According to Cisco and Ericsson executives, one of the immediate areas of impact in Cisco’s partnership with Ericsson will be helping service providers make the transformation to more virtualized networks and services.
Cisco CEO Chuck Robbins and Ericsson chief executive Hans Vestberg provided color on their mega-partnership during a conference call Monday morning. Robbins said that blending Cisco’s network capabilities and some of its future virtualized services with the network management and OSS/BSS capabilities that Ericsson is known for will be key to helping service providers transform their networks in the short term.
The partnership has Ericsson reselling Cisco products starting immediately. While Ericsson is a giant in the service provider market, Vestberg said the companies would also find opportunities in the enterprise sector and the Internet of Things (IoT).
The partnership was 13 months in the making, the CEOs said, meaning it predated the April announcement of Nokia‘s deal to buy Alcatel-Lucent. The Ericsson/Cisco partnership was about two industry leaders joining forces across networking, mobile cloud, and IP, Vestberg said — but it also appears to be Ericsson’s return salvo for the Nokia/AlcaLu deal.
“The choice was make, buy or partner, and here, ‘partner’ was clearly the only way forward,” Vestberg said.
For Cisco, forging a partnership was easier and faster than merging with Ericsson or buying more companies to fill in gaps in its portfolio, although Robbins didn’t rule the latter out.
“It allows us to bring the best from both sides, and it allows us to act now,” Robbins said.
Given the upheaval among equipment vendors and the disruption service providers face while they build their virtualized networks, Vestberg was asked if the partnership will still be able to support the combined products and services five or 10 years from now.
That wouldn’t be a problem, Vestberg argued, since Cisco and Ericsson will make their products as future-proof as possible. Both Vestberg and Robbins said they’ve spoken to customers, including AT&T, Verizon, and Vodafone, about the benefits of the strategic partnership.
“I’m quite comfortable with where we are,” said Robbins.
Robbins was asked what Ericsson has that had been missing from Cisco’s portfolio. He said combining Ericsson’s strength in radio, wireless networks, and mobility with Cisco’s IP expertise was a particular strength for the partnership. It also gives Cisco’s service capabilities an expanded reach, since Ericsson has 65,000 service professionals to Cisco’s 11,000.
Despite Cisco’s dominant position in routing, Ericsson will continue to offer its own Router 6000 series. Vestberg defended this by claiming that Ericsson’s router ambitions have always been limited to the edge router that sits nearest to the radio network.
Of course, Cisco has routers that could fill that spot as well, but Vestberg deflected the implication that Ericsson would therefore be a competitor of Cisco’s. What’s important, he said, is that Ericsson can now sell Cisco’s routers to the rest of the network — a breadth “which we never intended to address and we didn’t have the means for.”
About That $1 Billion…
Vestberg and Robbins were asked several times about the forecast that each company will generate $1 billion in additional revenues from the partnership by 2018. Vestberg said it was too early to say what the revenue splits would be on that additional revenue, but that its radio and wireless fortunes will continue along with “total new avenues for IP” by working with Cisco.
Robbins said the incremental business element of reselling each other’s products and services was one factor for the additional revenue. But the big picture for increased revenue lies in jointly created innovations, he said. The CEOs noted that the companies plan to develop a cloud and IP architecture together, and that they intend to build a network management system that covers both companies’ network gear.