650 Group Blog
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Ericsson has served the mobile service provider industry well over the years. Most devices connected to its customers’ networks are mobile phones; this, however, is changing. Internet of Things (IoT) devices are entering the fray and provide an avenue for growth, as is the enterprise market. Additionally, Ericsson’s channels have mostly been to operators, at a time when enterprise growth is expected to provide additional cellular industry growth. Ericsson’s portfolio, until the Cradlepoint acquisition, was not particularly well-positioned to benefit from IoT and enterprise growth vectors.
IoT devices come in all shapes and sizes, and they use a number of different connectivity methods, from cellular to Wi-Fi to Bluetooth to LoRa and many others. In 2020, we expect only 16% of IoT and wirelessly connected devices will connect to cellular systems; the rest connect to more popular (and mostly free) connectivity types. We see cellular connections growing in the future, but as a percentage of all IoT and wirelessly connected devices, we expect it will drop to 13% of all such devices five years from now. The reduction in the fraction of IoT and wireless devices connected to cellular is why the “cellular to other” gateway market (Cradlepoint’s main market) makes sense. There are some use cases where cellular backhaul connections to connect Wi-Fi, Bluetooth, Zigbee and others are vital. With US-based CBRS and European nations’ private enterprise spectrum opening up the opportunity that enterprises will build their own networks – without needing a mobile operator’s help with sub-leasing licensed spectrum – the folks at Ericsson had a choice to make. The choice was to continue selling to and through mobile operators and hope that mobile operators keep their share of enterprise and IoT growth, or to acquire products and distribution channels to access enterprise growth. Ericsson’s competitors were partnering with Cradlepoint with some success. Recently, Nokia’s enterprise revenues hit about 10% of revenues, in part because it was selling LTE gear to customers in verticals such as utilities, mining & exploration, and logistics & shipping. Many of these customers were using devices such as Cradlepoint’s. Ericsson is now invited to these ongoing dialogues as these networks expand and change. We would be remiss if we didn’t mention 5G in relation to Cradlepoint. Some enterprises seek a secondary wireless connection to supplement their primary wired broadband connection. Gear such as Cradlepoint routers can serve this need well. In this sense, we can see why Ericsson uses messages such as “Ericsson accelerates 5G for Enterprise with the Cradlepoint acquisition.” This acquisition is not without controversy, in our view. The Swedes are acquiring a company located in Boise, Idaho, and as such, managing from afar may present challenges. Cradlepoint sells its devices differently (mainly through channels) from how Ericsson sells its gear (mainly direct); these two distribution methods may conflict. Ericsson sold its cell phone business many years ago because it conflicted with its mobile infrastructure business. Similarly, Cradlepoint gear is focused mainly on enterprises, we see a similar conflict because Cradlepoint’s customer base liked its independence from cellular gear-makers. If Ericsson can manage through these challenges, it may enjoy exposure to IoT, enterprise and 5G gateway growth opportunities.
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We attended a well-organized and information-packed virtual conference hosted by Juniper Networks last week. While there were many themes (400G, telco cloud, AI, Mist), the one that really came through was how much the Mist acquisition has reinvigorated the Juniper organization. About a year ago, Juniper made its acquisition of the Wi-Fi startup. It is clear a year later that Juniper’s Enterprise strategy has been “Mistified.” We will share some Mist statistics from conference and our thoughts, as well. Juniper shared some milestones that now characterize the Juniper Enterprise group:
We asked the company what has worked well with the acquisition, including whether the deal structure may have contributed towards to its success. Juniper executives explained that there was nothing special about how the acquisition was structured beyond the normal incentives for the acquired team. What happened after the acquisition, though, is somewhat unique: in effect, the Enterprise group at Juniper was subject to a reverse merger with Mist, whereby the Mist management team now leads the group. Perhaps the fact that the Mist team is in charge of the show explains the rapid integration of the existing Juniper products into the Mist AI management system. Perhaps, also, the integration went well was because the Juniper products (switches, SD-WAN and Security) were designed to collect and easily share telemetry data for use by the Mist AI system. Juniper also featured a customer – whose name we cannot share – that is a major fast food chain across the US. It currently has 10,000 Wi-Fi Access Points with another vendor and recently made the decision to replace them with Mist Wi-Fi 6 APs by the end of 2022. We found it interesting how important support is for IoT and the increased importance of outdoor Wi-Fi during the pandemic. The company is deploying four indoor APs and three outdoor APs per restaurant. The customer spokesperson shared that Mist does AI-based, dynamic radio resource management (RRM) very well and he shared numerous screenshots showing power levels that were kept around 11-13 dBm instead of values he recalls seeing closer to 20 on the existing infrastructure. At this point, the customer has installed Mist APs in over 50 restaurants and he says he has not had a single Wi-Fi-related trouble ticket from these locations. He is also looking to implement location services in the future with the company’s vBLE technology. The company’s cloud-based location analytics capability is designed to serve as a contact tracing and crowd management system to allow Juniper WLAN customers to reduce risks as employees and visitors go to the campus environment. The company introduced this contact tracing capability in May 2020. The company said its cloud-based contact tracing service is something that can operate on top of Juniper infrastructure, as well as its competitors. The company shared details about a large elite US university that is using the service and decided to upgrade to Juniper WLAN infrastructure as well.
Our view is that Juniper is well-positioned in the Enterprise market because by year-end it will have an AI-driven, single-pane operations system that covers Wi-Fi, Ethernet Switching, Security and SD-WAN. This is an enviable position because increasingly customers are making purchasing decisions for various equipment at the same time, and they are looking to reduce ongoing operational costs. By managing a system with a single-pane, customers can correlate customer experience, application responses and network issues in an integrated system, and pinpoint corrective action. This is not to say that Juniper has an exclusive on single-pane managed systems covering all these network systems – Cisco, Fortinet and others lay claim in the same. Juniper is in good company. Alex Choi, SVP, Head of Strategy and Technology Innovation at Deutsche Telekom, presented at Day 2 joint keynote broadcast for ONF's Spotlight event on 5G and open source. He shared several comments about DT’s strategy that we thought were interesting and showed that the German telco is looking to break away from old ways of doing business.
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CHRIS DePUY
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