Cisco closes AppDynamics deal, increases software weight

Cisco today closed its approximately $3.7 billion deal for application analytics specialist AppDynamics giving the networking giant a nice revenue stream and bolstering its software strategy.

The nine-year-old company – which Cisco bought Jan. 24, days before it was to go IPO — and its almost 1,250 employees become part of Cisco as the 17^th acquisition since Chuck Robbins took the CEO reins in 2015.

+More on Cisco software from Network World: Has Cisco broken out of the network hardware box?+

“AppDynamics is special for a number of reasons. It is the largest acquisition we’ve announced since Cisco’s new leadership team was announced 22 months ago. At the time of the IPO, AppDynamics was on track to be the fastest growing publicly traded company in the enterprise software space. AppDynamics represents a great step forward in both our digital transformation and that of our customers and partners. Combining AppDyanmics’ unparalleled analytics with Cisco’s incredible global reach will enable us to accelerate AppDynamics’ success and broaden Cisco’s software offerings, a key area of investment and growth for us,’ wrote Hilton Romanski, senior vice president, Chief Strategy Officer for Cisco in a blog post.

Of course, it doesn’t hurt that AppDynamics had revenue growth of more than 50% year over year, and some 75% product revenue coming from subscriptions for nine months ending October 31, 2016, Cisco noted.

+More on Network World: Cisco amps-up Tetration platform with better security, reduced footprint, AWS cloud option+

Robbins in Cisco’s February earnings announcement said of the deal:

“We were very pleased to announce our intent to acquire AppDynamics as a continuation of our strategy to provide customers with deep analytics across the data center, the network as well as their applications. Increasingly, customers are seeing significant business value being delivered through applications and access through intelligent networks. Combining Cisco’s infrastructure, networking and security analytics with the application analytics from AppDynamics, we will provide customers with unprecedented insights to improve business performance.”

AppDynamics will continue to be led by David Wadhwani as a new software business unit in Cisco’s IoT and Applications business, reporting to senior vice president Rowan Trollope.

“Cisco is committed to providing AppDynamics with the autonomy we need to run the business as we always have. Together, we’re investing further in our widely-recognized culture of innovation, our obsession with customer success, and our remarkable account and sales teams.  This combination has made us one of the fastest growing software companies around and we couldn’t be more excited about our ability to accelerate our growth even further given Cisco’s reputation and reach,” Wadhwani, wrote in a blog today.

Zeus Kerravala, principal analyst with ZK Research wrote in his Network World blog about the acquisition: A good way to think of the complimentary nature of AppDynamics and Cisco is that Cisco interprets user experience through the lens of the network in a ‘bottom-up’ way, while AppDynamics looks at user experience from the ‘top down.’ Together, the two make a powerful combination that should help Cisco achieve the following:

• End-to-end visibility of the IT infrastructure, including cloud, device, security, network, compute and application infrastructure. Cisco can now monitor every layer of the application stack.
• Correlation of information across the different domains to better understand application performance and infrastructure dependencies to quickly identify problems.
• Analytics through the application of machine learning to understand why things are not working optimally and to predict when problems will occur, enabling IT to be more proactive.
• Automated remediation by tying into Cisco’s software-defined networking (SDN) solution, eventually leading to an autonomic, self-healing network.”