Nokia shifts private 5G sales strategy to go all-indirect, zero-touch, mega-sized
Another challenge, apart from devices, with the mission to scale industrial 5G is with sales channels. Speaking a while back, following its “flagship” arrangement with system integrator Kyndryl for its various Industry 4.0 gear, Nokia says its strategy on private networks has shifted, decisively. It is done, or nearly done, with direct selling, it says, and is priming third-party pumps to flush 5G into industrial environments. Kyndryl is just (about) its highest-profile partner.
But others, notable in their ways, have quickly followed; Chinese web firm Alibaba and French cloud services company Atos have also signed with Nokia. Both will integrate and resell its Digital Automation Cloud (DAC) private wireless solution, which is driving much of the Finnish firm’s growth with enterprises. Kyndryl will also take its Mission Critical Industrial Edge (MXIE) package, says Nokia, which has effectively subsumed the DAC offer into a bigger edge bundle.
In turn, these new channel partnerships follow, inevitably, from new relations with old familiars, based on the ties that bind in the telco crowd. AT&T and Verizon signed at the end of last year to resell its private networks package, nationally and internationally, respectively. Nokia says it has 20 “tier-one” operators on its books for private LTE and 5G. Which is significant, of course, given the early furore around its direct-selling in the Industry 4.0 space.
Unlike Ericsson, if we recall, which toed the line, in PR terms at least, on its go-to-market strategy, Nokia committed from the start to pitch to industry with or without its old compadres in the carrier community. Which also makes its latest strategy shift, to reverse back to indirect selling, interesting. Formal DAC deals with the big US cloud firms are probably due, as well; it is already working with Microsoft to combine with Azure IoT for operators and enterprises.
Nokia’s sales shift also makes clear the logic, and clear-sightedness, of its Industry 4.0 strategy, to go after 14-odd million industrial sites; that there is serious prep-work to define and develop the opportunity first, and a steep learning curve for foreign interlopers to even earn the right to take it. Nokia feels that time has come; that its reputation among the industrial set is decent (enough), and that it can start to scale its private network sales, at last, via proper specialists.
“We feel we have pioneered this private 5G market, the industrial 5G market. We spotted the opportunity early, and we developed the technology – with our DAC cloud core and radio capability. We have about 480 networks, today; and somewhere north of 400 customers. We are very confident in this – as a multi-vertical, multi geographical, massive-scale service proposition,” comments Chris Johnson, senior vice president of Nokia’s enterprise division.
“We are moving to a new phase, investing more in the go-to-market. The opportunity is for millions of sites; we are not about to build a direct sales force to go after all of them. We will find the most effective channels. And there are a few of them: mobile operators, because they have their own spectrum; value added resellers (VARs), because they specialise in different industries; and system integrators (SIs), because they deliver end-to-end digital change.”
The SI channel is multi-pronged, of course. The line is global SIs (GSIs) like Kyndryl, spun out of IBM late last year, offer run-phase infrastructure management, alongside pbuild-phase consultancy and design (“a sweet spot for this”), where other GSI brands are “consultancy heavy”, and local SIs like Siticom and Smart Mobile Labs in Germany (both on the books) serve a regional bias and an industrial niche, and parts perhaps that others cannot reach.
Until now, Nokia’s private LTE and 5G sales have been signed 50/50, direct and indirect, he says; but the needle is moving outwards, and will only go one way in the end. “It is a fairly standard cycle. You find your first customer, any customer; you lock them down and do a good job, and then expand to a second customer and a second industry. And then you find a partner to help you scale, and it evolves into an indirect model,” says Johnson.
He adds: “We anticipate this will be almost totally indirect.” Scale will come, instantly, with Kyndryl; the relationship grew out of an initial trial with the Dow Chemical Company (Dow Inc), to support worker safety, collaboration tools, and asset tracking. The pair have developed a “blueprint”, they say, which will see the Michigan firm expand its Industry 4.0 use cases in existing private LTE/5G networks, and into new private networks across its global footprint.
Johnson replays the narrative: “And in steps Kyndryl, the world’s largest managed SI player, the leader in this space, with more than 4,000 clients. The Dow pilot goes into live production, and so we find the next two sites, the next five, the next 10 – and we are now working on a couple of hundred. It has been a really easy (productive) partnership. And, you know, if you look at Kyndryl’s extended client base, it offers enormous scale for us, potentially.”
He goes on: “We don’t treat all partners the same; they are selected, just as we are selected the other way. Kyndryl is super large; the cultural fit is good. Relationships with other GSIs will be nuanced in different ways. The thing, as well, is vertical-market knowhow is important in this space. And so we will also work with more vertically integrated solution providers, and put focus on them as a supply chain; plus all sorts of industrial manufacturers.
“They become different kind of partners; giving access to the automotive industry, say. There will be swim lanes, in GTM parlance, where we pick partners for specific credibilities, and not just for the sake of it, which would bring congestion to the channel. But Kyndryl is a flagship partner; there will be others, but they will be non-conflicting.” Interesting; these references are to the likes of Bosch and Siemens, say, and to Caterpillar and Konecranes.
The meaning has to be untangled, some; but in the latter case, with industrial manufacturers, the upside is reputation-building, rather than solution-selling. “Most big equipment makers are not interested in reselling. But you need to be a part of the ecosystem, which serves those industries. And these players are centre stage. So integrating with them in a positive way works almost like a referral; it is incredibly powerful. You build credibility that way.”
What about the others? Presumably Bosch, certainly Siemens, will develop their own private 5G systems; is there an opportunity for Nokia to white-label a mission-critical DAC variant for others – in the event (unlikely, actually, given how crowded the cloud network space has become) that private 5G is a bridge too-far for an in-house team in an OT system vendor? “It hasn’t come up, and I wouldn’t comment,” responds Johnson. Unlikely, then.
Extending down and spreading out, the sales channel becomes unknowable, at least by name. Nokia has 500 VARs in place, already, says Johnson – “specialists in industry verticals, whether education or manufacturing, or whatever”. These are “selling desktop supplies and services, and hardware and data centre gear” to neighbourhood businesses, just beyond the direct reach of local SIs. They are IT resellers, in other words. Does this go to the old dealer market, too?
Actually, IT resellers and mobile dealers have converged in the enterprise space. But the question remains; whether, as radio complexity is abstracted and use cases are delineated, industrial 5G starts to play like off-the-shelf Wi-Fi – and whether private 5G becomes a box-shifting exercise, essentially, for third-party resellers on commission? Is that a waypoint in this journey, or another bridge too far?
Johnson takes the point on Wi-Fi-like volumes, but not on Wi-Fi like tech – and probably not on an easy dealer-style boom-time. Private 5G is a more rarefied sales discipline, he says, which requires hard-won experience with hard-to-know radio design, plus careful negotiation about “business outcomes”. He says: “Even though we sell lots of LTE, because LTE has been just as effective for us, 5G will bring connectivity to many more things – to cranes, machines, production lines.”
He goes on: “Instead of connecting hundreds of devices on LTE, we will be connecting tens of thousands on 5G. That is what is compelling for an enterprise. On the other thing; we should not compare 5G to Wi-Fi in tech terms, but, yes, the go-to-market is similar – in the sense it has to be easy to design and build. But you need specialist skills. Radio design is a very specific topic. But the route to market is very similar.”
At the same time, it is quite new for Nokia, and brand new for much of the rest of the telco crowd. “It is a different model; we are not selling to hundreds of operators, in an almost-totally direct fashion – this very technical, standards-driven, product-based portfolio; talking about features, benefits, price. This is more innovative; it is driven by vertical business outcomes, and ease of implementation. It very clearly scales as an indirect go-to-market model.”
To be clear, and for the record, is Nokia handing-over the sell/build/run process to third parties completely? Or does it expect to be engaged at every point, ultimately, whether the managed service is in its hands or not? “No, we would prefer to be zero-touch. We are enabling Kyndryl – which can do this quite well today, by the way – on all those touchpoints. We want to enable its technicians to do the radio design.
“Managed services are the core of its business, and we do not want to steal that away. That is where Kyndryl brings value, and, frankly, where it can create revenue streams for itself on top of our technology. As far as possible, we want our partners to take on board as much of the process as they can. In the meantime, of course, there is an enablement cycle, and we are hand-holding partners, variously, to be more self-sufficient.”
Some other thoughts and questions, to close-out. How does Johnson assess the progress, overall – or more specifically, the perception of progress? Because, anecdotally, analysts and commentators, and wags and sages, tell Enterprise IoT Insights the industrial SME market in Europe scratches its head when it opens the 5G box, because it doesn’t do what it says on the tin – in terms of higher grade networking control to automate their factories.
Clearly, these are Release 16/17/18-level capabilities, and the 5G NR standard is a moving feast; but the (anecdotal) sense of frustration says there is, at least, a disjunct presently between the promise and the reality. Johnson responds that the industrial 5G story does not start with industrial-grade late-release cellular, but just with common-or-garden cellular, with all its carrier-grade features, in industrial climes.
He says: “Certain industries – and I mean industries, rather than SMEs, because these are bigger organisations, with bigger footprints – have been early adopters, and it is based on a certain simplicity. Which is that in a container port, say, the primary objective is just to keep the machinery running. And, with the Wi-Fi technology that has gone before, all these automated cranes get disrupted multiple times a day, and literally just stop.
“So with true 24×7 quality-of-service, you have a business case that justifies a 5G network – within three or four months. The same is true for mining; we’ve discovered lots of interesting use cases in mining – around human safety, wear-and-tear. Some of these huge digger trucks, completely automated, can be proactively maintained, to guide them on particular routes. All this stuff provides a very compelling reason to buy the network, and an instant return.”
What about manufacturing? “Yes, manufacturing is the big prize. But it is conservative, and complex, as well – with heavily metallic environments, and this coexistence of legacy machinery and modern robotics. And these drivers – safety, efficiency, productivity – are all going on at once. We are making headway, with Volkswagen and Toyota, and some others, but we are also pushing harder – because it is an important vertical to win-big in.”
Nokia speaks very well about private 5G; it has to be said. There is an argument that its strategy, so clearly articulated and so well executed (it has to be said), is also rather narrowly defined. Yes, this is Industry 4.0-proper – for the die-hards and the purists, in hard hats and coveralls – which no one else in the mainstream telco market is currently serving so well, arguably. But the naysayers, which might put Nokia in a box, would argue that software mega-firms are circling this sector too, and that 5G will, in the end, be a sideshow in the Industry 4.0 story.
Nokia is plotting, for sure. Private industrial cellular will be a $5 billion market in 2026, it reckons, which will be dwarfed by “a much larger opportunity across the whole intelligent edge”. Hence why the DAC team is squarely focused on developing new applications and integrations into its MXIE master-play for Industry 4.0. But the back-slapping chorus about 5G as (yet) a(nother telco) hype tale, and just an app on the edge, will not go away.
So we have to ask again, in our own convoluted way; does it frustrate you when commentators kick against the perceived hype around private 5G? Is it not fair that Nokia, say, is working to rationalise and scale 5G for industry, and going step-by-step to realise the promise of it, while market-watchers crow about how the whole telco pudding is over-egged? That very-real, albeit eMBB-style, 5G use cases are going in, which are bringing value for industry?
That 5G might not be in position yet, and may never be in position, to deliver lights-out manufacturing, but that the cellular community is trying to open up and crossover, and make good on the marketing? So, you know, lay off? Is that the correct response? Johnson responds: “It is. Because it is an early-stage market still, remember. We have been driving it hard because we have had the technology, and, I think, where we’ve turned up, we’ve been successful.”
He goes on: “So our success is not limited by the attractiveness of the proposition, but by the scale of turning-up. We believe in the market. Am I upset that people say it is over-hyped? Not really. Because we’re seeing the revenue, today, and we have big customers that are ready to expand – like, Dow Chemicals will go from 20 sites to 200 sites. A lot of the big mining groups are signing framework agreements for all their plants. So we see the potential, very clearly. And the other thing is we have had quite good press, actually.”
It is a fair point; and the criticism is really directed at, and the question should probably be asked of, other parts of the old telco market, instead.
For more on this subject, sign up for the Enterprise IoT Insights webinar on April 28 on Industrial 5G (From Setting Standard to Becoming Standard) – plus the editorial report on the same subject. The webinar includes speakers from ABI Research, MFA (MulteFire Alliance)/Nokia, Schneider Electric, and Vodafone.