The team-up of industry giants Cisco and Ericsson to tackle the challenges of getting ahead in the communications network future caught the industry off-guard on Monday. But when viewed in a New IP light, the partnership makes sense.
After all, two of the core tenets of New IP are ecosystem and partnerships which enable companies to get to market faster and more efficiently than if they were going it alone. Speed and efficiently is increasingly important for suppliers as competition is mounting from other major vendors such as the joined-up Alcatel-Lucent (NYSE: ALU) and Nokia Networks , Huawei Technologies Co. Ltd. and Juniper Networks Inc. (NYSE: JNPR)
More specifically, Cisco Systems Inc. (Nasdaq: CSCO) and Ericsson AB (Nasdaq: ERIC) are teaming to combine Ericsson's mobile and managed-services capabilities with Cisco's IP strengths, according to Light Reading's news editor Iain Morris. The partnership is expected to generate an additional $1 billion in additional revenues for each company by 2018. "The partners could be offering each other's products and services imminently, with both parties confirming they expect to start generating incremental revenues from their tie-up as soon as next year," he wrote.
Added Morris, "The ultimate vision, however, is to develop a network management system that will integrate Cisco's new IP and virtualized service nous with the OSS/BSS capabilities of Ericsson. [Ericsson CEO Hans] Vestberg said this network management system will support 'multi-vendor' deployments by operators -- something the market sees as a key incentive for investments in SDN and NFV technologies." (See 'Ciscosson' Aims for Future-Proof Partnership.)
Just last week on The New IP, we wrote about a new research report from Telstra Corp. Ltd. (ASX: TLS; NZK: TLS) and The Economist Intelligence Unit that showed partnerships are increasingly important to driving revenue and lowering cost -- and that some businesses are looking toward partnerships rather than in-house R&D or acquisitions to keep pace with the rate of change. According to the survey of 1,044 senior business leaders, forming partnerships is so important that 44% of executives surveyed take the view that "companies going it alone will soon be a thing of the past." (See Partnerships Key to Survival in New IP.)
Looking back now, perhaps they'd interviewed Cisco and Ericsson? Or maybe it's just synchronicity?
As Ray Le Maistre, editor-in-chief of Light Reading, reported during Ericsson's capital markets day in Stockholm today, Cisco's executive chairman and former John Chambers joined Vestberg on stage and gave some insight into the partnership. Wrote Le Maistre, "There is a relatively short window for any company to establish itself as a supplier of technology and supporting services to the communications service providers and enterprises of the future." (See 'This Industry Will Be Won & Lost In the Next Three Years' – John Chambers.)
"This industry is about growth, innovation and speed," said Chambers on stage. However, acquisition would have taken too long, he noted. "If it takes six months to get through a regulatory board and then another year to combine... this industry will be won and lost in the next three years, so it is all about speed about how you go about it. While we are a huge believer in big-to-small and big-to-medium acquisitions, partnerships, if you can do them, are the way to go large-to-large. Joint ventures add an extra level of complexity. You have an over-riding group, a board, and that slows you down," added Chambers today.
For more coverage of the Cisco and Ericsson partnership, see also:
— Elizabeth Miller Coyne, Editor, The New IP