Using a crowdsourced army of programmers instead of a traditional employed workforce, Ericsson’s Innovation Center in Brazil broke away from the traditions of the office environment and managed to reduce its cost of software production by 30%.

Clearly, this formula yielded positive results — Ericsson’s headquarters in Sweden is planning to implement this solution in other its research centers across the globe. Ericsson expanded the Center this year to meet all demands for customization and development of Latin America and the Caribbean, a sign that the company plans to pursue a similar strategy worldwide.

Ericsson is a world-leading provider of telecommunications equipment and related services to mobile and fixed network operators globally.

What is now a success story began after the wave that swept the financial markets in 2008 and whose effects are still felt today. During the financial crisis, the real currency appreciated against the dollar, causing the cost of research in Brazil to become very high. Consequently, the Brazilian research center lost competitiveness.

Pressed by the Board of Directors in Stockholm, the Brazilian team needed to make a decision: be innovative or close the doors.

"We opted to be innovative, of course," said Jesper Rhode, director of New Business Innovation, Partnerships and Alliances, responsible for strategy and innovation initiatives in company's Latin American market. “We abandoned the rigid structure of traditional research and development to form a network of collaborators who work virtually integrated.”

For Rhode, networking meant that Ericsson could focus on software quality instead of team management. “We were able to simultaneously reduce costs and increase our production capacity,” he said.

Nowadays, only 20% of the Innovation Center’s workforce is comprised of formal employees — around 70 of its 350 total collaborators. “But despite this we were capable, for example, to assemble a software developing team to IPTV in just 30 days, which would take at least three months if we were using the traditional model,” added Rhode.

In the beginning, the first great challenge of this cultural turning point within the company was finding a way to preserve intellectual property. “We decided to create two separate networks: one internal to the formal employees, and other semi-external, where the partners are connected,” said Rhode.

The internal network is responsible for allocating tasks to external partners and at the same time ensuring the quality of what is produced. “So all code produced remains within the company,” he clarified.

To mount its external network of researchers, Ericsson began working with universities and other research centers in Brazil, later expanding its network to other countries. “Today we have people from India, China and other countries working with us, although our preference is for Brazilian collaborators," explained Rhodes. “They are people who work for the task. And may be simultaneously working on projects of Ericsson or not.”

The Innovation Center focuses on the activities of research, development and customization of new solutions, such as social media platforms, vertical and cloud computing. With this open innovation model, the Center will feature contributions from universities and other research institutions.

Over the past 15 years, Ericsson has invested more than $490 million dollars in development projects in Brazil. This year, the company will invest $25 million to transform the Brazilian operation in a center for Latin America and the Caribbean countries.

"With the new positioning Brazilian Innovation Center will focus on developing solutions that can include traditional products such as charging, billing and systems integration, and products derived from new businesses such as social media, computing and vertical cloud," explained Rhode.

The Innovation Center is composed of two main areas: General Solutions, which includes research, samples and prototypes, wireline and regional customization, and solutions billing and customer service.

"With these two divisions, we can think of from beginning to end, from research to customer service," said Rhode.

The new portfolio of products that the Center will offer Latin American and Caribbean markets is based on products and solutions for telephony servers to mobile and fixed networks, research activities from end to end for the improvement and evolution of mobile networks, multimedia application development and network projects social, cloud computing and software for IPTV.

Over the past 30 years, Ericsson has maintained a research and development center in Brazil, but it was always a center of traditional research. Now, this new experience is shaking brains inside the company. This strategy has not only reduced the cost of development in Brazil but at simultaneously demonstrated new possibilities for the entire company. What began in Brazil has become a global case.

By Flavio Gut, Crowdsourcing.org's correspondent in Brazil

Flavio's experience includes executive editor of Agêncita Estado and newspaper O Estado de S. Paulo, and reporter at Agência Folha, Agência Estado, and Jornal da Tarde. He can be reached at flavio@crowdsourcing.org