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Cisco Makes Another Cloud-Based Buy, Grabbing SD-WAN Startup Viptela for a Cool $610 Million

Network

By Stephan BeckertMay 5, 2017

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This week Cisco announced that it would acquire SD-WAN vendor Viptela.

The purchase is a big one, to be sure. But it comes as no surprise to those who have been watching Cisco’s pivot toward services that provide recurring revenue—such cloud services and online applications—and away from their traditional focus on hardware-based solutions.

A Shifting Focus and a Shopping Spree

Cisco’s credit card has been burning a cloud-shaped hole in its pocket.

It’s only been a few months since Cisco shelled out $3.7 billion for AppDynamics, an application performance management vendor. And last year it picked up Jasper Technologies, an IoT cloud platform, for $1.4 billion.

These cloud-focused acquisitions bookend a layoff of 5,500 jobs, primarily in Cisco’s legacy hardware devision, in August 2016.

The purchase of Viptela will provide one more service-oriented solution to offset shrinking hardware opportunities.

While the networking giant pivots toward software and cloud services that will provide recurring revenue, it must balance new ventures against a core switching a routing business, which currently makes up a much larger chunk of Cisco’s bottom line. Last year Chief Financial Officer Kelly Kramer disclosed that recurring revenue accounted for roughly 28% of the $12 billion Cisco reported for quarterly sales, up from about 25% the year prior.

The purchase of Viptela will provide one more service-oriented solution to offset shrinking hardware opportunities.

A Growing SD-WAN Portfolio

Cisco owned not only one, but two SD-WAN offerings prior to acquiring Viptela: Intelligent WAN (iWAN) and Meraki SD-WAN.

Further, Cisco has never shied away from SD-WAN. It was an early investor in Velocloud and remains one to this day. With this acquisition, Velocloud remains a leader in the SD-WAN space alongside Cisco.

The Viptela buy might seem like overkill, but upon further inspection, it’s clear that each of Cisco’s SD-WAN services come with a unique strength and audience. Viptela’s SD-WAN solution fills a gap in the form of its ease-of-use and flexible deployment options.

Each of Cisco’s SD-WAN services come with a unique strength and audience.

“Viptela’s technology is cloud-first, with a focus on simplicity and ease of deployment while simultaneously providing a rich set of capabilities and scale. These principles are what today’s customers demand,” said Scott Harrell, senior vice president of product management for the Cisco Enterprise Networking Group in the company’s press release.

SDX Central recently reported that nearly 90% of Viptela’s customers use a version of its networking technology delivered through Amazon Web Services. Meaning Cisco now owns a vendor that could help it win back customers who have since moved to cloud-services in place of buying data center hardware.

 

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SD-WAN is Everywhere

Cisco's acquisition of Viptela is hardly the first time SD-WAN has made headlines. Why are more businesses turning to this solution?

Johnson & Johnson's Gilles DeWorm talked through why SD-WAN is an attractive option—and how to implement it—during TeleGeography's WAN Summit in London.

Click below to watch his presentation. 

WATCH NOW

Stephan Beckert

Stephan Beckert

Stephan is TeleGeography's VP of Strategy. He is responsible for new product development and advises TeleGeography's research teams. Stephan launched TeleGeography's WAN Summit conference series.

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