Ciena (NYSE: CIEN) has broadened its global reach by signing an agreement to become Ericsson's (Nasdaq: ERIC) preferred partner for packet optical and software defined networking (SDN).
Both companies get benefits from the deal.
By working with Ericsson, Ciena will get access to a larger source of global service provider relationships, including the largest Tier 1 wireless operators, and its professional services unit.
Ericsson will be able to extend Ciena's packet optical portfolio, including the 6500 Packet-Optical Platform and 5400 family, to its customer base. It will also integrate Ciena's Wave Logic coherent optical technology into its IP portfolio, which it says will allow customers to seamlessly interoperate routers with Ciena's platforms.
"The deal significantly broadens Ciena's reach, giving it access to Ericsson's strong global base of customers and its professional services team along with its IP expertise," said Ron Kline, principal network infrastructure analyst at Ovum. "The agreement gives Ericsson access to Ciena's strong portfolio of converged packet optical gear that includes its WaveLogic3 coherent optical processing technology. As part of the agreement the two companies will collaborate on an open-source Layer 0-3 SDN controller."
While the deal could produce benefits for both companies, Kline cautions that Ericsson is "admitting weakness in optical networking after three years of developing its SPO product line."
According to Ovum and other industry research firms, Ciena is the third-ranked converged packet optical vendor globally with a 14 percent market share, while Ericsson is ranked 11th with just 1 percent market share.
Besides cross-promoting their solutions, the two vendors will create a collaboration framework to jointly develop and co-market SDN technology and drive other software and professional service-related capabilities.
"The key to the deal is the collaborative SDN effort that combines resources at both companies," Kline said. "The battleground for differentiation is quickly moving to software and professional services. Ericsson is the second-ranked provider of telecom infrastructure services [just behind Cisco] and is number one in the network-related subsegment."
In addition to SDN and optical, the partnership could drive joint work in the wireless backhaul market where both vendors already have a strong foothold. "A combination of an integrated Ciena packet backhaul and Ericsson microwave radio would be tough to beat especially given Ericsson's global strength in LTE," Kline said.
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