Edgecom
Internationalizing the Small and Medium Sized Firm – four cases
Brief background and history
Edgecom was founded in 1994 as a subsidiary of the Unisource Group. KPN, Swisscom, Telia and Telefonica (joined the consortium later) formed Unisource. Their strategy was to build mobile networks and services across Europe. Development was halted in 1996 and the company was transformed into a consultancy company instead. Initially most of the work was done internally, i.e. performed consultant services towards the four founding partners. At this time 20 persons were working in the company.
In 1998, the company started doing business under the Edgecom brand and began operations as an entirely independent consulting firm. As part of the breakup of Unisource, Ericsson acquired Edgecom later that year. The reason for the acquisition was that Ericsson was frequently asked by its customers to provide qualified consulting services. Ericsson was not always able to meet this request and the idea was that Edgecom would help filling this need from Ericsson’s customers. The objective has always been to mainly work with external customers. The goal is that 75% of revenues should be generated by external assignments and the rest internally (i.e. directly from Ericsson thru the company’s own needs for management consultancy). Ericsson did not invest any money in Edgecom, meaning that any growth had to be organic.
International expansion
Due to Ericsson’s global presence it was necessary that Edgecom opened global offices in order to be able to serve Ericsson’s customer. At this time Edgecom were 25 consultants. Most of them were positioned at the head-office in Stockholm. The rest worked out of their London office. The goal was to open 2-3 new offices per year.
The choice of markets was fully dependent on where Ericsson’s customer where located. The process of opening a new office was not same on all locations. The most common way was that Edgecom took maximal advantage of the local infrastructure that Ericsson already had in place. This often meant that Edgecom moved into Ericsson’s premises. In theses cases a local legal entity for the company was not founded. Local employees was hired by Ericsson and then “rented” to Edgecom. The reason for choosing this expansion approach was that it made it possible to get up and running in minimal time. The perceived main disadvantage with this approach was that it led to difficulties in getting the internal IT-systems up and running due to constraints from Ericsson’s internal security arrangements. Being a global consultancy, sharing information is of highest essence. The problem with getting a functioning internal IT-system in place resulted in that Edgecom lost speed in some markets. Another perceived problem was the culture differences between the mature company of Ericsson and the start-up mentality that prevailed at Edgecom. On some markets where the above approach was used, local companies were established at a later stage.
In some countries Edgecom used another approach by directly starting own local companies that were located apart from Ericsson. This, of course, meant more initial effort for Edgecom. On the other side it meant fewer problems with the internal IT-systems, which meant that this approach got them up to a fully working global consultancy faster.
Before a new office was opened, Edgecom worked approximately 6 months with getting customers at that specific market (primarily existing Ericsson’s customers). During this period it was only people from other offices working on the new market. There was no recruiting done at this stage. First when they had local customers and a significant interest from the local Ericsson Company, the office was opened. At this point normally a consultant from an already existing office was sent on a one-year contract to facilitate the opening of the new office. The first task was to recruit the “Managing Principal” who was going to head the office. This normally took up to 6 months and Edgecom used specialized local headhunters for this. The company believes that they managed to find the right people. Further recruiting was done as the office generated more assignments. This cautious approach minimized the risk of failure.
The main control measure of the offices’ performance was through P & L reports. Consultancies are easy to control and therefore performance control was never perceived as a problem.
The big challenge was to get people within Edgecom to sufficiently communicate with each other. As global advisors this is crucial for success. A general problem with consultancies is that the consultants devote more or less all of their time in client projects and not on internal tasks. The global expansion increased this problem. The geographic distance between the offices made it even more difficult to obtain well-functioning internal communication. The above-mentioned problems with the internal IT-systems even further increased this problem.
In the beginning of 2001 Edgecom had 11 local offices spread all over the world. They had grown to 133 employees. Being in the telecom industry Edgecom was affected doubly by the downturn in the economy, since the telecom industry was one of the sectors getting the biggest hit. In Q1 2001 Edgecom closed down two of their offices and reduced the workforce to approximately 100 persons. This went pretty smooth, since consultancies normally are relatively easy to scale down.
Outcome
Edgecom consider their international expansion to be a success. They have grown from 20 to 100 consultants and created a true global presence compared to when the international expansion started.
The main reasons for their success are that they have been successful in their recruiting and been able to establish new offices fast enough. Of course, a very important factor for the success is Edgecom’s advantage of being able to “piggyback” on Ericsson when it comes to getting customers, access to existing local infrastructure etc. Another important thing is believed to be the fact that they sent out “ambassadors” from existing offices in order to get the process to run smooth and fast.
Lessons
One thing that the company would do differently is to control information and communication in a more strict way. There have been significant challenges to get information and communication to run smoothly. Another thing would be to have more of the staff from the head-office present when building the new offices, perhaps in the form of a global expansion team.
Today
In the beginning of 2002 it was decided that Edgecom would fully consolidate into Ericsson. They will be merged with Ericsson Business Consulting and the new company will have 250 employees spread over 15 offices worldwide. The reasons are the general consolidation in the sector and that Ericsson wants to better leverage Edgecom in the offering towards their customers.
