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The great disrupter has partly accomplished its mission
I guess you have either seen or heard about the unusual alliance forged by Cisco and Ericsson by now. Although several reasons for that alliance have been mentioned, it's worth looking at the timing. Hans Vestberg, Ericsson's CEO said publicly that initial talks with John Chambers, Cisco's CEO started 13 months ago. Well, 13 months ago coincides with a monster gig organized by Huawei in a huge concert room in Shanghai typically crowded when rock bands of the caliber of the Rolling Stones play-see The Economist September 20th 2014. 10,000 people flocked the arena to attend the presentation of Huawei's new business strategy, which was all about taking on IBM, Cisco and HP, very specifically.
Since at that time Huawei was already getting bigger than Ericsson in telecom gear revenue, the Swedish giant and king of the radio was no longer the target as this mission was accomplished. It took 14 years for the disrupter to alter the course of Ericsson. Now, let's look at some insights into the move to the next mission!
In search of new revenue streams, Ericsson started to penetrate the ICT business 5 years ago and since has also been stepping on the turf of IBM, Cisco, and HP. Overall, results were mixed with lumpy revenue growth. Look at Cisco's revenue exacerbated by its dismal business in China, and look at HP now split into 2 separate companies, one becoming exclusively focused on enterprise. In fact, HP Enterprise emerges as a nice target for whoever thinks about going after Huawei and the Cisco/Ericsson alliance. What about IBM? The company is going through a massive transformation right now, shedding shrinking hardware businesses and trying to build up new ones in cloud computing, big data, analytics, businesses it calls its "Strategic Imperatives." Isn't that what Huawei and the Cisco/Ericsson alliance are doing as well?
Three years ago, Huawei too entered the enterprise and ICT business and our research indicates the early results are a mixed bag but the future looks promising because the company is private, has no quarterly pressure, and deep pockets to fix whatever is not working.
Consequently, it appears obvious that Cisco and Ericsson, both disrupted, had to do something about the great disrupter's threat. Will an alliance like this be efficient enough to fend it off is a great research topic. And the next question is: who will be interested in HP Enterprise? I may have some candidates to propose!
So far, I consider the disrupter's mission partly accomplished because it only forced the key ICT players to reinvent themselves, none have disappeared.
Stéphane Téral is a research director, mobile infrastructure & carrier economics for IHS
Posted on 16 November 2015
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