Industry heavyweights Ericsson and Cisco announced a strategic partnership today (9 November 2015) with the aim of offering the best of both companies in routing, data centre, networking, cloud, mobility, management and control, and global services capabilities.
The two will provide a key focus 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. Teams from both organisations will also begin working on a joint initiative focused on SDN/NFV and network management and control.
They estimate that each company will benefit from incremental revenue of US$1 billion or more for each by 2018. The partnership will be supported by multiple agreements that include commitments to network transformation through reference architectures and joint development, systems-based management and control, a broad reseller agreement, and collaboration in key emerging market segments.
The parties have also agreed to discuss FRAND (fair, reasonable and non-discriminatory) policies and enter a licensing agreement for their respective patent portfolios, enabling joint innovation and providing certainty for customers of both organisations. As part of this agreement, Ericsson will receive license fees from Cisco.
Ericsson and Cisco argue they are strong and complementary partners, with a combined 56,000+ patents, $11 billion of research and development investment, and more than 76,000 services professionals serving customers across more than 180 countries.
The partnership will provide each with added commercial clout and better position the two vis a vis rivals Nokia Networks and Alcatel-Lucent, which are merging to provide a powerful entity in both fixed and mobile networking.
Hans Vestberg, president and chief executive officer, Ericsson said in a blog on the Ericsson website today: ‘Ericsson and Cisco are announcing a multi-faceted partnership to create the networks of the future – and through this, shape the direction of the industry. Both companies have invested a lot of time in designing this partnership over the past year, and I am thrilled to be able to announce it today.
‘As industry leaders, we have worked together to develop a joint vision for innovation and customer success. Cisco brings their leading position in IP and a strong presence in enterprise. We bring our leadership in mobile networks, our strength in global services, and strong relationships with the world’s leading service providers.’
Vestberg also explained in his blog why he thought a partnership, rather than a merger was the best approach. ‘We have evaluated the impact of acquisitions, our own development, and other strategic opportunities – and this partnership is by far the best way forward. We believe that this partnership will create the most value both for our customers and for Ericsson and Cisco.’
Chuck Robbins, chief executive officer, Cisco, said: ‘With the pace the market is moving, the successful companies will be those who build the right strategic partnerships to accelerate innovation, growth, and customer value. Today's announcement brings together two visionary industry leaders, with complementary cultures and track records of innovation.
‘We have worked with Ericsson during the last year on developing a strategy for future industry leadership, and can start executing together today. Our partnership will drive growth for both companies, unique value for our customers, and incredible innovation for the industry.’
Vestberg indicated that the partnership will initially focus on service providers, then on opportunities for the enterprise segment and accelerating the scale and adoption of IoT services across industries. He added: ‘We have already signed a reseller agreement with associated services opportunities for Ericsson.’