The strong upswing of 5G deployments is likely to flatten out in coming years, according to Ericsson chief executive Börje Ekholm, who said the vendor plans to focus expanding more deeply into the enterprise space - a market it expects to drive extended network investment plus new opportunity.
Ericsson highlighted a strategic push for enterprise during its third quarter earnings presentation on Tuesday. It postponed a more in-depth investor update, originally planned for November 9, until next year.
By 2025 Ericsson believes enterprise could pose a $15-$25 billion market opportunity for the Swedish vendor, growing at a 25% CAGR over the next few years and contributing to Ericsson’s addressable market (including its core mobile networks business) of about $194 billion by then.
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As a current ramp in 5G network deployments evens out as earlier generations have, the technology differs in providing more chance to serve not only consumers but enterprise as well.
“What is actually different with 5G, is that it's also addressing enterprise needs,” Ekholm said on the earnings call, adding it was designed for those requirements. “So we believe that is going to drive traffic into the networks and actually provide a much longer investment cycle in the networks.”
Aside from longer network investment cycle, 5G can start opening up new segments to use mobile, he added. Ekholm said a focused push into enterprises can open higher growth markets and new value streams for Ericsson – and the enterprise market is already growing rapidly at rates above 20% per year.
“What we see with the new future with 5G is that businesses are increasingly making choices where wireless [can] be a primary access technology,” he noted. “This is very different and we believe this opens up new markets for us that could be worth up to $25 billion by 2025.”
Part of it comes from performance enhancements like higher bandwidth, more capacity and lower latency but he also called out the ability to specify quality of service where performance is adjusted in real time based on needs as a new way for businesses to tap wireless networks.
Network slicing momentum, orchestration and edge clouds are all capabilities Ericsson is investing in and that Ekholm said the company’s developing together with ecosystem partners.
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Changing quality of service parameters based on customers’ needs is something that enables differentiated services – and a feature the technique of network slicing is often touted for.
“Think for example, telemedicine or…a sensitive video conference where you need to adjust and rely on very high quality performance or high-quality networks,” he said. “I think this is an opportunity for sustainable growth for us.”
Ericsson isn’t the only vendor targeting enterprise. Rival Nokia has made enterprise customers a clear priority, particularly with private networks. So far Ericsson has more often gone to enterprise with its service provider partners (who also want a piece of the business customer pie) rather than directly. For example, CBRS private network offerings with AT&T.
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However, it has taken its own enterprise-focused steps, including a newly packaged 5G private network suite unveiled this June. Along with dedicated or private networks, the vendor has focused on mission-critical networks and has a global IoT platform with a dedicated core. According to Ericsson’s June Mobility report, cellular IoT connects are expected to soar, with 23% CAGR from 2020-2026, while the presentation pegged wireless WAN edge solutions at 29% CAGR from 2020-2025.
It also bolstered enterprise capabilities and brought on relationships through a $1 billion acquisition of U.S.-based Cradlepoint last year. The company, headquartered in Idaho, provides wireless wide area network (WAN) and edge gear for enterprises and private network expertise. It joined Ericsson with more than 1,500 channel partners and about 10 service provider customers. Ekholm called out has the investment in “network-near” solutions via Cradlepoint.
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“Not only does it provide us with the market opportunity, it actually generates revenues for the CSPs because with every Cradlepoint installation there is a network need as well,” he said. “We see this to be a win-win together with our CSP customers, but we’re also very encouraged about the performance we see in those enterprise applications, where we can provide a very high growth.”
Cradlepoint is part of Ericsson’s emerging business segment, which reported 4% organic growth in the fourth quarter and sales of SEK 2 billion. Cradlepoint was credited as the main driver of Q3 revenue and gross margin improvements in the business unit.
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For its strengthen focused Ericsson will pursue organic enterprise growth, but additional purchases are on the table too as Ekholm cited the need also to rely on inorganic growth. He noted the vendor’s capital position saying, “we have the opportunity to make acquisitions we need to strengthen our offering in enterprises.”