Wireless Must Move Beyond Hardware to Grow Business

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When you’re told by flight attendants before takeoff to turn off the Samsung Galaxy Note 7, that’s a sign the wireless industry needs to retrench and shift towards software. So too, are job layoffs by Ericsson and now Verizon, according to Rethink Research.

Samsung has stopped production of the device. The recall and refund process, not to mention the loss of future sales, may add up to a $5.3 billion loss. The carrier will likely shift its efforts towards non-smartphone sectors like memory, processors and displays, and boost software focus as it recovers.

“The trouble is, while the company is having some success with services like mobile payments, the classic software/content model for a device maker is to use those services to drive additional usage, and upgrades, to the smartphones, by creating an optimized and highly usable experience. Apple is the star at this, and the failure of the new Note – whose pen interface can support some interesting applications – will be a blow to Samsung’s hardware/software hopes,” writes Rethink Research.  

Google, too is moving towards integrated devices/services as the business model is headed toward a decline. The up and coming players will not be hardware and software providers that lock consumers into a specific brand, but web content and applications firms that create differentiated user experiences across a range of models.

Amazon is a good example with its new low-cost music streaming service tied into its Echo and Prime platforms. Rethink Research sees the old guard of network vendors and operators being squeezed out as they adjust to new business realities, as evidenced by Ericsson’s 3,000 layoffs followed by Verizon’s 3,200. Note Ericsson’s plans to restructure and an alliance with Cisco.

However, growth businesses like virtualization, cloud and media delivered “only” about $60 million of additional revenue in Q2 and the total is falling. As it did in 2003, Ericsson is facing the redefinition of the industry. Back then, that meant the shift to the internet “while now it’s about the convergence of telecoms and IT and the ride of the software-driven network and the cloud.”

And while 5G is certainly important, testing aside, it’s not ready for primetime. Tactile internet, artificial intelligence, IoT, hosted and virtualized RANs — all delivered from the cloud along with network slicing — will be the foundations of the next-gen mobile and web experiences and business models, according to Rethink Research.

October 17, 2016

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