Analyst Gruia weighs in on Ericsson-Cisco technology pact
November 10, 2015
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Recent telecom industry upheaval such as Dell’s EMC acquisition, HP’s split and the Nokia/Alcatel-Lucent merger, clearly demonstrates the need to rethink some of the old guard posturing and to consolidate or partner as stand-alone vendors face increased threats to their positions as newer and leaner competitors disrupt their business, says Ronald Gruia, emerging telecoms director with Frost & Sullivan.
Gruia made the comments following yesterday’s announcement that Ericsson and Cisco Systems Inc. have formed a global business and technology partnership to “create the networks of the future.”
Those networks will require news design principles to ensure they are agile, autonomous and highly secure, the two companies said.
Ericsson president and CEO Hans Vestberg said that “foremost, we share the same vision of the network’s strategic role at the center of every company’s and every industry’s digital transformation. Initially, the partnership will focus on service providers, then on opportunities for the enterprise segment and accelerating the scale and adoption of IoT services across industries.”
Cisco CEO Chuck Robbins added that 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.”
Gruia, meanwhile said, that the highly complementary nature of both companies’ portfolios coupled with the fact that they are both very customer centric organizations suggest that this relationship will yield some positive results: “Cisco and Ericsson are under the same gross margin pressure and the transition towards software defined networks can help them both in this area, which translates into some potential “coopetition” in the future.”
He added that there are risks to the deal, such as what will be the go-to-market strategy in emerging areas such as SDN and NFV, where each vendor has its own set of solutions, or a potential Cisco expansion in new areas.