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Leading enterprises are planning massive investments in DT; 5G implicated in many cases

Leading enterprises intend to spend big on digital transformation, which in many cases implicates 5G

Leading companies in their respective verticals, such as Amazon, Walmart, Walgreens, Ford and Deere & Co., are preparing to make relatively large investments in digital transformation (DT) over the next few years as they adjust to the post-pandemic new normal, respond to competitive pressures and capitalize on new opportunities. In many cases 5G will play a key role in these digital transformations, serving as a foundational platform that will support these enterprises’ digital infrastructure and business operations (e.g., drone operations and reimagined in-store experience). Ecosystem players are striking strategic partnerships with some of these key enterprises (e.g., Verizon with Walmart and Walgreens) to capitalize on opportunities brought about by 5G as well as edge computing and AI.

Several early adopter enterprises have opted for 5G versus Wi-Fi 6, portending a market shift toward cellular

Several leading enterprises, such as Whirlpool, have made a strategic decision to deploy 5G versus Wi-Fi 6 in their factories after their assessments deemed 5G can better meet their long-term needs. These decisions are in line with TBR’s belief that 5G should be viewed as a future-proof connectivity platform that will serve as a foundation for enterprise digitalization. Though Wi-Fi 6 (and LTE) will have their place in enterprise networks going forward, TBR expects the pendulum to swing more toward 5G as the de facto connectivity technology for enterprise communications and IT-OT convergence.

TBR’s Private Cellular Networks Market Landscape deep dives into the market for private cellular networks. This global report covers enterprises that are investing in private cellular networks as well as all of the major vendors and some nascent players that provide infrastructure products and services in this space. The research includes key findings, key market developments, market sizing and forecast, regional trends, technology trends, vertical trends, use cases, and key customer deals, alliances and acquisitions that are occurring in the market.

Enterprise spend on private 5G infrastructure will grow at a TBR-projected 97.4% CAGR from 2020 to 2025 to $7.5B

Enterprise spend on private 5G infrastructure will grow at a TBR-projected 97.4% CAGR from 2020 to 2025 to $7.5B

Key Insights

Global 2000 companies and governments will drive the vast majority (more than 90%) of spend on private 5G infrastructure through 2025.

Leading enterprises intend to fundamentally transform their operations by converting IT and operational technology with 5G, edge computing, AI, machine learning and IoT.

LTE and Wi-Fi will have a place in the private networks domain, but most enterprises will ultimately need 5G.

TBR’s Private Cellular Networks Market Forecast, which is global in scope, details private cellular network spending trends among enterprises and governments, particularly as it pertains to 5G. The report includes current-year market sizing and a five-year forecast of the private cellular networks opportunity by vertical, by provider type and by region.

HPE’s CMS unit reemerges as a software-centric contender in the new network architecture

TBR perspective  

TBR believes HPE’s CMS unit has the potential to become a significant disruptor in the telecom space. CMS, which had been marginalized in prior years while Hewlett Packard Co. split into HP Inc. and HPE and as HPE executed divestitures, restructurings and developed a new strategy, has received new life after obtaining corporate sponsorship from HPE’s relatively new CEO, Antonio Neri, and CFO, Tarek Robbiati, who was formerly the CFO at Sprint (NYSE: S). CMS leadership reports directly to Robbiati. With the C-Suite and board of directors providing corporate support, the telecom vertical will become a key growth pillar for HPE going forward, given the technology transformation and business model transformation that is being prompted by 5G, edge computing, AI and automation. 

The CMS unit represents only a small percentage of HPE’s total revenue, but the unit is a key gateway into emerging opportunities that are impacting the telecom vertical. CMS is reestablishing itself in the market as a growth engine for HPE corporate and is receiving the funding and support required to drive its portfolio, particularly in the management and orchestration (MANO), 5G core, and digital identity spaces. TBR believes CMS is positioned to be a key vendor in the new network architecture, which will be microservices-based, cloud-native and distributed.

CMS faces some notable hurdles, including the negative perception of its capabilities that followed the bad press it received as a supplier and the prime systems integrator for Telefonica’s (NYSE: TEF) software-defined transformation initiative back in 2015. The company was eventually replaced by several other suppliers. TBR believes the lingering effects of this situation have hindered CMS’ growth over the past few years, but notes that CMS has put the incident in its rearview mirror and is making significant headway moving forward.

CMS’ mindshare and credibility are moving in a positive direction, and the unit is gaining significant traction in CSP accounts, particularly for its Service Orchestrator and NFV Director MANO offerings. CMS has an impressive roster of CSP customers and has played a behind-the-scenes role in several significant network transformation projects, including SK Telecom (NYSE: SKM) and Vodafone (Nasdaq: VOD). These reference wins will be critical to positioning HPE as a contender in new RFPs, particularly in disruptive areas such as MANO and 5G core.

CMS is challenged by OSS domain incumbents like Amdocs (Nasdaq: DOX) and Ericsson (Nasdaq: ERIC), which CSPs will be reluctant to move on from due to possible migration and integration issues. This hesitancy could also prohibit the majority of CSPs from altering their procurement models to adopt more modular solutions, as webscales have done. CMS’ portfolio is increasingly aligned to this trend. The most difficult challenge may be delivering on helping CSPs become more than the connectivity provider or “dumb pipe” in a 5G world. Vendors will be jockeying to deliver this dream, but HPE may be better served focusing on providing the solutions that will enable CSPs to run the most efficient, cost-effective networks possible.

HPE (NYSE: HPE) hosted its first ever North America Communications and Media Solutions (CMS) Analyst Summit in Boston, bringing along top leadership from the company’s CMS business, who delved into CMS’ strategy and portfolio as well as key customer wins and success stories. Following executive presentations, which were interactive in nature, with industry analysts able to pose questions to presenters, analysts received one-on-one time with CMS VP and General Manager Phil Mottram, CMS Chief Technology Officer Jeff Edlund, CMS VP of R&D and Delivery Mark Colaluca, and CMS VP of Product Strategy and Lifecycle Management Domenico Convertino.

With CMS recently emerging from the shadows of HPE’s Pointnext business and retooling its portfolio to align with demand from communications service providers (CSPs), executives were upbeat about CMS’ ability to take market share and compete with highly entrenched incumbent vendors and startups alike.

Nokia hedges 5G play with focus on opportunities in the enterprise space

TBR perspective

The next few years will be challenging for Nokia (NYSE: NOK), and execution will be critical to ensure the company is optimized to drive profitable revenue growth when its addressable market ultimately returns to sustained growth. With its core communication service provider (CSP) customer segment, which composes 95% of Networks’ revenue, expected to remain in a cost-optimization cycle pending new, proven revenue growth opportunities enabled by 5G (which TBR’s research suggests remains several years away), Nokia’s strategic focus on opportunities in the enterprise space and its internal digital transformation are prudent and timely and will take center stage in determining how financially successful the company will be as it transitions into the next decade.

Though more CSPs are committing to deploy 5G and other advanced network innovations such as virtualization over the next few years, the reality is that these infrastructure investments are being justified because they provide significant cost efficiencies to CSPs, enabling them to build, operate and support networks in a much more efficient and cost-effective manner compared to prior generations of network technology. This reality not only increases pressure on Nokia to boost its enterprise exposure to grow revenue, but also pushes management to accelerate digital transformation to protect margins.

Though TBR generally agrees with Nokia’s stance that the world is at the cusp of Industry 4.0, the divergence in thought comes down to timing and whether this cycle will be a short-duration revolution or a long-term evolution. TBR’s research suggests the latter and that Industry 4.0, which includes mass 5G adoption globally, will not ramp up until the 2022-2025 timeframe, at which point business cases will be proved, justifying an increase in market spend on ICT infrastructure. Until that time, Nokia needs to rightsize its shorter-term expectations and focus on building a solid foundation for its fledgling enterprise business while digitally transforming its internal operations to stay competitive.

 

 

Enterprises, 5G and Industry 4.0 dominated most of the mindshare at Nokia’s 2018 Global Analyst Forum. Nokia spent much less time discussing its individual product innovations and more time discussing how technology, people and processes are coming together to enable digital transformation, not only for CSPs but also for enterprises.