When Ericsson announces that it has hit a road block with its major BSS product you have to wonder what message it sends to the market. Last Thursday the company announced one time charges of 6.1 billion SEK ($676 million), plus 1.7 billion SEK ($170 million) to allow it to restructure its BSS offering.
Their Revenue Manager product has ‘proved unsuccessful’ and is being written off. This will allow them to invest in their Ericsson Digital BSS platform, the core of which came with their purchase of German software company LHS.
According to reports, some of the money set aside for this restructuring will go towards payments for contract losses, customer compensation and provision for project delays.
The question is whether Ericsson’s strategy with its Revenue Manager – to pursue large transformation projects with pre-integrated, full stack solutions – was flawed for them, or whether this strategy is flawed, period. According to Ericsson, the expected customer demand did not materialize and the Revenue Manager product did not generate any revenue. This is odd in itself as the product – according to the company’s website – ‘is a cloud-native, 5G and IoT ready end-to-end digital BSS suite that delivers an open architecture with customizable APIs’. As long as it did some of that, then there should have been some traction for the offering.
Certainly ‘big bang’ transformations are widely thought to be high risk. And certainly such strategies often result in cost overruns, missed deadlines and compensations claims. Yet, a company whose focus is very much in the same area – our source did not wish the company to be named – is winning a lot of business with full stack BSS deals and BSS transformation deals. There are, it seems, deals to be won but Ericsson is – or was – not winning them.
Commenting on whether this is a trend in the market, Openet CEO Niall Norton said, “BSS transformations are risky, digital transformations are tough and big bang approaches to refreshing IT systems have not enjoyed a high success rate. Add them together and it’s a challenge”.
The only place that Norton has seen successful big bang implementations has been in the greenfield space, where an established company will launch a second brand, or establish an enterprise business unit or an MVNE/MVNO. “The one thing these have in common” says Norton, “is there is no legacy kit. There is also the option of running new services through a new BSS stack and phasing out the legacy systems over time”.
Certainly it is not a lack of resources that has caused Ericsson to make this decision. Indeed the company would seem to be a perfect provider of end-to-end solutions, given its position in the market.
The view that ‘digital’ transformation needs a different approach is one that is shared by Matrixx Software, who believe that ‘you can’t deliver digital transformation on legacy IT systems that were developed for a different purpose; you need to re-tool with digital-grade technology’. This according to a new eBook the company published as a result of the Ericsson news.
It seems that while the widely held view is that big bang, full stack transformations are very risky, they are definitely out there and business is being won.
So, is it actually that Ericsson, unlike competitors we could mention, is a company that is so focused on the network side of its business, particularly 5G, that it views the BSS ‘bit’ of the jigsaw as something of an afterthought, or an add-on?
And as such, simply did not give it enough attention to make it work?