Ericsson Cisco collaboration, the ongoing questions

If it's a super plus strategic partnership, is it a precursor to a merger? How much co-development will we see? And what happens to existing partnerships?

More than a sales partnership? 
On the face of it, the answer to this question is yes. And the company is clear to mention how long they have been thinking about partnership – 13 months – possibly to stave off the response that this is a quick reaction to the changing market dynamic formed by the Nokia-Alu merger. But there are two ways to do partnerships. One is to compete where competition is appropriate, but work together where you have less cross-over or a clear client preference of supplier. The other is to align development and “architecture”, so you are delivering much more of a united front to the market.

The second option is of course much more radical, but there are hints that, certainly in some elements of SDN and in NFV, this is where the companies may be headed. Hans Vestberg himself said this goes “way beyond” any normal strategic partnership. Analysts probed on whether Ericsson would keep selling its edge routers (ie compete directly with Cisco) and the answer was a bit of a fudge from Vestberg, saying that the product is “out there” and Ericsson would continue to “support it”.

The big follow up question to this is of course, in that case:

WHY NOT MERGE?” And the answer that Vestberg and Robbins gave is that they wanted to be able to move right away, delivering joint capabilities as soon as possible into the market, without going through the full merger process. Interestingly, there was no philosophical objection raised to a merger, and neither man ruled it out. So… not exactly a speculation killer.

Impact on Innovation
This is the second follow up question to the impression given that the companies are going to be working pretty closely together. Operators like standardised architectures, but they also like competition in price and innovation. How far will the strategic partnership go in aligning product development, and if the answer is “quite far” (Ericsson and Cisco have joint engineering teams working on SDN-NFV management, for example), then has the market just lost one player in terms of competitive differentiation, and also in terms of potential innovation that arises? The CEOs both made mention of the complementary nature of their product sets – number one in IP (Cisco) and number one in radio (Ericsson) – and so the likelihood is that they continue to develop their own separate product lines, but aligned under a management architecture.

The biggest potential is surely in the cloud and IP environments, where both companies are full out on NFV – and the deployment of VNFs – and the control and flexibility of networking enhanced by SDN, but are coming at it from different angles. Robbins mentioned the need for more autonomous networks, and flexible networks. Here in this Virtual and Software-Defined crucible is where that happens. So Cisco can surely benefit from Ericsson’s deep telco networking knowledge – and Robbins namechecked its OSS capabilities, for instance. And Ericsson can benefit from Cisco’s knowledge of virtualisation in the data centre and the enterprise space. Both companies are hot on the analytics-fed, smart network. Pooling thoughts here could create some new value for service providers. This is the “Service Provider Transformation” sweetspot that forms one of three main target areas for the partnership (the other two are mobile enterprise and the IoT).

Ericsson’s Vestberg said there would be “synergies” of a billion Kroner from the partnership, with that coming from manufacturing production, R&D, as well as go-to-market and sales costs. Clearly there is going to be some element of joint endeavour. How much will really determine if this partnership looks more like a JV, or the more usual partnerships we seen between the liks of, say, Juniper Networks and Nokia Networks.

Indoor-outdoor enterprise
One of the stated aims of the strategic partnership is: “Creating the mobile enterprise experience of the future through a highly secure technology architecture for seamless indoor/outdoor networks.” OK, so how far does this extend into what products actually sit under that architecture? Cisco has a reseller agreement with Spidercloud for indoor small cells in large enterprise environments in licensed spectrum. Ericsson has its Radio Dot System which sits under a very different architecture than Spidercloud’s.  Should Spidercloud be worried? (TMN has asked both Spidercloud and Cisco for a comment on this.)

PRESENTATION SLIDES:
You can view the slides Ericsson and Cisco used during the analyst and media presentation. The commentary comes from TMN, not from Cisco or Ericsson.

Cisco Ericsson One

Combined capabilities: Cisco on the left, Ericsson on the right.

Cisco Ericsson Two

NB: Joint innovation and end-to-end product portfolio. Note also the converged service provider/enterprise messaging.

Cisco Ericsson Three

Ericsson to resell Cisco products but no mention of what Ericsson products Cisco might sell. But they envisage joint cloud and 5G customer engagements.

Cisco Ericsson Four

Look at the future elements here. Highly optimised backhaul elements could signal a rationalisation of both companies’ products in this area. Seamless indoor/outdoor access is also of note. Is this about tying Cisco’s WiFi more under converged control cellular-WiFi control, or seeing Cisco push further into reselling licensed spectrum products?

Cisco Ericsson Five

“Maximizes financial latitude” Not sure what this means.

Cisco Ericsson Six

Synergies, yes, but this is about growth, Vestberg had to repeatedly state.

Cisco Ericsson Seven

If you’ve made it this far, here are your key takeaways.

 

Comments

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[…] At that press conference both CEOs made a great play of the benefits of having increased scale and scope and the breadth of the full portfolio of both companies. You would never have guessed that the full merger had in fact been in play for only three of the 24 months of discussions. Alcatel Lucent CEO Michel Combes was even moved to state, ” The movement we are triggering means some actors will have to ask themselves a few questions, focus on widening their portfolio [of] operations.” He meant Ericsson, and his words were this week proved prophetic. […]

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