.

Total revenues stood at $53.3 billion, a year-on-year increase of 17%, with iPhone X sales and the services business unit leading the charge with year-on-year rises of 20% and 31% respectively compared to the same period of 2017. While it might have been a slow-start for the ridiculously expensive flagship device, the premium seems to compensated for slightly jaded 1% increase in smartphone shipments.

“We’re thrilled to report Apple’s best June quarter ever, and our fourth consecutive quarter of double-digit revenue growth,” said CEO Tim Cook. “Our Q3 results were driven by continued strong sales of iPhone, Services and Wearables, and we are very excited about the products and services in our pipeline.”

“Our strong business performance drove revenue growth in each of our geographic segments, net income of $11.5 billion, and operating cash flow of $14.5 billion,” said Luca Maestri, Apple’s CFO. “We returned almost $25 billion to investors through our capital return program during the quarter, including $20 billion in share repurchases.”

Looking deeper into the business, Cook pointed towards first time buyers of the iPhone as a win, while the services unit brought in record revenue of $9.5 billion. Paid subscriptions from Apple and third parties have now surpassed $300 million, an increase of more than 60% in the past 12 months, while the CEO also claims the App Store generated nearly twice the revenue of Google Play so far in 2018.

Services is a significant growth area for the iChief, which seems to be able to print cash with whatever it touches (except original content… who remembers Shark Tank). Apple Music grew by over 50%, AppleCare revenue grew at its highest rate in 18 quarters, and Cloud services revenue was also up over 50%. When you also tie in the wearables division, which finally seems to be making progress, its smart speaker reaching new markets, Siri improving and products like Apple TV gaining a bit of traction, Apple is giving a perfect lesson in exploiting customer loyalty.

Looking forward, the Apple train looks like it will continue to print off cash. For the next quarter, the team expects revenue between $60 billion and $62 billion, compared to $52.6 billion brought in during Q4 2017, with a gross margin between 38% and 38.5%.

Seat and Orange aim to make car your home away from home

Orange Spain and Seat have signed an agreement to promote new advances in the development and use of the connected car, promising to make it your home away from home.

The agreement itself will focus on three separate areas. Firstly, improving the experience of vehicle occupants by developing connected car services. Secondly, developing the digital home or office experience for car users. And finally, promoting a loyalty programme that promotes the frequent use of new connectivity and mobility solutions they launch.

“We feel privileged to have strategic arrangements with partners such as Orange that give a major boost to our development of car connectivity,” said Seat Head of Business Development Arantxa Alonso. “This partnership opens up a large collaborative space for both companies that are pursuing a common goal – promote the use of the connected car and make the car user’s experience easier and more efficient.”

“This strategic agreement with Seat is a great step for Orange in its strategy of connected objects and Big Data and opens the door to innovations and new developments surrounding cars of the future, which will contribute to helping us achieve our goal of connecting our customers with what truly matters most to them,” said Orange Director of Innovation and New Digital Services for Spain Luis Santos.

While it does sound like marketing jargon, the home away from home idea is simply down to getting those in the car to use the same services there as they do at home. We pretty sure Orange and Seat are not suggesting the driver load up a Modern Family box set just yet, but there are of course numerous services which can be used in a safe manner. Part of the partnership will be a joint effort to create leisure and entertainment services that drivers and other passengers can enjoy.

Of course, while the idea of a connected (or autonomous) car does sound attractive in theory, success to date has been very slow. That said, incentivised customers can be forced out of their comfort zone as we all like free stuff. Offers for discounts on other services, freebies and gifts will be up for grabs depending on how much the customers actually interacts and uses the connected features.

Loyalty is the word being used here, but normality is one which is probably more accurate. Customers might need a little push to use the services, but this will normalize the new ideas in the mind of the customer, and also offer data for Orange and Seat to adjust and improve. The customer gets more comfortable with a scary new thing, while Orange and Seat make the service better. It’s a win for the pair.

Nokia puts Global Services at the centre of its diversification strategy

Using a mixture of artificial intelligence, automation and consulting, Nokia is hoping its Analytics Services offering will unlock a bunch of new markets.

All the big kit vendors have been trying to diversify for years, as the margins on networking kit are squeezed and the vendor lock-in model disappears into the past. Among the challenges associated with that are picking winners, not straying too far from their core competencies and maintaining their core business at the same time as looking beyond it.

The telecoms industry is littered with failed diversification moves, from Cisco’s forays into consumer electronics to Ericsson’s struggles in the TV industry. Nokia, of course, got out of the smartphone and mapping games to focus on networks and seems to have made a relative success of acquiring another networking player in Alcatel Lucent.

But however much Nokia can now bang on about end-to-end networking solutions, it knows merely supplying and maintaining kit will not result in much growth. The main strategic alternatives, therefore, are to extract more revenue from its core CSP market and to take its core offering to different markets.

This, according to the President of Nokia Global Services – Igor Leprince – who spoke to a small group of journalists at a briefing, lot of the heavy lifting for this diversification is being done by his division and specifically the Analytics Services offering that Nokia has just augmented. In the strategy diagram below, the first point refers to offering more services to CSPs and the other three represent targeted new markets.

Nokia global services 2

Just as important as strategic targeting is changing the way services are delivered, according to Leprince. Here we start getting into familiar buzzwords such as digital transformation and DevOps, but also the use of automation, machine learning and clever algorithms that claim to speed things up, reduce human error and anticipate problems. Supporting all this are things like the Nokia AVA cognitive services platform and the Shannon Intelligence set of predictive and AI tools.

Nokia global services 3

The successful implementation of all this cleverness in a more consulting setting isn’t necessarily a traditional core competence for vendors so Nokia has had to undergo its own cultural transformation and take on talent such as data scientists that it didn’t have on board previously.

The underlying picture Leprince was keen to communicate was one of Nokia Global services using things like AI, automation and consulting to both provide extra value for CSP customers and offer telecoms-like solutions to other verticals. In the latter case the need for agility and a use-case driven, ‘as a service’ delivery model is vital but equally there’s no point in Nokia trying to take on the big IT services players at their own game.