From the power of 5G to the end of the SIM: a conversation with Sierra Wireless CEO Phil Brace

From the power of 5G to the end of the SIM: a conversation with Sierra Wireless CEO Phil Brace

While the technology industry is still grappling with pandemic-induced problems such as the supply chain crisis, there is still much to be excited about, including the growth of smart cities, artificial intelligence and hybrid cloud solutions. In this interview, BDOin the UK partner Jonathan Rowan talks with Phil Brace, just ten months into his new post as Chief Executive Officer at Sierra Wireless, about issues such as post-pandemic strategy, the 5G boom and today’s connected economy.

As a leading IoT [Internet of Things] wireless provider, what are your priorities and strategic imperatives for the next three to five years? 

I’m looking to improve the operational performance of the business. We’ve been through a challenging time with the pandemic. We had supply chain issues and chip shortages, but we haven't let the crisis go to waste. We're now in a situation where demand is much greater than supply. For me, priority number one is to get the company operating profitably. Priority number two is to start evaluating the portfolio businesses. 

Building a recurring revenue stream and increasing our software content will be a key part of our strategy. I'm focused on building the company holistically and making sure that what we do in the recurring space really makes sense for our customers, for us, and is in line with where we want to go.

Can you expand on where you want to go as a business?

We need to build a fantastic value proposition in each layer and each product. We need to build great modules and we need to build great routers. There’s a value proposition for us to go in and offer that, but we also need to open up our managed connectivity services too. We're not that big in the managed connectivity market yet, so we need to open that up to everybody—it’s a global proposition. 

We’ve got a great value proposition for our managed connectivity, and we should be able to put that into anybody's hardware. If all you're going to do is sell your solution to the people who only buy your hardware, it’s too narrow. Our goal is to make sure that we are building competitive and comprehensive solutions. 

When it comes to innovation, what are you excited about? 

We launched some very innovative products recently. Our XR router, our new 5G enterprise router, is on track to be our fastest ramping product, and our new hybrid cloud software management and 5G modules are also getting great reviews. 5G is one of the main things that is getting me really excited this year. Looking forward, we probably have a ten-year horizon of new applications and new deployments in 5G. 

On the connectivity side, what I like is our new smart and enhanced connectivity options, along with eUICC [embedded universal integrated circuit card], which in the long term will replace the physical SIM [Subscriber Identity Module]. Ease of use will go up significantly from a customer point of view. Overall, there are lots of things on the horizon that are going to be growth drivers for us and the wider IoT market. 

I completely agree with your point about 5G—but how quickly will 2G, 3G and perhaps even 4G modules be phased out? 

We’ve already started to see 2G/3G being phased out in the US. 4G will be around for a long time. What’s also interesting is the emergence of new technologies that ride on 5G. For example, 5G Red Cap (Reduced Capacity) should allow for significantly reduced costs and power compared to today’s 5G broadband solutions, which will help a lot because most IoT devices need to optimized for both power and cost.

With the world emerging from the pandemic, and supply chain issues being resolved, what’s your outlook in terms of global markets?

The US will continue to be a massive market for us. That’s one of the areas I'm excited about in terms of growth. If you look at where we are in the enterprise space, we're strong. We have a great presence in a lot of the first responders. Given that we have a long list of customer references and use cases, there should be no excuse why we're not like that in every country, particularly in Europe. I'm excited about the growth potential there. 

Our smart connectivity business is growing particularly well in Asia, Australia and New Zealand and is also growing well in Europe. What makes our smart connectivity proposition unique is it's one SIM, and depending on which country you go to, it'll pick the best network for you. The US is dominated by major national carriers so it’s less of a compelling proposition there, but it’s a strong proposition in Europe and many other parts of the world where the mobile operator landscape is more fragmented. 

In terms of 5G-related trends driving growth, something that’s increasingly being discussed and deployed is private networks. What are your thoughts? 

Everybody's talking about it, and everybody likes it but like everything there's a cost involved, so the benefits need to be weighed against those costs. I suspect it’s going to go through a cycle, like with any technology, where everyone gets excited and considers investing in private networks, but then the number of people that deploy them is smaller. I do believe it’s an opportunity for us though, because in this environment, where you're constantly worried about security, it could be very important. We're seeing a lot of interest domestically as well as in Europe in this area.

Do you see an opportunity for strategic partnerships in this area, for example to be able to say, here's an integrated IoT solution in a private network deployment?

It’s an interesting use case. It would certainly be a good proposition for some customers. It’s something that requires close cooperation with the mobile operators, so it’s a possibility from that side. We’ve just got to make sure that what we're doing will demonstrate value for our customers as well as a return for our shareholders and our investors.

You mentioned eUICC and eSIMs earlier—do you think it will be a game changer to do away with physical SIM cards and how quickly do you think embedded SIMs will gain traction?

It's certainly a game changer because it increases ease of use, supportability and configurability, and anything that reduces friction from the customer’s perspective is a game changer. Some of the old SIM cards used to be credit card size and now they're the size of the fingernail on your little finger. 

In terms of how long it will take, the funny thing about tech is that everybody thinks it’ll ramp up fast, but the reality is generally that new tech ramp ups are more gradual. Having said that, I’m sure you’ll see a steep adoption curve over the next two to three years and it won’t be all that long before we'll get rid of SIM cards altogether. That will be a very exciting development. 

Playing devil's advocate, no SIMs may make life easier for customers—but could it also create a competitive challenge for you in terms of reduced switching costs?

I don't think so. If you look at our value proposition, what are we doing on the connectivity side? We pick the best network, we provision it, deploy it, help manage the traffic, the customer costs, and the lifecycle of the SIM. It's all dependent on a physical SIM. You could argue that it could make life for companies like Sierra more interesting because we can offer a wider range of things. 

For a company like Sierra, you can now have multiple offerings on the same device that previously required different physical devices, so overall it should be beneficial.

Moving on, and thinking about the wide diversity of IoT use cases across industry sectors, how sector focused are you and in which sectors do you see the most exciting growth opportunities?

In some cases, I don't think the company has done as good a job as we could have in taking our expertise and applying it to different geographies or different industries and sectors. It’s definitely an area of opportunity for us. When it comes to smart cities, energy infrastructure, smart metering, first responders and so on, that’s right in our wheelhouse. But a deeper sector focus will definitely be in the next wave of innovation and is one of the reasons I'm so excited to be here. 

Do you see the need to become more specialised in terms of enterprise solutions? 

There’s an opportunity for us to expand on our existing roadmap in the enterprise space because of the characteristics we bring in terms of reliability, good connectivity and performance. It’s definitely something we’re continually looking at and re-evaluating.

I appreciate the IoT cellular module market is fragmented—do you expect to see consolidation?

Our business operates across the three major pillars of modules, routers and managed connectivity. In all these areas there are Chinese competitors, but we're just trying to focus on building great products and to position ourselves as a trusted western alternative to our mainly eastern competitors. Having said that, there are a few other western players that are in in our markets as well. There’s an argument to be had that there will be some consolidation happening in the IoT space as it naturally evolves. Overall, if you look at the landscape, I think it's inevitable that that will happen to some extent. 

Whether you're a buyer or a seller, our job is to make sure that we're operating as well as we can, delivering a value proposition for the customers and putting ourselves in a position where, if the conditions are right, we can grow. We're looking at it all. My priority right now is to make sure we're navigating through the current crisis, growing the business profitably, and being the trusted western provider for our customers. But I do think consolidation is likely in our markets.

What are your thoughts on the hot topic of AI/ML [artificial intelligence and machine learning]?

I’m glad you brought that up as it’s a key topic for us. There's no point in having AI/ML at the edge if you can't communicate it back to the core. Having that connectivity is the baseline for the technology to go out there, and so you would expect our products to have an enabled intelligence and AI/ML at the edge. 

We can do that by increasing processing capability because you don't need to transmit all that data back. Doing a little filtering at the edge will help make the data that goes back more efficient; reduce power and reduce costs. We’re in the infancy but there's a lot of interest and it will be an area that'll continue to evolve. 

How we enable our customers to put more AI/ML at the edge is something we're looking at right now. 

Is there anything else you’d like to share before we wrap up?

It's an incredibly exciting time to be at Sierra Wireless and an incredibly exciting time to be in the cellular IoT industry. We're at the leading edge of a decade of growth vectors that are incredibly exciting for the industry. We're going to be focused on improving our operations, delivering value for our customers and continuing to push the envelope in terms of innovation and delivering great products. 

There are lots of opportunities and I'm sure there will be lots of ups and downs along the way. If the last couple of years has taught us anything it’s that you need to be flexible, dynamic and nimble. We’re in better shape than ever as we have been forced to adapt in the face of the challenges the pandemic has thrown at us, and we are looking forward to continuing to deliver for our customers and to building a thriving, sustainable and profitable company in the rapidly evolving world of the IoT.