Making Sense of the Verizon–Ericsson SD WAN Deal

Transforming Ericsson’s IT environment

Verizon (VZ) recently inked an important service contract with Ericsson (ERIC), one of its suppliers. Under the deal, Ericsson would adopt Verizon’s SD-WAN (software-defined wide area network) in the form of managed service for its corporate IT services.

The managed service package Ericsson is getting from Verizon includes virtualized security services and E-RAN (Enterprise Radio Access Network). With these solutions, Ericsson would make a major leap toward virtual services implementation in its IT environment. The SD-WAN deal that Ericsson has signed with Verizon is usage-based and billed on a pay-as-you-go basis.

Making Sense of the Verizon–Ericsson SD WAN Deal

A vital win for Verizon

Getting Ericsson to use its SD-WAN indicates a major win for Verizon’s Network-as-a-Service operations and a boost to the company’s Enterprise Solutions business. Verizon is keen to unlock new revenue streams beyond its traditional carrier operations where the market is crowded and competition is tough.

Verizon’s Enterprise Solutions revenues dipped to less than $2.5 billion in 1Q17 from more than $2.5 billion a year earlier.

Strengthening business ties

Considering that Ericsson is also a Verizon supplier, the SD-WAN deal also comes as a strategic move for both companies. This deal could deepen their ties, cultivate a longer-term relationship, and potentially yield cost-saving opportunities for Verizon.

Verizon is gearing up to spend huge sums of money on 5G network deployment, and Ericsson is a partner in the 5G efforts. Among the major carriers, AT&T (T), T-Mobile (TMUS), and Sprint (S) are also working toward 5G deployment in the next few years.