For quite some time, Nokia has been pointing out the importance of their independent software business the company has been developing for years in quarterly reports. Especially now during the times when software and services showed how important they are in keeping the world going, Nokia’s early efforts in recognizing the importance of software in the TelCo space proved to be a great strategic decision.
In an interview with LightReading.com, the President of Nokia’s software business Bhaskar Gorti shared some insights how the unit has been improving and how much potential there is on the telco software market. Nokia Software unit is generating around 3 billion euro in revenue annually and finished the first quarter of 2020 with a 70 million euro operating profit, compared to a 7 million euro operating loss for the same period of 2019.
Mr. Gorti mentioned how Nokia’s Software unit spent 458 million euro in Research and Development last year that includes development of a Common Software Foundation (CSF) for all of their services. In other words, Nokia’s software tools are now sharing business logic and components which makes them easier to maintain and develop on top of them, making the productivity of the unit go up, as well as the speed in which the company can introduce new features.
Nokia’s CSF allows them do develop software for operator’s own infrastructure or public cloud, meaning the company is in the SaaS (Software as a Service) market as well. The goal for the unit is not to rapidly expand in sales, but to grow while keeping the profitability rising.
The software business is also the least impacted during the COVID-19 pandemic, though the company had to “secure” each employees home location and treat is as individual sites. The software business could have negative consequences if the lockdown prevents them to access customer sites in the near future, even though the Software Unit is exploring ways to minimise the need for manual intervention on customer premises and have the deployment of services fully automated.
Nokia is the biggest player in the Telecom software in services business with 7% market share per the most recent report, but the market is really crowded with no single player really dominating the space, which leaves a lot of room for growth.
Nokia’s Software business was also mentioned by a Finnish analysts as a possible cornerstone of a new Nokia, that could sell its networks business and use the money to dominate the software space. Nevertheless, an interesting point of view.