Massive Enterprise Merger Between Ericsson and Cisco Set To Shape The Network Society

Two of the biggest producers of the equipment and technology at the heart of most of our communications networks (Ericsson and Cisco) have announced that they’re teaming up in a strategic partnership. 

Drivers

Drivers for this partnership that was reported to have been first talked about 13 months ago are thought to include:
  • The need to avoid being outpaced by many of the newer, faster and smaller businesses that are moving into the many different market segments.
     
  • Encroaching competition from large players such as Huawei, and Nokia Siemens (who have merged).

  • The pace of change in the market generally.

  • Confidence from positive experiences of Ericsson and Cisco working together earlier in the year on developing a strategy for future industry leadership.

The partnership is of course likely to be lucrative for both companies who could expect to bring in more than $1 billion in more sales by 2018. As well as the licensing fee, Cisco will pay Ericsson, the patents and IP element of the deal. Ericsson and Cisco together have more than 56,000 patents and $11 billion of research and development investment. 

Another Sign of Big Changes

This partnership is seen by some commentators as another sign of the re-thinking and changes taking place among many of the bigger network hardware and services technology companies e.g. Dell buying EMC, Western Digital buying SanDisk, and HP is selling off its TippingPoint network security business to TrendMicro. 

Working on What?

In a recent interview with TechCrunch an Ericsson spokesperson confirmed that they would be using 400 R & D people from both companies to work on a joint initiative focusing on newer areas such as software defined networks and virtualisation.

According to a Cisco spokesperson this won’t affect existing relationships such as the virtualisation deal with VMWare. The partnership will focus at first on service providers, then on opportunities for the enterprise segment and accelerating the scale and adoption of IoT services across industries.

How Will This Partnership Affect UK Businesses?

These are 2 giant technology companies that have a combined number of 176,000 employees and businesses in 180 countries. The range of their businesses is huge and the collaboration will be across nearly all of the range of their businesses including carrier and enterprise equipment and services, intellectual property, products including routing, data centre, networking, cloud, mobility, management and control, and global services capabilities. This partnership is likely therefore to produce:

  • More innovative products and services for businesses.

  • Greater competition and / or opportunities for UK tech businesses.

  • End-to-end product and services portfolios for service provider customers.

  • Accelerated business transformation for customers who can draw on the companies' joint capabilities (and global capabilities) such as consulting, integration, and support to managed operations across IT and networks.

In fact Ericsson CEO Hans Vestberg’s statement summed up his ambitious vision for the partnership when he said “I am excited to work with Cisco on continuing to shape the Networked Society. Foremost, we share the same vision of the network’s strategic role at the centre of every company’s and every industry’s digital transformation”.