The two companies have been doing business for more than 10 years, but usually on an ad hoc basis. AT&T Vice President Jack Crowley said AT&T would learn what a customer wanted, then approach Cisco or other vendors to see what equipment and expertise was needed.
Under the new relationship, there's more of a game plan between the two companies. For instance, they will be pushing certain products, and sales staff from both companies will usually act in concert when approaching some customers, Crowley said.and also created "councils" of executives from both companies to discuss future products and direction, Crowley said.
"We?re going to be very active in defining new services to be sold by AT&T," said Roland Acra, chief technology office for Cisco?s service provider market.
The two companies are focusing their initial combined effort on the multibillion-dollar-a-year market to sell managed services, Crowley said. As with any managed service, AT&T supplies all the gear, know-how and day-to-day management so a business can host Web sites or link workers remotely using virtual private networks. Managed services are intended to be a cheaper alternative to companies that buy all the gear themselves.
North American businesses spend more than $1 billion a year using managed services, with AT&T taking the lion's share. Last year, AT&T's revenue from managed services increased 20 percent, Crowley said. Its rivals--Sprint and regional telephone companies such as WorldCom--average about 6 percent revenue growth.
"Clearly, Cisco will benefit from AT&T's deployment of its equipment," said Erik Suppiger, a networking analyst with Pacific Growth Equities. "The deal is also addressing markets where AT&T has considerable opportunity to expand."
Crowley said AT&T intends to use the newarrangement to push for more business internationally. Nearly all of AT&T's managed service business comes from U.S.-based companies that have overseas offices, he said. "This will let us take our business outside the United States," he said.