Thank you, Alexandra. Welcome everyone to today's call, part of the series of calls where our business area heads will present current topics, new contracts and other interesting news and development. The format is straightforward. We have planned for maximum one-hour session and we intend to have more or less 50/50 presentation and Q&A. Today, we hold the second call, and it's my pleasure to introduce Peter Laurin, Head of Business Area Managed Services . Peter, please go ahead. The stage and screen are yours.
Thank you, Stefan. First of all, great to have you virtually on board for this session. Interesting times in many ways. I would like to use the following 20 minutes to give you an update on where we stand in the Business Area Managed Services, build on what we showed also in previous capital market days, but also give a new sort of a view on what this offering is all about, because we have now doubled down on a new offering that we talked about before as well on AI and automation and what this really can mean for operations of the networks of the future, meaning 5G and IoT. We think that this is super exciting, and I hope you share that view after this call. All right. If we dig in, what are we talking about first?
If you go to the first slide there, Ericsson, a global leader in managed services. We have 28,000 people that operate in networks 24/7 in the world. We have around 1 billion subscriptions that we manage, 700,000 sites. We are one of the largest operators in the world if you look at it that way. What has really changed for the last, I would say two to three years, is that we have not only taken the old processes and done sort of what the operators did, we did in a centralized offshore manner, but we more or less did it the same way. What has happened in the last couple of years is that we have used much more data-driven approach, really been driven by a lot of tools like open source as well as in-house developed to be much more AI and machine learning driven.
That has also led us to higher competence lift in a different way. We have some 300 data scientists now working on these AI and machine learning use cases, but also automating in a much broader way. I'll come back to that. It's really a fundamental step change in how we do this business. It's not just an evolution, it's really in-house. We more or less see it as a revolution, if you call it that way. All right. Let me go to the next slide. This is a little bit to explain and share the journey. Many of you that have met me as well as Ericsson and the services area, the managed services area in particular, you know about this journey. When we started in 2017 and Börje organized us as a segment, we also realized that we were not making money.
If we singled out this specific area of managed services as well as NDO, network design optimization, we were not making money. The turnaround has really been about moving out contracts that were not strategic fit or not profitable, and zoom in on our strategy, our simplified strategy. Out of the 300 contracts, the 42 were completed in 2018, and then we significantly automated. We went from some 36,000 staff down to the 27, 28 that we are today. The second part, I would say, is the most interesting. This is really about the R&D. Services has not had its history of having a lot of R&D, but now we have invested a lot in R&D. Three is then what I would like to talk about more about today, which is how do we package this now? What is the offering?
How do we scale this, and how do we sell it? We have done a lot in this space, but this is really where the battle will be fought, so to speak, in the years ahead. How do we scale our AI and machine learning, and how do we really use a federated learning, so to speak, where you have different algorithms being in one part of the world and then being sold in different parts of the world, and then those trained algorithms are coming back to the first buyer, so to speak. I'll come back to that. This is really the whole change process, which is so exciting. Nothing of this would have been possible without R&D, money, and investment. This is a slide that we showed at the investor update in 2019.
It really sort of holds true still, of course, but it really shows if you start on the net sales, how yet we will actually have a pressure on the top line because we're exiting deals. That's sort of, we aligned on how to exit at 2018, but still those exits are sort of happening mostly in 2019, but some of them are coming out now. We are also taking new business, which is great. You heard about some of them, like Indosat and TDC, and so on. That's the top line. On the operating margin side, if I start on the baseline there, the 6.4% on the operating margin that we had rolling four quarters in 2019, as we show this slide. That is being improved by delivery efficiency because we are really taking cost out of the whole chain.
What I really would like to do is, at the same time, invest. We've said that we would reach the 5%-8% operating income by 2020. I'm still committed to that. We still say that we can do that, and we will do that. I think the interesting piece is that, yes, we will reach those good margin levels, but we will not compromise on the R&D investments. That's why we will continue to invest. We are investing even in these challenging times of COVID-19. We are actually seeing that we can get traction during these times as well. Even with many of our R&Ds working from home, we are getting traction, and we are able to spend the money and also get the output of it. This is just a chart that, yes, we are delivering to what we said.
If I go to the next slide, this is about the cost customer view. I could imagine that you meet and listen to many customers, and this is really a customer reality and this technology complexity curve. You are adding as a customer now 5G on existing technologies, 2G, 3G, and 4G. You're introducing IoT. You're virtualizing your core network. You're introducing a lot of new devices, smart factories, industry use cases. This is a complex world, not only to manage and to bring to market, but also from an operational standpoint in the back end. Our goal and our value proposition is really how to simplify that. To do that, we need to be thought leaders and experts in automation and AI, because we believe that AI here is not a nice to have, it's a must-have.
We would not be able to cope ourselves with it, and we see that from 5G and other introductions now that the number of alarms that comes and the number of outputs that come are just enormous, right? We need to both filter the alarms in a different way, but also then be able to go as far as to go to what we call closed loop. It's not only about human guided anymore. It's about that the alarms will be fixed and triggered by the platform itself. That's a complete new level of automation, so to speak. That is what we are super committed to. One aspect of this is also that we don't believe that the operators, even the large ones, will have the scale to do this on their own.
There is no one really, as we see it, that could be the subject matter expertise and the latest data-driven platforms mirror those better than we can. It might sound bullish, but we believe that we have a unique position there. Not the large IT players, not our competition, have the same access to data and trusted and have invested and been so focused in this area as us. Here we see that we have a very interesting dialogue with our customers. If you go to the next step, this is really about the journey that we have done, because our offering to solve that customer challenge is Ericsson Operations Engine. This Ericsson Operations is the Ericsson data-driven offering that is the encompassing proposition to the operators of how to do everything from managed services networks to Managed Services IT, to network design and optimization.
It really started in 2017 on the one here. It's very process-driven, and that's also been a huge asset that it was quite, I'll say easy, but there's always a caveat to that. We use the industry processes in this space, ITIL and the other ones. These 26 processes we have re-engineered. That is the first step of it. The second part of this, to fast-forward here, has really been to automate and deploy new tools and platforms and make it data-driven. We have had data lakes. We now cloudified our solution so we can scale our tools platform. If you're, say, an operator, if I take Telenor in Asia, then we can easily then plug them in, get them onto our tool suite for everything in service assurance, and then operate their network remotely.
That was quite a long process before of transformation, but now we have simplified that and made it much more future-proof, I would say. Even so now, if I take another example, is the cases we have in Indonesia, where we've taken the operations for Indosat. There again, we can do a lot of that transformation even in the COVID-19 times, where travel is difficult. We actually have, I would say, the muscle memory, if you call it that way, or the experience to do so much with our experts from remote to still operate and use this new platform remotely. That has been a huge experience in the last couple of years, taking it from first step of process-driven, then automation, and then data-driven. We have 300 automation use cases. 6,000 of those are then rules that are developed and reused.
The thing is here that when we have done an automation for one operator, we can then scale that over the whole network, because the issues that we see are quite similar. If that is voice dropped calls, or if that is anomaly detection in a telco network, same AI and machine learning use cases can be used across. This is our reuse that is so valuable. All of this, these are the huge investments that we made, has led now to that we have 40 AI use cases and these five capabilities. If you keep this in mind, the yellow part here, as you go to the next slide, because the data-driven processes, the application platform, the people, because this is not only about software. This is really also about the subject matter expertise that we have been upskilling.
Front office and back office is more or less obsolete, you can say. It's more higher sort of skilled engineers in a service desk that we call it, handling multiple customers. Before it was more single island, one team doing one operator, for example, from India handling the U.K. Now it's one team in India handling multiple customers. Automated execution, then fifth, the insights that we can make. Why is it less voice dropped call rates, for example, in Bangalore versus in Washington, D.C.? How can we then take these learnings and do that in a very data-driven way? These are the capabilities. If I go to this slide then, the next slide, Ericsson Operations Engine, Stefan. What is it then when we say Ericsson Operations Engine? How do we make this simple?
I really think this is a great slide because it shows the capabilities that I just showed, that we have invested in for the last three years, comes really down to these five capabilities. Those capabilities then lead into four offerings. We talked for many years about network management, sort of the network managed services. That's one piece of it. This is where we operate networks on behalf of our customers, primarily mobile, but we can do fixed as well. The enterprise services is very much linked to what Åsa talked about last week in her session. How can we enable this enterprise service? It could be SD-WAN, or it could be a lot of different services where dedicated networks and so on, where we provide support and the operations of that. It's really about We are enabling the enterprise offerings.
Cloud and IT services, as well as network design optimization. These are the four offerings, super simple, very straightforward. You can double-click on each and then the offerings underneath. I will come to that. I think it's good to keep in mind that four offerings and that leads to certain outcomes then for the operators. We are purely operator-focused in that sense. We are aiming for a low TCO, lowest total cost of ownership. We have the improved customer experience at the center of our offering. We also then focus in on new revenue stream, efficient transformation, and trusted and secured. This is of course, super important now when we talk about data, how do we secure it? What is the privacy? All of that will be, of course, key.
We have changed our contracts for a different sort of consent and different relationship. I think it's important to keep in mind here also that we don't use end user data as such. We use network performance data and anonymized. It's a little bit different, but of course, it's still sensitive and it's still something that we have put a lot of focus on. All right. If you go to the next then, because I really would like to double-click on the offering, because this is new and this is something we have not showed before. If you kept in mind those four green boxes on the previous slide, now I'm on the Ericsson Operations Engine portfolio, Stefan, is these new offerings.
This should be then super simple for our sales force and for our customers to understand that in network design optimization, we have the dark gray here is a base pack. That's sort of when you buy something, a large-base being an operation of a network, for example. We take over 300, 400 people or whatever size they have in the network that they want us to operate. That goes here across network managed services as well as NDO. That is the base pack. You add value packs on top. The light gray here is value packs that you can buy, network planning, et cetera. These are new. The good thing here, network planning, design, and tuning are quite traditional, but the new part is that you can buy them as a value pack.
As you sell it, you double-click, and it's clearly how you price it and what the outcomes are. Same thing with the new things that are more software-driven, cognitive planning and so on. The main thing with this slide is that we have 19 offerings now that are much more data-driven and AI-based. The same thing goes for the other parts. The main thing here is that the gray one, the dark gray, is base packs with clearly defined offerings. Same thing with the light gray, that's our value packs. Some of the value packs you can buy standalone, and some you have to have a Managed Services contract in the base because it's an add-on that requires that we are fully integrated tool wise and so on.
I will show others here that are not requiring that you are a Managed Services customer, so to speak. That is also a benefit now as we go out, because, of course, not all customers are outsourced to us. We would like to have our offering to be independent, so to speak. We are multi-vendor. That's the other key part. When you talk to other parts of Ericsson, they might be more focused on Ericsson's hardware and software and offerings. We are in a true multi-vendor environment. We can offer them that we operate networks that are not fully Ericsson. We want them to be part Ericsson, but they don't need to be fully Ericsson. We can take an end-to-end view as an operator has us and other vendors installed. All right. We go to the next.
I just wanted to make some examples of this. What do we really mean when it comes to operating networks of the future, so to speak? We have done this for many years, but what is different then? If I take Telenor in Asia, I think that's a great example. They are, as you know, doing quite well in Asia, but also being quite focused on what they call CDC, Common Delivery Center, trying to optimize their delivery. There, they have used us to be their partner. We are operating all their three assets in these countries, Thailand, Malaysia, and Myanmar, from the same place in India with the same tool suite, with the same KPIs and SLAs, then being able to cross-fertilize, but also use the best of breed from Ericsson to all of them to get cost down and end-user experience up.
For these 54 million subscribers, we are doing this operation for seven, and we've done that. We started with Myanmar back in 2017, now we have continued and prolonged and then taken both Digi in Malaysia as well as DTAC in the last two years. It's really about base packs and then around value packs on top of it. You see here capacity management and optimization, network security monitoring, Net Promoter Score improvement, and energy infrastructure operations. These are value packs on top. It's quite easy then also to measure this operation. You can measure the web experience, you can measure the NPS score. It's been a very interesting journey with a very demanding customer. It's been a great innovation journey with Telenor.
One part that I would like to then double-click on is the last value pack here, which is energy infrastructure operations. As you might know, Telenor has been very bullish on their carbon dioxide statement and sustainability ambitions, as well as taking cost out of the energy piece. If you go to the next there, and it might come across as a busy slide, but bear with me here because I think this is super exciting. If you look at a site today, it's around 5,000 watts on a site. I sometimes compare it with a large commercial Christmas tree with 100 light bulbs, 50-watt light bulbs, shining every hour of the day, 365 days a year. That's just one site. Half of that consumption is active equipment, and half of it is passive.
What we do here, we take that holistic view on the site, and we've done this with Telenor, and it's now a commercial offering, but we have created over the last year with Telenor. What it is all about is that we put about eight to 10 sensors on a site, and then we put a site controller on the site. All that data, both on the passive and active, around 34 data streams, we shoot that up into the energy management server in the cloud. From there we can shoot back action to the site. It could be, for example, that you don't need to have all technologies, 2G, 3G, and 4G, and then in the next step, 5G, on all the time.
Maybe you know from the machine learning that in this very area, there is no traffic in the middle of the night between 2:00 and 3:00 or 3:00 or 4:00 or whatever time slots. Then you might not need all technologies. You keep maybe, say, 2G and 4G on. You can switch between whatever is most efficient from a cost perspective between the grid and the batteries and so on, or solar and so on. You might say that air con does not need to jump on now because we have cool weather coming in, et cetera. There is tons of things we can do, and I sometimes compare it with your car and your diesel car when it sort of stops or shut down or goes to sleeping mode when you come to a red light, right? Similar to the site.
We can be much more dynamic here. We see now savings of up to 15% on the consumption. We see savings of about five metric tons, on an annual basis on the carbon footprint. Super interesting and a great opportunity for the whole industry, I would say. More to come on this, but this is what we want to achieve and how we use data in a very practical value pack. This we can now sell not only to the Managed Services customers, but to all customers. All right. If you go to the next then. Stefan. Here we go. Yeah. We don't need to go into all of these, but I just wanted to give you a little bit of a sense what we do with another large tier one customer in India with 370 million subs.
In pan-India then, we are doing the charging and expansion into the cloud. We are very multi-vendor capable, but also very capable in the MS IT and ADM domain. This is about helping the customer into the cloud, and we have that capacity and capability as well. Okay. Docomo, I also would like to take one case on the design and optimization. Docomo is an interesting one because they have very high demands, and we have been together with them, and they have 8 million subs in Japan, and it's a multi-vendor network. They went out on an RFQ on create a AI-based optimization vendor for their RAN nationwide. We won that in steep competition, and then we've been deploying our AI use cases during the year.
We're very proud of this deal, and it also is a testimonial to the AI capabilities that we have invested in over the last couple of years. It's very powerful, as you see here, a 98% troubleshooting accuracy, 600,000 cell to be optimized automatically. Multi-vendor KPIs, of course, and now ranking on vendor selection in the trial as I talked about. This is a great case. It's been press released. We feel that this is also just the beginning of something bigger when it comes to AI and machine learning in the optimization of existing networks. These were three examples, but I also would like to not only talk about what we have done, but also talk about what we will do.
If you go to the next one, and I talked about R&D investment, but what do we invest in then? We have the cases that we do now to get a lot of our customers into the Ericsson Operations Engine. What we put into our sort of R&D box is also around these four areas: managed algorithms, AI for 5G, machine reasoning, and AI for energy management. AI for energy management was partly what we talked about in the case, but it's also more there that we can do. AI for 5G is sort of quite self-intuitive, but this is really about also about 5G slicing and how you can use data to see the problems before they occur. I will come back to that, but it's extremely powerful, and we also see that this is where operators could add more value than only connectivity.
When an operator goes and offer, for example, a full network to an industry, for example, what Åsa talked a lot about, we can operate that for them and also then use data, not only from that industry in that country, but from similar industries in other countries, and provide additional value. Use that value and that data to see if the fault will happen before it happens. I'll come back to that. Machine reasoning. This is a lot of research that we're doing together with Ericsson Research around. It's easy to make an assumption and a decision when you have the full data set. How do you make a decision when you don't have all the data? That is hard. It becomes reasoning, it becomes logic. It becomes almost like a human.
When you have different faults happening at the same time in a network, how do you make sense of all that? That we are taking now to the next level, and that is super powerful as well. Again, this requires so much subject expertise and so much research, so it doesn't make sense for every operator to do this on their own. It makes much more sense to think that we do it and then we provide it to these operators. Managed algorithm, this is really about when you have an algorithm in a use case. For example, say that you have an algorithm to do that energy consumption in Telenor, in Myanmar, for example, and you really optimize that. You can use that same data to another operator, say, in the U.S. We don't use the data as such.
We just use the weighting in the algorithm. It's federated. Here we use that algorithm in a marketplace. You can have multiple algorithms then trained and being better and better all the time as they go around. It's being part of that community. That brings me to the next page, because this is a bit of an illustration of just that, managed algorithms. I think the picture is quite intuitive in that way, that these algorithms for one specific use case, it could be what I talked about before, sleeping cells, power climb prediction, anomaly detection, KPI degradation, or what we talked about now, the energy part. That algorithm that does that work and optimizes that work in, for example, one country, then goes into the Ericsson marquee in the middle in the picture, and then goes out to another operator.
For example, it could be that the accuracy of that algorithm could be, say, 85% as it left the first customer, but then as it comes back after being trained by the others with a larger data set, it comes back with 95% accuracy. It's really a federated learning, and we're going to put this into a marketplace where we then can offer it more or less as a smorgasbord, you can say. It's also an opportunity for us internally to use it between the different parts of the company. Here we work very close with BDGS and BNET, the other areas as well as BTEB. All business areas are using the same thinking when it comes to architecture, security, privacy, life cycle management, and so on.
Last but least, I would like to end on what I believe is an interesting, exciting use case. This is about the 5G slicing, because I get a lot of questions around what is data-driven operation in 5G? Why is that different from a 4G operation? I believe that it's very much around the 5G slicing. If I take an example that we're now doing in the ENCQOR network in Canada. ENCQOR is the government-owned network where they use academia and others to test and trial 5G. What we have been able to do there to significantly load test the network, and it is a 5G radio and core, and it's the best of breed network. It's a very good test environment.
In this case, it's a simulated factory where the robot is walking, carrying hazardous material, dangerous material. There is no human involved on the shop floor, so to speak. This is a 5G factory and 5G managed and virtual environment. What we do then is that we have four slices, sorry, three slices. One is the motor heuristics, so the balance of the robot. The other one is the video streaming, which is the eyes of the robot. The last part is sensors being just safety sensors for smoke and fire. The safety sensors, they just need high uptime, never to be down in any way. The video streaming, that needs high uplink. They should see if there's anything is boiling or what type of material it is it's carrying. The motor heuristic is really about latency.
Anything below 10 ms, the robot will fall. The operator would contract this industry with these three slices and with SLAs accordingly. We would then keep track of that because you can just imagine how many different slices and SLAs that will be, right? That's one part of it and that's really industry standard, and we can help with that. The real value comes in the data. What we have seen is that in the beginning, with machine learning, with about four months of data, we could have a couple of minutes, around 15 minutes, we could see that the robot will fall, the latency will be above 10 ms. What we have seen is that the more data we get, the more predictions we can have. Now we're up to an hour in advance. We can see end to end.
It could be the internet link into the factory. It could be a congestion in the baseband. It could be several different things. If there is, for example, a congestion in that baseband in that factory on a Friday afternoon that will cause the robot to fall. We can take action in a closed loop and shift that. We can sort of shift the traffic to a node that is not congested in an automated way. This we could not do before. This is what is different with 5G, that we can, in 5G slicing, provide different values and be much more predictive and not reactive as we've been on 4G and other technologies when it comes to operations. This is an ability to make the networks much more resilient with smart operations and AI.
On that, I would like to end and open up for questions.
Thank you very much, Peter. Yeah, like you said, it is now time for questions. Before we start, I have a request, and that is that you please focus your questions on Peter's areas of responsibility, being managed services. Broader company or group questions, IR will be happy to help you out with a little later. With that, Alexandra, would you please start the Q&A session?
Thank you. Ladies and gentlemen, at this time, we will begin the question-and-answer session. If you would like to ask a question, please press zero one on your push button phone. If you would like to decline from the polling process, please press zero two. Our first question is from Andrew Gardiner from Barclays. Please go ahead. Your line is open.
Good afternoon. Thank you for taking the question. I had a higher level one for you, Peter. Just as we sort of think through the current phase of business in which you find yourself, where you've been exiting some of the more legacy contracts and revenue has been under pressure. You acknowledged in one of your earlier slides that there's limited net new business, net new revenue at the moment. As you get to the end of that phase and look to 2022 or perhaps beyond that, why wouldn't the industry challenges that you've highlighted on the technology complexity slide result in growth for your business? Presumably, given the R&D that you're putting in place, you do think that's coming. I'd just be interested in how you could frame the longer-term growth opportunity.
Thanks for that question. We see that we have growth in many contracts. It's a little bit harder to see how big is that growth. We have, I think in our earlier statement, sort of showed a 2%-4% CAGR. That we still have that prudent outlook, if you say. If, of course, if this becomes as powerful as we could hope, there's also upsides in that. Of course, there's always price pressures, and we will, of course, be price competitive. A lot of these automation savings we share with the customers. I have big faith in this business. It's here to stay as I see it. How big the growth will be, it's a little bit hard to tell.
Okay. I suppose also from what you've described with the lead you think you've got with the Ericsson Operations Engine from a competitive standpoint, the way you've described it here, it feels like you should be able to monetize it or get a better margin out of it than in the past when managed services was more of a headcount business.
How much could you take on, how lean could you get? If you have this competitive lead at the moment with the Operations Engine, then presumably the ultimate margin should be better.
Absolutely. What we said in the previous analyst sessions has also been that we believe in this business, we have gone from a sort of a turnaround from negative to positive. 2020 will be 5%-8% on operating income. In 2022, we said that we are 8%-10%. We will gradually improve margins. I think it's also important to say that we are doing that at the same time as we're doubling down on R&D for the long term. I think that tells you a little bit about that we are both increasing margin at the same time as we are investing. We're not tying up any capital, more or less. We have a capital turnover of about seven times. From that point of view, the return on capital employed is very good for us.
Thank you very much.
Our next question is from Jurgen Westey from Nordea. Please go ahead, your line is open.
Hey, Peter. Thanks for taking my question. I have a couple, actually. One, I'd like to double-click on what Andrew said. When it comes to the maybe long-term profitability here and the increase, if you could elaborate a little bit where the biggest contributions are going to come from? Is it a mix shift? Is it the lower share of problem contracts? Is it generally just a better product offering, to give some sense where it's coming from? My second question is, if you could talk a little bit about the emergence of private networks and how you think about that revenue opportunity. If you're thinking about going direct to enterprise on that or if you're going on behalf of operators, or if it will be a mix? Thank you.
Super good questions. I start with the margin profile, when we have cleaned up the contracts that were not profitable and deals that we were not able to turn around, we did that in 2017 and 2018, and now some of them are coming out in 2019 as well. The margin profile is quite stable on the base business. What we see is that when we offer these value packs, they have a higher margin profile. You can say that we are doing a couple of things at the same time. One is, of course, to be more lean and mean in the base business, which is all the installed base that we have. That is, I would say, throttling along, if you call it that way, if I may say so. The new offerings comes with a better margin than the base.
That's really a little bit also how it should be in the new offering, that we are more AI, ML, more software-based, you can say. In the past, as you rightly said, service has been very much a labor arbitrage. Now we are moving away from that. The labor arbitrage will be there as kind of a base and a table stake, but the differentiator is really the AI and ML, as well as all the data-driven. It might sound sort of a little bit of a high level, but it's a lot of things that need to come to play to actually do that. Data lakes, cloud for the tools to be able to scale quickly, and all of that. We have taken those investments. Now we can improve margins steadily as we go forward.
We also said that this is a profitability over growth has been a strategy. That, and maybe a little bit back to Andrew's question, that we will take deals, but we will not take bad deals. We feel also we are in a position of strength in that sense, that we don't need to take business for the sake of taking business. We need to take good business, and we know that we will provide value to the operators. That is the first question. Second question. If you may repeat that question, I'm sure I answered correctly.
No, it relates to private networks like CBRS.
To private networks.
in the U.S., et cetera.
Yeah. No, thanks. I think also if you heard Åsa talking, the focus now on private networks, so it's really that we can do more of an end-to-end, right? Similar to what we do on IoT, where we operate for Åsa. She's the goes-to-market, and you can see us as the engine room. In Romania, we're operating all her IoT connections. The DCP or the Device Connection Platform, the platform, the underlying engine of that, so to speak, we do from Romania. That is the base for the IoT offering. When it comes to the private networks and the dedicated networks and Industry Connect and so on, all of that space, that would be more of a cookie cutter approach to the operators. It's also you talked about the channels there. We are focused on through the operators, right?
We will be the engine house for that as well. That is, of course, an offering that is developing as we speak. We believe that it will be very much a services play in that. We are working together with this enterprise team, and that's also why you saw in the Ericsson Operations Engine that we have this new offering called Enterprise. That is really also us enabling the larger company.
Is that a 2021 opportunity or 2022 or even further out? What are you thinking?
Yeah, we have already taken deals, actually. Some of them are publicly announced with Deutsche Telekom and so on, where we are doing this. Commercially it's out there. To your question, which I think is fair, when do we really scale this or when do we see this to be significant? I would say that would be probably 2022, 2023, where we see big volumes coming in. The foundations is set right now.
Okay, Jurgen.
Okay, thanks.
Happy with that?
Our next question is from Amit Kalabandi from Citigroup.
Good afternoon. Amit Kalabandi from Citi, Thanks for the opportunity and the detailed overview. Two questions, if I may. Both sort of big picture. The first question relates to what we have seen out there, for example, in the U.S. with one of the operators insourcing a portion of the business. I'm referring to Sprint and T-Mobile. I just wanted to get your thoughts on how do you think this insourcing versus outsourcing dynamic plays out more broadly as it relates to managed services? What are the key considerations? And how would you think about it or help us think about it?
Second question, if I may. There's also a lot of talk of longer- term moving to virtual networks and open networks. From your perspective, what would that imply for the opportunity for managed services on a longer term view with more vRAN and open networks? Does that diminish it? Does that accelerate it? What are the puts and takes there, please? Thank you.
Excellent question. That's sort of the macro trends in this, right? Outsourced telecom networks today is about 15% of the global telecom networks that are outsourced. It's a quite limited amount. We see that this is still a lot of business to take. Then you can say, will that increase or decrease? We believe that it will be continuous, that with the networks being more complex, then less complex, that the operators then have a choice. Do we continue to do this? Do we invest in our own competence to manage these complex networks? We invest in the tools required, we invest in the AI and ML required, or we let someone else do it. We find a hybrid solution where certain part we believe is core and others we believe is not core.
In the U.S. specifically, if you talked about the T-Mobile and Sprint coming together. Let's see how they play their cards there. We are a big provider to them, both to T-Mobile and to Sprint. That will be interesting to see how they now do these strategic choices. Overall, we see that this is an opportunity going forward, and that this will be more of this, not less of this. That a little bit we're going to see what's happening in the IT space also happening in the telecom space. The level of outsourcing is significantly higher, as you know, in the IT space than in the telecom space. We believe that it will be more.
Also as we see this being mission-critical networks, that you really, and I think also COVID-19 also showed that it's no doubt how vital these networks are for society. Some will choose to do this in-house, but also some will say that this is somewhere we will need a partner to support us and also to be that second spine, so to speak, or that competence pool. It might not be for all, but could be for very critical parts that you take of the network. Yes. I hope that answered your question. Sorry about the long answer to a short question.
With regards to your thoughts on how open networks and virtual networks imply for managed services longer- term?
That's also very interesting. We get a lot of business now on operating and managing. It was happening in the MSIT and ADM space, both managing older applications, asking for help to managing workloads into the cloud, both IT workloads primarily into the cloud. When it comes to virtualization of the core, it's a lot of complexity there to manage. For our partners in MSIT and ADM, we have been able to add a lot of value on helping out in that virtualization from an operational point of view. BdGS can help a lot from the solutions point of view. I believe that's also an opportunity as we go forward, because from an operational point of view, it's not necessarily so that it becomes less complex just because you use sort of off-the-shelf hardware or that you virtualize and so on.
It could actually be quite complex. That we also see in the system integration, and Jan Karlsson will probably talk more about that. That's also a complexity in that in itself.
Okay.
Are you happy with that, Amit?
Just a quick clarification on the last answer, if I may. If we move to open networks, you said the complexity exists, but because it's open networks, would that allow someone else to come and do managed services on top of equipment provided by Ericsson more effectively or less effectively?
I don't really have an opinion on that. I wouldn't have a view on that, really. We also see that quite limited. This business is right now at least very much dominated by the large infrastructure vendors. I don't see that changing even in an open situation because there will be so much telecom equipment in the end-to-end network anyway. Even if you would have certain nodes being open, so to speak.
Got it. Thank you very much.
Yeah.
We are getting close to the hour. Alexandra, could you please now let us have the final, the last question. Thank you.
Our last question is from Frank Merrill from DNB. Please go ahead. Your line is open.
Yes, hi. Thanks for taking my question. If I may, just a question of how you manage customers' wishes for exclusivity in the markets. Say, take the Telenor example. When Telenor has done this innovation journey with you in Asia, they might, of course, want to keep the gains in those countries, and probably would like you not to work for their competition in those markets. How do you manage that? You grant exclusivity? If so, for a few years? Yeah, some comments on that would be great. Thank you.
Thank you for that. Thanks all of you for listening. A great hour. I hope you're as excited about this topic as we are. When it comes to that exclusivity question specifically, we don't go into exclusivity like that. I can't recall. I've been in this business for a long time, and there's probably been some in the past, possibly. As we have now, I don't see that we have exclusivity anywhere, actually. That would be really contra our philosophy of one to many, so to speak. No, we don't do that, not even on a local market, right? Even so, if you take just the field side, right? The field operation that we do when we come to an end-to-end operation, it's great if we can serve multiple customers in one country, like we do in many of the geographies.
No, we don't do exclusivity. Actually, I don't believe it's in the interest of the customer either. It's really taking that cost down for all of us with multi-skilled labor. I think it is good. Yeah.
Okay, thank you.
All right.
Okay. With that, we then conclude today's call. Thank you very much, Peter, and I trust everyone on the call found it both productive and interesting. Until next time, which is Tuesday, June the 9th, when we have a session with Fredrik Jejdling, Head of Networks, and Jan Karlsson, Head of Digital Services. Stay healthy and well, and goodbye for now.
Thank you.