At the end of last year, Cisco and Ericsson announced a major partnership combining Cisco’s product line with Ericsson’s massive service organization to aim for more than $X billion in new revenue for each company by 2018. The announced partnership aims to capture the immense revenue potential offered by service providers aggressively - even desperately - modernizing their broadband, TV, and cellular networks to accommodate soaring OTT video consumption and combat new services such as Google Fiber and Netflix. It also positions them well for the long run to serve the demand for 5G wireless networks and infrastructure investments around the Internet of Things (IoT). The three key goals, as stated by the companies, for the short term are:
- 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
- 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.
On the one hand, this is a decisive countermeasure to the significant threat posed by the merger of services giant Alcatel-Lucent with equipment vendor Nokia. According to CEOs Hans Vestberg and Chuck Robbins, each company had the choice to build, buy, or partner, in order to retain competitive strength and growth potential. For Ericsson, clearly the partnership option won out against other options (for example, acquiring Juniper Networks).
For Cisco Systems, the benefits of a robust new distribution partner with presence in over 180 countries and a strong service force provide formidable competitive advantage in a crowd ed and price-challenged market. The partnership also has the potential to help, Cisco and Ericsson alike, combat specialty vendors, such as ARRIS that holds a significant presence in the cable IP-fication segment, and Chinese juggernauts Huawei and ZTE. Managed services and end-to-end offerings are crucial and unmet needs in the service provider segment.