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New billion dollar Cisco-Ericsson partnership 'aggressive' move

A new partnership between Cisco and Ericsson to create ‘the networks of the future’ has been dubbed an ‘aggressive move’ aimed at taking on competitors in an effort to become partner of choice for CSPs wanting to become digital service provider.

The two companies announced the ‘global business and technology partnership’ this week, saying the multi-faceted relationship will offer customers the best of both companies: routing, data centre, networking, cloud, mobility, management and control, and global services capabilities.

The partnership is focused on business transformations in the communications service provider space, supported by a common network-function virtualisation and software defined networking architecture.

The pair say they will offer service provider customers an end-to-end product and services portfolio and joint innovation that accelerates new business models.

“In a world driven by mobility, cloud and digitisation, the networks of the future will require new design principles to ensure they are agile, automomus and highly secure,” the companies said in a joint statement.

“Ericsson and Cisco will meet this challenge together by offering end-to-end leadership across network architectures including 5G, cloud, IP and the internet of things – from devices and sensors to access and core networks to the enterprise IT cloud.”

The partnership includes multiple agreements covering commitments to network transformation, reference architectures, joint development, systems-based management and control, a broad reseller agreement and collaboration in key emerging market segments.

Chuck Robbins, Cisco chief executive, says with the pace the market is moving, successful companies will be those who build the right strategic partnerships to accelerate innovation, growth and customer value.

“We have worked with Ericsson during the last year on developing a strategy for future industry leadership, and can start executing together today,” Robbins says. “Our partnerhsip will drive growth for both companies, unique value for our customers and incredible innovation for the industry.”

Ericsson and Cisco say the partnership will provide incremental revenue opportunity of US$1 billion or more for each company by calendar 2018.

Dana Cooperson, Analysys Mason research director, says the deal provides a number of areas ripe for growth, with the $1 billion in incremental revenue ‘achieveable’.

“Given Ericsson’s annual revenues of more than US$26 billion and Cisco’s of more than US$49 billion, and the opportunities in new enterprise-driven communications and IoT services, we think each company’s goal of driving US$1 billion in new revenues by 2018 based on this strategic partnership is achieveable,” Cooperson says.

“We see Ericsson’s nearly USD5 billion and Cisco’s over USD 0.7 billion in telecom software professional services as just one area ripe for growth,” Cooperson adds.

Analysys Mason says the partnership is an ‘aggressive move positioning Ericsson and Cisco against their main competitors, including Huawei, HP, and the combined Nokia/Alcatel-Lucent, for dominance as the partners of choice for communications services providers wanting to become digital service providers’.

However, the analyst firm says there are areas where the companies will need to tread carefully for the success of the partnership.

“The common architecture must be robust enough and the companies’ ability to pre-integrate solutions based on the architecture must be of sufficient value in time and money to be compelling to customers,” Cooperson says.

Secondly, the companies will need to show that they are not too big to move quickly to create joint solutions, she says.

“Customers will need to be comfortable that Ericsson and Cisco are not, even with assurances of openness and embrace of OPNFV, Open Daylight and other industry open source initiatives, strengthening their leading positions in mobile infrastructure, professional services and IP infrastructure to create de facto lock-in,” she adds.

The announcement puts paid to rumours that Ericsson was looking to buy Juniper Networks.

Juniper stocks tumbled immediately following the announcement this week.

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