Networking giant Cisco shook up the enterprise IT sector yesterday with the announcement that it has agreed to acquire business software company AppDynamics for $3.7 billion shortly before the latter was slated to launch its initial public offering. The deal should help Cisco appeal to enterprise clients struggling to manage business applications running across multiple cloud deployments.
"Applications have become the lifeblood of a company's success," said Rowan Trollope, Cisco senior vice president and general manager of Cisco's Internet of Things and Applications Business Group, in a statement. "Keeping those apps running and performing well has never been more important. Unfortunately, that job has only gotten harder, as IT departments and developers struggle with a tangled web of disconnected, complex data that's hard to understand."
Trollope added that the addition of AppDynamics will allow Cisco to provide its customers with greater end-to-end visibility and intelligence from the network through to the application. The acquisition should be particularly beneficial to companies that are trying to manage applications that may run across a variety of cloud providers and onsite data centers.
AppDynamics allows businesses to monitor their applications across cloud providers, and address any problems before they can impact performance. That is a task that has become increasingly important as more companies have moved from on-premise deployments to a hybrid cloud architecture.
The deal will result in an entirely new business unit within Cisco’s Internet of Things and applications divisions. The acquisition also plays into Cisco CEO Chuck Robbins’ strategy of diversifying his company's revenues to include more subscription and software-based services, in addition to its traditional core of hardware networking products.
Better Insight Across the Stack
"Digitization and the transition to cloud are forcing the worlds of IT and business to blend together," Rob Salvagno, head of Cisco's M&A and venture investment team, wrote in a blog post yesterday. Real-time visibility and intelligence at the network, security, and application layers have become increasingly important for enterprises as business applications have become more critical.
"It can provide them with insight into the state of their business and, most importantly, into the quality of their customers' experiences," Salvagno said. As companies across industries are expanding their digital infrastructures, IT departments are faced with vast amounts of complex, siloed data, he added. Cisco's acquisition of AppDynamics will help its large enterprise clients translate their data into business insights.
"Together with Cisco’s industry leading digital network architecture, customers will now have unprecedented end-to-end insight across their technology stack, from infrastructure to application," Salvagno said. "With this insight, companies will be equipped to improve customer experiences and accelerate revenue opportunities."
AppDynamics will continue to be a led by CEO David Wadhwani as a new software business unit in Cisco's IoT and applications business, reporting to Trollope. The acquisition is expected to close in the third quarter of Cisco's 2017 fiscal year, subject to customary closing conditions.