Will Cloud Computing Really Help the New Nokia Succeed?

David Snow
David Snow

Summary Bullets:

  • The hope for more rapid and successful integration than in the past to form the ‘New Nokia’ is predicated on, among other things, the advantages of ‘cloud computing.’
  • If this means NFV, then such a hope may be a double-edged sword. Internally, NFV could help, while externally, New Nokia customers will have more choices than ever before.

After the initial furor of analysis and comment around the news of the proposed acquisition of Alcatel-Lucent by Nokia, much of the news flow has now subsided. Apart from the occasional justification from one or other of the CEOs from the approvals and regulatory perspective, the debate as to whether this acquisition will work any better than the mega-mergers of the past has largely been put into the ‘pending’ tray.

However, there has been one comment that’s worth a deeper look. Rajeev Suri is reported to have said, “While some of our past integration experiences have been painful at times, you should not be thinking about swap-out costs in the same way as in the past.” Open interfaces, 4G technology and cloud computing “allow more rapid and efficient integration.”

Now there’s certainly something to that, but it’s the cloud computing piece that’s interesting. Granted, cloud computing is a broad term, but given Nokia’s current strategy, it’s not too much of a stretch to assume at least some of what Mr. Suri said pertains to NFV. If so, then the question arises as to whether NFV will actually help or hinder the ‘integration experience.’ One of the initial conclusions of Current Analysis’ coverage of the move was that “a long acquisition/integration process could be at odds with a period earmarked for advanced operator commercial NFV implementations.”

So, what could be the impact of the New Nokia on an operator’s NFV program?

  • It Could Help

On the one hand, Mr. Suri is right: NFV proposes a natively flexible environment so that ‘best-of-breed’ VNFs can be swapped in and out at will. So, in theory, the New Nokia could choose to take forward either a Nokia VNF or the equivalent Alcatel-Lucent VNF into its carrier base. In this case, an operator left with a discontinued VNF would simply instruct its NFV MANO stack to terminate it through the lifecycle management process and load up the New Nokia VNF in its place. Okay, it’s an oversimplification, but that’s the NFV dream, at least at a VNF level.

  • It Could Hinder

On the other hand, we all know it’s not that simple. There’s always an integration piece, but to be fair, integration problems are nothing new; now it’s just called horizontal integration. Why? Because NFV introduces a whole new realm of vertical integration, not only by separating of hardware and software, but also up and down the management (MANO) stack. Swapping one VNF for another may be relatively simple horizontally, but vertically, the current lack of standardized MANO interfaces makes the job far more difficult. In the vertical dimension, an operator (and the New Nokia) can expect major headaches in swapping out a VNF for some time to come.

  • It Could Backfire

And that brings us to perhaps the worst-case NFV scenario for the New Nokia. If transitioning to a New Nokia VNF is not so easy, particularly from a MANO perspective, then operators faced with this dilemma may start to look beyond the company for a way forward. Perhaps a rival’s VNF or even its MANO offering would provide a better fit. After all, if there’s going to be integration problems anyway, why not even take the opportunity to introduce another vendor into the NFV mix? Again, that’s one of the aims of NFV. Yes, this is still some way off, but so is the New Nokia.

All of this brings us back again to classic acquisition/integration/disruption dynamics, which traditionally open up new opportunities for competitors. NFV may help a little, but by its very nature, it has far more potential to disrupt than to help. Moreover, New Nokia’s rivals will not just include the normal suspects (e.g., Ericsson and Huawei), but also come from a wider competitive field including ‘software first’ vendors fielding new VNFs (e.g., Metaswitch and OpenCloud) and IT players with vendor-neutral MANO offerings (e.g., HP) – just what the NFV dream intended.

So, from an NFV perspective, we’ll stand by our statement of risk for the New Nokia. Internally, ‘cloud computing’ may help the company rationalize its portfolio overlaps, but in the outside world, far more may be at stake.

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