Analysts today are mostly perplexed by Ericsson’s agreement to acquire Vonage for $6.2 billion, particularly with respect to how the deal reinforces the radio access network (RAN) vendor’s push into the wireless enterprise market.

Vonage is a smaller player in the communications platform and unified communications services markets, but Ericsson pointed to the company’s APIs and footprint of at least 1 million registered developers globally as core assets it intends to leverage and integrate into its platforms for enterprises. 

Vonage Communication Platform, the business unit that attracted Ericsson, spans communications platform as a service (CPaaS), unified communications as a service (UCaaS), and contact center as a service (CCaaS). That unit currently generates about 80% of Vonage’s revenue. 

The deal with Vonage, which represents the largest ever for Ericsson, follows last year’s $1.1 billion acquisition of wireless WAN vendor Cradlepoint. 

“Cradlepoint gave them some of the network APIs, and Vonage will bring them the communications APIs, and I actually think that makes some sense,” said Zeus Kerravala, founder and principal analyst at ZK Research.

“The important thing to understand about 5G is that it’s cloud native. That creates an excellent opportunity for a developer platform on top, and then roll out a whole bunch of other applications that run on top of that network that are integrated in the network,” he added.

Despite that potential logic for the deal, Kerravala and other analysts describe Ericsson’s purchase of Vonage as a surprise. “On paper it looks a little bit like square peg, round hole,” Kerravala said.

Dell’Oro Group VP Stefan Pongratz also expressed some slight bewilderment about the deal due to a lack of clear synergies with 5G connectivity. “With carrier revenues now growing at the fastest pace in 10 years, and operators and suppliers slowly coming to terms with the fact that connectivity is a profitable business with upside potential if done right, it is somewhat surprising to see this pivot,” he wrote in response to questions. 

“The enterprise WiFi access point installed base is roughly one-thousand times the size of the private wireless LTE/5G small cell installed base, meaning we have a long way to go when it comes to LTE/5G connectivity in the enterprise,” Pongratz added. 

Ericsson CEO Börje Ekholm said Vonage provides the company with key capabilities that enhance its position in the wireless enterprise market. “Vonage creates impetus for the second leg of our strategy, developing a global open network innovation platform,” he said on a conference call. 

“Our shared intent with Vonage is to develop a platform that allows developers to access network capabilities, which literally puts the power of the wireless networks at their fingertips,” Ekholm added.

That strategy paired with the Vonage acquisition provides Ericsson with a “significant arsenal” to further expand into the enterprise segment, according to John Byrne, service director of telecom technology and software at GlobalData. He too pointed to Vonage’s developer community as one the biggest benefits for Ericsson. 

“As 5G continues to evolve, these developers could jumpstart development of more sophisticated network slice use cases,” Byrne wrote. 

“I think the acquisition is likely to have enterprise customers view Ericsson in a different light. To succeed they will need to make sure that the developer community remains educated and provide incentives to encourage Vonage developers to become loyal Ericsson developers,” he added.

Many analysts expected Vonage to be acquired but few, if any, expected Ericsson to be the acquirer. Count Stéphane Téral, chief analyst at LightCounting, among that group. “It is only a smart move if Ericsson gets serious about CPaaS for enterprises,” he explained.

“After its voice-over-IP (VoIP) debut at the beginning of this century, Vonage managed to create a niche in the industry, competing only with a few other players. Acquiring it provides Ericsson with a serious CPaaS play that is going to challenge this niche market but also reinforces Ericsson’s position in the enterprise market,” Téral added.

Téral and Kerravala both pointed to Twilio as one of Vonage’s primary competitors, which places Ericsson in a new competitive landscape as well. Kerravala isn’t convinced Ericsson will become a big player in the UCaaS or CCaaS markets, but he said the company could replicate what Twilio has done by going after enterprise developers with a combination of Cradlepoint and Vonage for telco operators. 

Indeed, according to Kerravala, the impact of this deal will largely ride on Ericsson’s ability to effectively use and expand upon Vonage’s strength with developers focused on enterprise communications. 

“If Ericsson is serious about really wanting to be an enterprise communications player, I’d actually like to see them do a roll up” and acquire more suppliers, he said. “Are they in or are they out in the enterprise? If you’re in, be serious about it. Go buy another one.”