Ericsson’s acquisition of Cradlepoint for $1.1 billion highlights the growing importance of enterprise and non-telecoms (i.e. industry vertical) networks, particularly in the era of 5G. And while the news can initially be understood as increasing competitiveness against the likes of Cisco, Juniper and Nokia, the real significance may lie in its changed relationship with its traditional CSP customers.
Cradlepoint has a strong position in Wireless Edge and WAN market. Pairing this with Ericsson’s strong 5G story makes a lot of sense in creating a credible enterprise edge proposition.
However, it also highlights some of the challenges faced by traditional network providers and their vendors in selling to enterprise. Ericsson has for years had a very clear policy that it sells to, and through CSPs. Historically, this made sense, by not confusing its major customers. However, it meant that companies like Ericsson were reliant on the credibility of CSPs in selling to enterprise. This worked where the primary product for enterprise was communications. However, with 5G and increasing commoditisation of connectivity the proposition needs to be more than communications alone. (CSP’s recognition of the need for better industry vertical domain knowledge and broader solutions was a recurring theme at last week’s FutureNet conference.)
Cradlepoint remains a separate business for now
At the recent analyst briefing, Ericsson stated that they intended to continue to run Cradlepoint as a separate business and retain its direct-to-enterprise salesforce. Appledore believes that this recognises that selling to enterprise is different and requires non CSP channels to market. Ericsson joins other equipment vendors in recognising this. Companies such as Cisco and Juniper have always had a direct to enterprise business. Nokia has grown a direct to enterprise channel for its private 5G networks and Industrial Automation capability. For these companies it means that there is another major network solutions provider actively competing for enterprise business globally.
CSPs need wider relevance to enterprise beyond connectivity
But it is for CSPs that this should possibly be a wake up call. For all the noise about CSPs serving new industry verticals with 5G, the reality is that CSPs are not the natural channel to market for complete enterprise solutions.This is something CSPs need to address, supported by partners like Ericsson.(CenturyLink’s just-announced spinout of its enterprise business into a whole new company – Lumen – reinforces this point; an Appledore research note will follow very shortly…)
Appledore’s research highlights many of the challenges that network providers and vendors face in becoming relevant to enterprise industry verticals in our report on Industrial Automation and 5G.