Telecom industry titans Ericsson and Cisco announced a global business and echnologypartnership to create the networks of the future.
The multi-faceted relationship will offer customers the best of both companies: routing, data center, networking, cloud, mobility, management and control, and global services capabilities. Together the companies plan to deliver customer value by:
- Offering service provider customers an end-to-end product and services portfolio, and joint innovation that accelerates new business models,
- Creating the mobile enterprise experience of the future through a highly secure technology architecture for seamless indoor/outdoor networks, and
- Channeling the combined scale and innovation of both companies to accelerate the platforms and services needed to digitize countries and create the Internet of Things.
As you can imagine, details are sketchy at this point. However, Hans Vestberg, President and Chief Executive Officer, Ericsson and Chuck Robbins, Chief Executive Officer, Cisco, predicted that the relationship would bring each company an incremental billion dollars in revenue by 2018.
Cisco Chuck Robbins said, “With the pace the market is moving, the successful companies will be those who build the right strategic partnerships to accelerate innovation, growth, and customer value. Today’s announcement brings together two visionary industry leaders, with complementary cultures and track records of innovation. We have worked with Ericsson during the last year on developing a strategy for future industry leadership, and can start executing together today. Our partnership will drive growth for both companies, unique value for our customers, and incredible innovation for the industry.”
Cisco is a large company with an established culture and product offering. Ericsson is also a large company with an established culture and product offering. There is no exchange of equity ownership involved, and no joint venture company announced. So what is likely to be the impact of this relationship? Will this end up being another big announcement with lots of headlines that has no impact? It seems quite likely that Cisco and Ericsson will start to sell each others products and offer them as part of a turn-key system integration. This should result in increased revenues to both and potentially increased value to customers.
“At the same time, Cisco has been pulled into a system integrator role — in service provider generally, and especially in mobile — that doesn’t suit its business model. It is subscale and doesn’t really want integrator margins on its books. Ericsson, of course, has a very strong, high-end, system integration business with the scale to be profitable. And it has massive global reach, so it’s the ultimate channel partner for Cisco in the service provider market.
With the industry’s major data networking company, Cisco, partnering with the industry’s major wireless company, Ericsson, they will now be able to offer the most complete end-to-end solution in the industry. This really differentiates themselves from the competitor’s, including Alcatel-Lucent, Nokia, Juniper and Ciena. But in my view, the main target was Huawei. They have been growing market share by building powerful, yet very cheap boxes. Neither Cisco not Ericsson will ever be able to compete with Huawei by that measure. They are trying to move the goalposts in a different direction.
One of the unknowns is the impact of this new partnership on Ericsson’s existing relationships. Juniper has partnered for many years with Ericsson. Ciena is also in a partnership relation ship with Ericsson. And many of Ciena’s products compete directly with Cisco. Is this relationship over?
Only time will tell how successful the Ericsson-Cisco partnership will be. I would like to see a lot more details before I feel comfortable making any predictions.