Q&A: NSN CEOs ON THE IMPORTANCE OF U.S. AND SERVICES

In the three years you have been NSN's CEO, did you accomplish everything you wanted to?

Simon Beresford-Wylie: No, I don't feel I've accomplished everything I wanted to accomplish, but that's life. When we announced this merger back in January of 2006, the world was very different, in terms of the global economy, first, and secondly in the nature of the telecom market, which was growing. Our operator customers were in extremely good growth then, and of course the competitive landscape was different. None of us, frankly, had any experience in a merger or integration of this size and complexity. But I think as we look back we feel we've done quite a good job in putting together two companies that were in many ways similar and in many ways different. In that sense, mission accomplished.

From a financial performance perspective — from which a CEO is clearly judged — I'm extremely unhappy with how particularly this year has played out. Moving toward the end of 2008, we were making good progress then “Whammo!“ We had a number of effects on our business. On the other hand I'm proud we were able to put these two companies together and build quite a good culture and value set.

We're at point now where we're transitioning. I feel very good about the services business — the bold decision we made to approach the services business differently from anyone else. We're seeing all of the benefits of that now. As we look out to 2010, we face a different market landscape with a few new facts: the fact that the integration is behind us, the fact that restructuring is behind us, the fact that synergies have been captured.

Does the fact that you're taking over NSN after leading its services business give any indication of the direction NSN will be heading in the future? Is services outstripping infrastructure in importance?

Rajeev Suri: You need to have both. You need to have a good and strong product business. You need to have a strong services business, and they need to coexist in a symbiotic relationship. I think what we need to bring to customers, to communications service providers, is really the best products and services package. That's what they're expecting. On the services business itself, clearly managed services is a growth driver. Consulting and systems integration is a growth driver. We've done two things: Services has grown as a percentage of company revenue, but even within services we have grown or changed the business from a product-attached service set to an independent professional services group. Professional services is now 60% of the services business. When we started it was around 40% of the business. It's got to be a symbiotic relationship. We can't be a services company only. We will not be a product company only.

NSN bid on bankrupt Nortel Networks' CDMA and LTE businesses, though ultimately Ericsson won the auction. Why the interest in that business?

Beresford-Wylie: We weren't looking to get into the CDMA business per se, but what we had been endeavoring to do for as long as I can remember was build a significant market position here in North America and a deeper customer intimacy. What that business offered and the reason it was attractive was that we would have catapulted to a market share around 30% here. Rarely does one get the opportunity to gain such a significant share.

Now of course the challenge with the CDMA business, like the GSM business, is that it is a fast, fast contracting business. We analyzed it very, very carefully. We went backwards and forwards with our own team and our board. We feel we reached a very prudent view in terms of how to create value from it, which meant there was a certain price cap we put on the assets. We decided we would remained disciplined and would not go beyond that cap. Once we got to that amount we felt it was fully and fairly valued. We saw that around the 1 billion mark the blood started to come through the pores in our skin. When it got to that point we said “fine.“

When NSN was formed in 2007, you faced the task of merging two distinct company cultures. Almost three years later, do you think the process is complete? Is NSN a single culture, or is it still the product of its parts?

Beresford-Wylie: I think it is. When books are written on this, my sense is we'll rise quite close to the top in terms of the job we have done, given the fact that we have 60,000 people here. It was fascinating to watch this play out. … One thing that struck me was we were 90% the same and 10% different. What I mean by that is we all grew up in a traditional telecom heritage as fine engineering companies, so there were a lot of similarities. That was good and bad. When one looks to the transformation required now — building the services business, becoming more of a software-and solution-oriented company — then these require the culture to continue to evolve beyond the recent integration. We're coming from a particular type of company, evolving into something else.

Suri: We started with 60,000 people, we captured the synergies and did the required restructuring. We're still 60,000 people, but within that number are some 13,000 new people that have joined us primarily due to infusions in the managed services business and in ramping up lower-cost R&D sites in the product organization. If we look at the employee engagement survey that we do — I'll just give you the numbers we have for managed services — we had something like a 20% increase in employee engagement for these roughly 13,000 people in one year. This tells you that these people, that actually had chosen to work for operator customers but wound up working for us, they see a culture that's working. It tells you that there is one culture here, and it tells you that they are far more motivated now than they were at the point of joining.