Partners: Cisco-Ericsson Pact Is Potential IoT Game-Changer

Solution providers Monday said a joint development pact between mobile and smartphone communications giant Ericsson and enterprise networking leader Cisco Systems is a potential Internet of Things (IoT) game-changer.

"It is a really big deal to have the enterprise networking leader in Cisco starting to mesh with Ericsson on Internet of Things networking," said Worth Davis, CTO at Houston-based Computex Technology Solutions, No. 130 on the CRN 2015 Solution Provider 500. "It would be really cool to have next-generation mobile networks integrated with enterprise networking in mind. This could open the door for businesses to switch from a 5G network onto enterprise wireless onto public wireless through multiple countries."

Cisco and Ericsson said the partnership will generate incremental sales in 2016 for both companies, ramping to $1 billion or more for each by 2018.

[Related: The 2015 Internet Of Things 50]

Under the far-reaching pact, Ericsson, a $33.3 billion global mobile communications powerhouse, and Cisco, the $49.2 billion enterprise networking behemoth, are going to team on joint development centered on next generation service provider networks and new platforms and services around Internet of Things.

The first order of business for the two companies is a joint initiative centered on software-defined networks (SDN) and Network Functions Virtualization (NFV) -- hotly contested markets where Cisco is facing increasing competition from Hewlett Packard Enterprise and Dell.

"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," said Ericsson CEO Hans Vestberg in a prepared statement. "For Ericsson, this partnership also fortifies the IP strategy we have developed over the past several years, and it is a key move forward in our transformation."

Cisco will pay licensing fees to Ericsson under a broad patent portfolio licensing agreement. The two companies say together they have a combined 56,000 patents and a combined R&D budget of $11 billion.

Computex's Davis said he expects the partnership to have a far-reaching impact focused on next-generation networks for specific industries. "A lot of the innovation that can happen with IoT is in places that don't have the wireless Internet access like rural areas or oil rigs 100 miles offshore," he said. "Those are very archaic networks right now. If Cisco and Ericsson can make a device that is economical and easy for networks like that, it would huge for these markets. It is easy to innovate in a downtown building. It is not as easy to innovate 50 miles down a white gravel road "

Davis applauded Cisco and Ericsson for stepping up to make mobile networks more seamless for enterprise customers. He said the deal could make smartphones more compelling for enterprise customers rather than just a "bolt-on" to the current enterprise network.

"Cisco and Ericsson can start at the chip level and put networking hooks, APIs and methodologies into next-gen handsets," he said. "That will be great for Cisco because it will only work with Cisco, and it will also make smartphones more useful in the enterprise. Smartphones for the most part up until now have been developed without the enterprise in mind at all outside of email access."

The partnership is the result of a year's worth of work, said Cisco CEO Chuck Robbins in a statement. "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," he said.

The Ericsson pact follows a blockbuster Cisco pact in August with Apple aimed at providing tighter integration with Apple iPhones and iPads and Cisco enterprise collaboration products.
Under the Apple pact, Cisco said it is teaming with the smartphone market leader to optimize Cisco networks for Apple iOS-based devices and apps. Furthermore, Cisco said it will optimize collaboration tools like Cisco Spark, Cisco Telepresence and Cisco WebEx on iOS devices to deliver business services across mobile and cloud environments.

Michael Goldstein, president and CEO of LAN Infotech, a Fort Lauderdale, Fla.-based Cisco partner that sells Meraki solutions and Cisco infrastructure, said the deal was essential for Cisco to get ahead in the increasingly competitive telecom space, particularly to match Nokia's recent blockbuster $17.6 billion takeover of Alcatel-Lucent SA.

"This partnership gives both companies important pieces of the market. It’s a good strategy to join forces when everyone's fighting for market share in the telecom space," he said. "I'm not sure how this will affect the channel on both sides, and I haven't heard anything [from Cisco] on the partnership yet, but this gives Cisco another feather in their hat to compete with some of the other biggest telecom providers in this space."

Lindsey O'Donnell contributed to this story.

PUBLISHED NOV. 9, 2015