Global supply risks

Cisco & Ericsson Team Up to Take On the Competition and Drive Innovation

Written by

Networking giants Cisco and Ericsson announced a partnership to tackle competition and the changing tech environment. The ten-year partnership will enable both companies to overcome inadequacies, generate growth and increase innovation, all without the drawn out legal procedures of a merger.

Details of the Deal

Both Cisco and Ericsson are facing challenges due to the slump in the smartphone market and expect that this deal will help them drive revenue where they are strongest – telecom. Ericsson and Cisco have established themselves in the networking market with the former’s expertise in hardware for wireless communication and the latter’s significant success in equipment such as routers and switches.

The deal has been revealed as a “broad strategic partnership” which includes co-marketing, sales and integration of products and service lines along with co-licensing of intellectual property. The deal will have significance having scope in 180 countries, have a combined portfolio of 56,000 patents, and integrate 76,000 service employees. The deal is also the second biggest partnership Cisco has signed in recent months (after the September 2015 alliance with Apple to cross-sell each other’s products) and is anticipated to generate $1 billion in annual sales for both companies by 2018.

Several other benefits are expected to come out of this partnership, but it is particularly important for 5G, the ultra-fast mobile broadband that could power the booming connected devices market. Additionally, Cisco also gets access to Ericsson’s consulting unit. The strategic partnership will also benefit Cisco in a way that Ericsson will now be able to resell Cisco’s products. The company will be able to provide Ericsson consultants for more complex kinds of infrastructure for their customers. The new partners also plans to create joint engineering teams.

What Do These Types of Partnerships Mean for Buyers?

A streamlined communication process with strategic partners will ensure that all possible outcomes of a partnership are anticipated. This will also help you to gain a clear picture about your supplier’s roadmaps and investment strategies. A robust communication process will also enable you to monitor the activities of your suppliers, which is key to achieving your goals and objectives.

If you’re considering using your suppliers’ partners, make sure that you evaluate those partners separately, but also have detailed conversations with the company about the contractual obligations of each partner relative to the client’s engagement.

A successful global company will also have kept in mind the possible negative impacts of the deal as well. While your supplier may continue to add partners, you should ensure that they have reviewed the possible pitfalls of the partnership and create a strong contract that ensures the terms are met by the partner as well. The contract should also protect you in the event the partner is sued and should give a quick exit option.

Being aware of changes at your suppliers is critical to understanding the risks and opportunities at hand. For a practical model to help you proactively monitor your suppliers in real-time and respond to changes effectively, check out our white paper on Third Party Oversight.