Innovation is the engine that powers Cisco. Its machinery was first assembled by an entrepreneurial husband and wife team with a great idea to connect the computers of two departments at Stanford University. It has since been turbo-charged by the simple notion that an open, standards-based communication protocol can be extended across the many ways of bringing together people, process, data and things to create networked connections. Now, that innovation engine is driving Cisco to become the world’s leading IT company with the power of capturing the next phase of the internet – the Internet of Everything – to make networked connections more relevant and valuable than ever before. Cisco will do this through building on in-house R&D and investing in employees, alongside acquiring great technologies, business models and talent during this time of massive industry change, when it matters most.
Our build, buy, partner approach is at the heart of Cisco’s innovation culture. It is an integrated toolkit that is critical to maintaining sustainable long-term differentiation, particularly as markets go through major transitions and disruption. Cisco first led innovation in the hugely disruptive routing arena by building incredibly relevant solutions during the infancy of the Internet. We then expanded into new disruptive markets, such as switching, with pivotal acquisitions of companies like Crescendo, Grand Junction and Granite. Later, Cisco extended into areas where major transitions continue to take place today, such as collaboration, mobility, data center and video with deals like WebEx, Starent, Meraki, Nuova, and NDS.
So where are we now and how did we get here?
In 2012, M&A deal volume in the industry dropped more than 15 percent while overall deal consideration dropped by a dramatic 30 percent. Despite this trend, 2012 represented the most active M&A year for Cisco in over a decade with 14 acquisitions and nearly $8 billion in transactions. After two of the quietest years for M&A at Cisco, why have we kicked our M&A motor into high gear? Well the answer can be found in the journey we have been on over the last couple of years. That journey started with a new Strategy. It has been fueled by Readiness. And, it has arrived through Actionability.
2010 and 2011 were challenging times for Cisco in which the company wrestled with driving growth across many priority areas—arguably difficult for any one company to handle. That, in combination with downward pressure on the business within Cisco’s market segments, resulted in sharpening the company strategy in 2011. We refined our focus from 30+ market adjacencies to 5 foundational priorities. This shift allowed for the development of a reinvigorated corporate strategy as well as individual market initiatives closely coupled with the priority areas.
In late 2011, with a solid strategy in place, management turned its attention back to what it had always done from its humble beginnings: lead in strategic categories and extend leadership to new markets. With a breadth of talented leadership, fresh ideas began to flow to key posts across Cisco’s engineering, sales and services ranks.
The combination of good strategy and exceptional leadership inside the business allowed Cisco to aggressively seek out opportunities in the market during a time when the tech M&A landscape seemed to be largely void of meaningful activity. As an example, the steady-step execution of a clear Cisco Mobility strategy has delivered for our customers in a big way. In the span of a quarter, Cisco acquired Cariden, Broadhop, and Intucell—all of which are part of an overall drive to bring more intelligence from the very ends of networks to the IP edge where Cisco can add value and solve customer problems. Other examples include leadership in Unified Access and Data Center where deals like Meraki and Cloupia enable Cisco to continue to stress next generation enterprise architectures and business models that are adjacent to Cisco’s core business. Finally, in the area of Video, Cisco delivered on its software-based Videoscape architectural strategy through a series of well-mapped acquisitions, culminating in the $5 billion acquisition of NDS, the largest tech deal of 2012.
As we drive a higher pace of M&A, we have kept a close eye on how to “save to invest”, ever-clarifying the portfolio through carefully selected divestitures such as the sale of Linksys to Belkin. These kinds of moves continue to help sharpen our focus in areas where Cisco can compete to win.
We continue to evaluate exciting new opportunities to lead the industry in a time of powerful market transitions and disruption. Cisco will be active, but disciplined, in our M&A approach—which has been, and always will be, built on a platform of solid strategy, operational readiness, and market actionability.
I look forward to sharing more about our moves as they unfold in 2013.
Tags: Cisco acquisitions, Corporate Development, Hilton Romanski, M&A
Cisco is pleased to announce that it has acquired privately-held vCider. Based in Mountain View, California, vCider has expertise in the development of virtual network overlay technology for secure data center infrastructure. vCider will be integrated into Cisco’s Cloud Computing organization, reporting to Lew Tucker, chief technology officer, Cloud Computing, and will play an important role in the Cisco Open Network Environment (ONE) strategy, particularly in support of OpenStack.
OpenStack is a key pillar of Cisco’s open, multi-hypervisor, multi-stack Cloud computing strategy. Cisco joined OpenStack 18 months ago and has been a significant contributor to the OpenStack Quantum API track ever since.
With Quantum becoming a core OpenStack service, it’s clear that programmable networking is quickly becoming an important component in large scale, multi-tenant, cloud computing environments. Cisco’s Quantum plug-in is designed to give application developers increased programmability of both virtual and physical networks linking the world of cloud computing to the advanced capabilities of Cisco’s Open Networking Environment (ONE).
So where does vCider come in? The vCider team has created a multi-tenant distributed virtual network controller. vCider’s code and technology will be integrated into our current development efforts of the OpenStack Quantum network service.
Mergers and acquisitions along with investments remain a key part of Cisco’s build, buy, and partner innovation framework and supports our strategy of providing best-in-class solutions for our customers. The vCider acquisition is well-aligned to our strategic goals to develop innovative virtualization/cloud technologies, while also cultivating top talent.
Tags: acquisition, Cloud Computing, lew tucker, M&A, OpenStack
Cisco is pleased to announce that it has acquired privately held Virtuata. Based in Milpitas, Calif., Virtuata provides innovative capabilities for securing virtual machine level information in data centers and cloud environments. Together, Cisco and Virtuata will enable consistent and enhanced security for virtual machines allowing customers to accelerate the deployment of multi-tenant, multi-hypervisor cloud infrastructures.
Cloud and virtualization are significant disrupters in the market. When customers move to these environments, security concerns arise where infrastructure is shared across multiple applications, business units or even organizations. As more and more business applications move to virtualized platforms, security and isolation become necessary conditions at the virtual machine level. This acquisition is highly complementary to Cisco’s vision of a unified data center that securely connects people and businesses with applications and data through virtual and cloud environments.
The Virtuata acquisition reinforces Cisco’s build, buy, partner innovation framework and supports our strategy of providing best-in-class solutions for our customers. It is well-aligned to our strategic goals to develop innovative virtualization, cloud and security technologies, while also cultivating top talent. The Virtuata team will join Cisco’s Data Center Group led by David Yen, senior vice president, Data Center Group.
As we continue to use all of Cisco’s assets to drive innovation, acquisitions such as Virtuata will help bring additional top talent, new technology, and unique business models into Cisco. The Virtuata acquisition reinforces Cisco’s commitment to deliver an intelligent network by providing market leading infrastructure across the data center.
Tags: acquisition, M&A, virtuata
Today, Cisco announces the acquisition of BNI Video, an emerging supplier of video back-office and content delivery network (CDN) analytics capabilities to service providers. This announcement is another step forward in Cisco’s leadership in video, one of Cisco’s five strategic priorities. We will continue to drive growth in this important and exciting market through internal innovation, complemented by acquisitions like BNI Video.
In fact, BNI Video is one in a line of strategic acquisitions to accelerate Cisco’s growth and differentiation in video. Over the last year and a half, Cisco has acquired ExtendMedia and Inlet Technologies, which added video content management and adaptive bit rate capabilities to our portfolio, respectively. BNI Video brings back-office video session management and control expertise to Cisco—key elements involved in helping to efficiently deliver ‘TV Everywhere’ services. Together, these additions to Cisco’s video solutions will help service providers in their transition to deliver more powerful on-demand video services and experiences to customers. This move further demonstrates Cisco’s commitment to our service provider customers and our Videoscape strategy. Additionally, with Boost headquarters in Boxborough, this acquisition will continues Cisco’s ongoing effort to grow our already strong presence in the greater Boston area on top of recent acquisitions such as Starent Networks and LineSider.
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Tags: acquistion, cable, M&A, Service Provider, video
In the past I’ve written about the classic challenge within Enterprise IT, and specifically within the Data Center, that 70-80% of the resources are allocated to “legacy” activities. This obviously leaves very little time to work on new technology-centric innovations to drive the business. Or to put a different way, “IT only does innovation on Friday”.
The McKinsey Quarterly recently had an interesting article about reshaping IT management, where they introduce the concepts “Factory IT” and “Enabling IT”. The premise being that the focus of the Factory IT (70% of the activities) groups should be about cost-reduction, scale, standardization and simplification. The Enabling IT (30%, hopefully growing) should be focused on innovative ways to enable the business to grow. And the management of those groups doesn’t necessarily have to the same, since they’d have different objectives. Read More »
Tags: Cloud Computing, Consumerization of IT, Enabling IT, Enterprise IT, Factory IT, innovation, M&A, McKinsey Quarterly