When your buyers believe in the flat earth, you don’t try to sell them globes. Given the fact that the telcos have a fixation on connection services, and see every “opportunity” as something that involves and extends them, you have to expect that their vendors are impacted. Maybe that’s why Ericsson did a deal for Vonage back in 2021. But to quote my blog on that event, “Vendors in the telecom space have proven they have no better grasp of the evolution of services and the importance of the cloud than their customers. Ericsson may have just spent almost seven billion dollars on something that had potential, but potential they couldn’t realize.”
Apparently that’s what happened, because Ericsson has now taken a second write-down on their investment, meaning they’ve written off over half of it. Still, the question is why Ericsson couldn’t realize the potential. Was there none, did they miss what could have been done, did conditions change, or what?
Vonage was seen as a UCaaS (unified communications as a service) player when Ericsson bought them. If UC in any form was Ericsson’s goal, then it seems to me that Teams and Zoom had already transformed that space into one where OTT players dominated. If Ericsson though that their telco customers, who have zero successes to point to in competition with OTTs, would somehow win with Vonage, they were misguided and the move was doomed to fail, which was my point at the time.
I thought Ericsson’s chance was 5G. Back in 2021, Ericsson was trying to avoid committing to open-model 5G, and if they could have created an ecosystem for services in 5G, build with Vonage as a starting point, I think they might have had a shot, providing that they undertook that task with what I’d have to describe as naked aggression. Too much to ask for a telecom vendor to have that will, and the capability to deliver on it.
What finally doomed Ericsson’s deal was the fact that they couldn’t sustain a proprietary 5G story in a market where buyers were demanding openness. You don’t pay billions to buy something you intend to open-source, but once Ericsson decided it had to join with Open RAN, there wasn’t much else you could do with Vonage. But what does that mean given the write-downs Ericsson has taken? I don’t see any way for Ericsson to avoid simply making Vonage open-source. There is no value to be had for them in UCaaS, and little chance they could monetize Vonage in its current proprietary form no matter what mission they assigned it. That would make Ericsson’s mission to support a “global network platform for network APIs” pretty darn hard to achieve and even harder to monetize.
How would Vonage achieve anything for Ericsson? The only hope I could see would be as an on-ramp to something bigger, which means that Ericsson would have to create some useful “network APIs” that would be built to the deployment model Ericsson envisions for Vonage, and for which the Vonage stuff would be a kind of loss-leader shill. That would work best if Ericsson simply open-sourced Vonage and made them a part of their Open RAN strategy and contribution.
From the perspective of enhancing network API adoption, this approach could encourage developers to extend Vonage and, by lowering the cost of adopting Vonage features, also encourage operators to test the network API waters. From there, Ericsson could help them step off into the new, non-Vonage, proprietary Ericsson stuff.
From the competitive dynamic side, it would put companies like Nokia in a tough position. Do they refuse to support the Vonage open-source tools? They really could not, if Ericsson built their Vonage APIs to mesh with Open RAN APIs. If they support Ericsson’s Vonage APIs, and those build to new Ericsson APIs, then competitors would be opening up their own deployment to possible Ericsson exploitation.
All of this would depend on Ericsson creating a new set of network APIs with features that telcos would want to deploy, and that would be symbiotic with the Vonage APIs they were opening up. I think this new set would have to include two layers, one that would represent perhaps the “facilitating services” that AT&T led the way in promoting conceptually, and the other that would implement a realistic set of features that could offer telcos who were more aggressive a bridge into a new service area. Unfortunately, neither layer is likely to be easy for Ericsson.
While the details of the two new layers is different, both depend on a vision of what new network-based services would be valued by consumers and/or businesses, and so valuable to telcos. From that list, a vendor like Ericsson would have to pull candidates from this list of new services, candidates that had a subordinate element or two that an operator could deploy to support a retail provider’s offering of the superior service. To do otherwise, meaning to simply assert a set of facilitating subordinate elements without any superior service target, would ask telcos to take a major risk.
Let me illustrate this with an example. There are clearly metaverse and IoT services/applications that would rely on edge computing. Ericsson might therefore say they’ll deploy edge computing as a facilitating service. The problem is defining what features “edge computing” might contain. If it’s nothing more than a way to host something like a VM or container in a place closer to service users to reduce latency, then it may not add enough to encourage anyone to create anything above it, particularly something a telco could promote. On the other hand, if the service were a set of APIs that facilitated IoT, metaverse, or both, we could assume that barriers to developer exploitation of the APIs would be lower, that adoption could be faster and broader, and that telcos would have an easier time promoting their role.
You can surely see that a lot more market insight, meaning a greater understanding of the retail market for services, would be required to frame the latter strategy than would be needed for the former. I suspect that if telcos were to announce to Wall Street they were going to embark on a massive edge computing deployment, absent a credible retail opportunity link, they’d see their share price punished, and knowing this they’d be unlikely to even attempt that approach. But can they define and support that credible retail link when the telcos themselves tend to reject anything that doesn’t look like selling pre- or post-pay connectivity?
Ericsson, like all sellers, is to a degree both a showperson and a slave to its audience. You can’t get too wild, too disconnected, and yet you can’t let buyers fall into a “nothing new out there” mindset. I think Ericsson, with Vonage, has done too much of the latter, and that a little wildness is now indicated.
