Fundamental market dynamics and disruptions are accelerating demand for critical networks and driving Nokia’s aim, through the new strategy of the Cloud and Network Services (CNS) business group, to lead the transition to cloud-native software and as-a-service delivery models.
Revenue and cost pressures are forcing communication service providers (CSP) to rethink how they architect, operate, and secure their networks; the global pandemic is magnifying the need for resiliency, capacity, and automation to stay productive; and data and security concerns are increasing as CSPs disaggregate and open their networks and as industrial enterprises connect more of their previously air-locked mission critical assets.
These megatrends in the market landscape point to the industrial automation and the digitization of industries happening before us. They reflect what I call a “private wireless inflection point,” which recognizes that industrial private wireless networks provide a level of predictable performance required to accelerate industrial automation and digital transformation.
Together, these trends are creating faster growing, higher profit margin opportunities that CNS is now targeting; specifically, the emerging opportunities of:
- Growth in 5G core
- Widening use of analytics and AI-based services that add intelligence to the network
- Accelerating uptake of private wireless and industrial automation
- Increasing investment in digital operations and closed loop automation, and,
- Surging interest in managed security
We expect the CNS addressable market of EUR 25 billion to grow at a two percent compound annual growth rate and reach EUR 26 billion in 2023. Within that market lay the faster growing emerging opportunities, which we expect to grow by 150 percent by 2023 relative to 2020. With the strategy we are taking, we expect to nearly double the portion of the CNS business that comes from the emerging opportunities by the end of 2023.
So how is CNS getting there?
Technology leadership
We are leveraging our strong foundation – CNS has #1 market positions in communications software, private wireless networks, and cognitive (or intelligent) services – to expand our technology leadership position in 5G core, digital operations, private wireless, cognitive services, and security.
We are refocusing R&D spend in the technology building blocks of security, automation, monetization, and everything-as-a-service; we are also ramping down investment in declining areas, such as 3G/4G core, voice prepaid systems, and legacy transactional managed and network performance services.
Security is the top concern we hear from our service provider and enterprise customers. Governments are strengthening security regulations in places like the US, France, India, the UK, and other geographies; our customers are expected to fully comply with those regulations.
Automation is arguably the most important aspect of 5G, with automated network slicing critical to creating and monetizing unique 5G services. Digital operations and end-to-end orchestration enable our customers to provide network as a service.
Monetization is a key element for service providers for customizing services that can be activated to create entirely new revenue streams in areas like cloud gaming.
While our customers recognize the value of a secure, automated, and monetizeable network, it is the as-a-service model that gets them to market more quickly with new services in a capital efficient way.
We are also strengthening two enablers that support the technology building blocks I just mentioned. One of those enablers is analytics and artificial intelligence, critical ingredients behind any self-protected, self-healing, user activated network. The other is any cloud; our software is deployable in public and private cloud environments and our customers expect us to continue driving technology developments that address their business requirements.
Strong to stronger
As we now drive our strategy into full gear, there are multiple reasons that give me confidence about where the CNS business is going.
First, Cloud and Network Services is a business that is already taking share and growing faster than the overall market, and that reflects customer recognition of our technology leadership, as well as how customers trust us and value our working relationship.
We have already deployed over 250+ core networks and 50 5G stand-alone networks; we have delivered over 1,500 mission critical networks across industry segments such as Energy, Transportation, Manufacturing, and Public Safety; we work with all 50 of the top CSPs globally; and we have deployed 260 private wireless networks.
Second, our customers value our software openness to multi-vendor settings with no lock-in, allowing them to thrive in the emerging digital ecosystem. We actively engage with them on open software standards, open-source, and open API (application programming surfaces); our customers know that openness is the way forward.
Third, we are automating many processes, investing in our remote delivery capacity, and creating several excellence centers to consolidate our workforce in those centers; all of which strengthen our operational and financial agility.
Through those actions we are taking and focused execution, we expect to outgrow our market each year in the 2021-2023 period; deliver healthy profitability; and create value for our service providers and enterprise customers to lead the transition to cloud-native software and as-a-service delivery models.
