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Summary

Nokia has recently announced its intent to acquire its longtime partner, fellow Finland-based software provider Comptel. The proposed acquisition aligns with Nokia's strategy to strengthen its software portfolio by extending its software product offerings and its go-to-market capabilities. Comptel's products, services, and people support this strategy, because Comptel brings a strong portfolio of products and expertise in service fulfillment/orchestration, data management and analytics, service monetization, and customer engagement.

The intended acquisition of Comptel will position Nokia as a strong software solution provider

Nokia's announced intent to acquire Comptel follows its strategy to develop a standalone software business. Finnish company Comptel will bring Nokia closer to this goal because it comes with more than 30 years of experience in the telecoms software market, selling products for service fulfillment/orchestration, monetization, data processing, analytics, and customer engagement. Given its time in the software market, the vendor has developed an organization with strong salesforce and R&D functions and has a broad customer base, all of which stand as proof points of its expertise.

If the deal goes through, Nokia will strengthen its software portfolio and obtain the resources to push its software go-to-market strategies. Initially it will require some effort to combine the two portfolios, which share a few areas of overlap, but it may be a price worth paying, because the acquisition nicely complements Nokia's existing software portfolio.

Comptel's FlowOne platform will enhance the service assurance and orchestration functions delivered by Nokia's CloudBand and Nuage product portfolios. FlowOne comes with catalog-driven service fulfillment/orchestration capabilities that enable automation of an operator's order management and service delivery functions. It will enable Nokia to deliver the end-to-end service management capabilities that operators require as they transform their networks using SDN/NFV. Because it is expected to take several years for a majority of the telco network to get virtualized (with some parts not being virtualized at all), it is absolutely critical that this transformation does not disrupt existing services and that the resulting network is easy to manage. Competitors such as Amdocs and Ericsson are also developing capabilities in service orchestration and we expect more activities and announcements from others, such as Huawei and NetCracker.

While Nokia already has a product set in the area of analytics – in networks analytics and customer care functions (from a service assurance perspective) – the acquisition of Comptel's assets, such as Data Refinery, the FWD app, and FasterMind, will deepen its capabilities in BSS. Nokia plans to use Comptel's Data Refinery product to extract and consolidate data from several data sources to serve BSS functions (this includes policy and charging functions) and other analytics engines/or applications. The FWD app, launched in November 2015, enables mobile operators to market and sell mobile data offerings quickly based on customer context and preferences. The FWD app has already gained traction with Comptel's customers and Nokia sees FWD as being attractive to its customers. FasterMind, on the other hand, provides artificial intelligence (AI) applications to digital telcos, simplifying and accelerating the advancement of telcos' analytics and automation capabilities. While this might still be early days, Nokia may leverage FasterMind's capabilities to enhance some of Nokia's applications, such as its recently launched digital assistant tool MIKA.

Although software accounts for about 6.4% of Nokia's overall company revenues (estimate based on Nokia's reported quarterly earnings for 2016), the vendor has announced that its software business is key to its long-term growth strategy in the telecoms market. We expect to see more software-related acquisitions from Nokia. As its network equipment business declines, it needs to look to other opportunities to grow its business.

Competitors such as Ericsson and Huawei are also in this race, and are developing their software capabilities and moving into other industries to ensure profitability and relevance. The question is who will outrun the others. These companies need to show that they can deliver a complete end-to-end solution with proven customer references to back up their claims.

Appendix

Further reading

"How can AI support CSPs transformation programs?" TE0008-001486 (December 2016)

"Ericsson and Nokia have a common strategy: To reach beyond their CSP customer base," TE0006-001318 (December 2016)

"Nokia uses its analyst conference to highlight greater ambitions of a larger company," TE0006-001259 (June 2016)

Author

Adaora Okeleke, Senior Analyst, Telecoms Operations and IT

adaora.okeleke@ovum.com

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