What Does Cisco Gain by Partnering With Ericsson?

November 10, 2015, 12:20 AM UTC
Photographs by Getty Images

Cisco Systems has forged a big partnership with telecommunication gear maker Ericsson, creating an alliance between two tech titans that sell pricey equipment for funneling Internet and telephone traffic.

In a conference call about the partnership, Cisco CEO Chuck Robbins explained that the companies complement each other by filling in gaps in each other’s businesses. Both can concentrate on what they’re good at while sharing in areas they’re not.

Cisco is primarily known for selling routers and switches that help move data through a company’s infrastructure. Ericsson, on the other hand, is known for gear and services for managing mobile networks.

Robbins said, for example, that the partnership gives Cisco access to Ericsson’s technology for managing data that flows through mobile networks and bills customers based on their data usage. Cisco will work on integrating that into its own technology, including for telecom customers with wired networks.

Mobile management services are important to Cisco because of a boom in traffic flowing on networks owned by telecommunication companies like AT&T (ATT). Combining Cisco’s legacy networking hardware business and Ericsson’s wireless technology “give’s us a reach we don’t have today,” Robbins said.

Additionally, Cisco gets access to Ericsson’s consulting unit, something that Cisco hasn’t traditionally been known for. Although Robbins said that Cisco has 11,000 employees in consulting services, Ericsson has nearly 65,000.

Consulting services are becoming more important to big telecoms and other companies looking to overhaul their networking infrastructure. Providers like AT&T are adopting a type of technology called software defined networking that makes managing networks more flexible and efficient.

However, running these newer networking software systems is complex and often requires legions of highly skilled networking engineers like Google or Facebook have. Otherwise, it can be difficult to manage the infrastructure. With the partnership, Cisco will be able to provide Ericsson consultants for more complex kinds of infrastructure. Before, Cisco could generally help in dealing with old-school switches and routers.

In an interview with Fortune, Ericsson CEO Hans Vestberg said that he and former CEO and current Cisco executive chairman John Chambers had been discussing the partnership for the past 13 months. However, Chambers will not be managing the partnership with Ericsson (ERIC). Instead, Vestberg and Robbins will meet on a quarterly basis to discuss how the deal is going.

The new partners also plan to create joint engineering teams, said Vestberg, but he did not say how many people will be involved. He also failed to elaborate about what exactly the two companies will develop together, but he said to expect new products or services in the next year.

Both companies said that the partnership will contribute an additional $1 billion or more in revenue by 2018.

The deal is the second big partnership Cisco has signed in recent months. In September, Cisco announced an alliance with Apple to sell each other’s products. Cisco can push Apple iPhones and iPads to corporate customers. Meanwhile, Apple’s sales team can push Cisco’s video and web conferencing systems, for instance.

Additionally, the two companies will create joint engineering teams to develop technology for making Apple’s products work more efficiently with Cisco’s networking technology.

Robbins said during the conference call about the Ericsson deal that Cisco has been very vocal in recent months in explaining why partnerships are important for the company’s future. It’s a sentiment shared by Vestberg, who hinted about his company signing more partnerships.

Asked about teaming up with General Electric, which has been developing its own cloud computing infrastructure for its industrial customers, Vestberg minimized the possibility by saying he was busy focusing on the current deal with Cisco (CSCO). But he added that “you can never rule it out.”

For more on Cisco, check out the following Fortune video:

Subscribe to Data Sheet, Fortune’s daily newsletter on the business of technology.


Read More

Artificial IntelligenceCryptocurrencyMetaverseCybersecurityTech Forward