On Monday, Jan 23, 2017, Cisco purchased AppDynamics for US$3.7 billion. AppDynamics provides application monitoring security software and services and has been a partner of Cisco for many years. AppDynamics benefited from growth of public cloud for application infrastructure, and the growth in distributed apps across desktop, web, mobile, and, potentially, wearables. AppDynamics clients range across the industry with heavy presence in retail, financial, and technology. It services 270 clients in the Forbes Global 2000 index.
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On Monday, Jan. 23, 2017, Cisco purchased AppDynamics for US$3.7 billion. AppDynamics provides application monitoring security software and services and has been a partner of Cisco for many years. AppDynamics benefited from growth of public cloud for application infrastructure, and the growth in distributed apps across desktop, web, mobile, and, potentially, wearables. AppDynamics clients range across the industry with heavy presence in retail, financial, and technology. It services 270 clients in the Forbes Global 2000 index.
What AppDynamics Does and How it Benefits Cisco
AppDynamics software and services help companies monitor performance of applications from end-to-end, including apps on the mobile and web, data center servers, and on any middleware in between. Its metrics and monitoring are facilitated primarily via agents deployed on devices and infrastructure.
Cisco is in transition from a predominantly hardware supplier to a software and services supplier. While it is expected that AppDynamics will operate as an independent entity for a while after sale finalization, the immediate opportunity for both companies is leveraging Cisco’s vast distributor channel network to increase Cisco revenues.
From a product perspective, Cisco says that what was heard from customers was a great need for application performance software, which is what drove the AppDynamics partnership in the first place. With AppDynamics in the Cisco family there will be upsell opportunities but also bundling opportunities of software and network gear. The latter opportunity will take some time to understand how to price in particular market segments and will be based on hardware replacement/upgrade cycles.
AppDynamics noted in its press conference with Cisco that the growth of public cloud for applications particularly through its relationship with Amazon has been a major driver of its business. Cisco is prominent in building private clouds for enterprise; therefore, the AppDynamics acquisition will help Cisco drive more revenues from apps residing in public clouds. This is notable, as Cisco announced in December 2016 that it would shut down its public cloud offering in 2017.
What is the IoT Angle?
AppDynamics will help Cisco’s IoT business, however, the value is not immediately obvious—unlike the value for Cisco in IoT from the Jasper acquisition.
IoT Application Performance – Apps are important in IoT for existing apps (where IoT data augments the app), IoT apps used to monitor health of a thing or machine, and customer-facing IoT apps that are driven only by IoT data such as patient-monitoring applications. So, similar to non-IoT apps, AppDynamics will help developers and businesses with IoT app performance, and, therefore, can contribute to Cisco’s push into IoT application markets. Mobile apps and latency-sensitive IoT applications will likely benefit the from AppDynamics software in markets such as healthcare, field services, and, potentially, smart city. The question is, will the obvious benefits of AppDynamics for all applications, provide much of a bump for Cisco’s IoT business?
Network Access and Troubleshooting – Another benefit of AppDynamics for Cisco is it adds another tool in its network troubleshooting toolbox. AppDynamics enhances troubleshooting of networks by identifying how much of the business performance issues are related to application performance versus problems in the network. This is somewhat similar to Cisco’s acquisition of Jasper, which provides network management and troubleshooting for customers of IoT apps operating on mobile networks. Another way to position this benefit is with improved network access. Cisco quickly pointed out in its acquisition press conference that AppDynamics can help things access the network in a more reliable way.
Analytics – IoT analytics software can run anywhere from the data center to the end device, but it is the edge analytics software that may benefit the most from AppDynamics. Edge analytics refers to software that can analyze machine data and detect at a simplistic level of events (for example, data that exceeds a threshold limit) or run more sophisticated analytics that detects patterns and used to predict events. AppDynamics may not improve the analytics of the software, but could improve the operations of the analytics software and, therefore, improve its performance. Performance enhancement of edge analytics apps may be the more sought after capability as many will be used to detect and act on events in real time such as in industrial markets.
App Development with IOx – Cisco’s IOx is an application framework that sits on top of Linux OS designed for building applications used on Cisco gateways and routers. AppD could enhance the value of IOx driven very much by its end-to-end app performance management capabilities.
Ultimately the value of the AppD acquisition for Cisco’s IoT business will, in the short-term, be based on Cisco’s marketing and packaging strategies. In the long-term, it will be based on product development and future acquisitions. For instance, autonomous driving and intelligent transportation systems are future IoT markets that Cisco can tap. However, it will require that AppDynamics agents run on low footprint or RTOS-based sensors. It will also require Cisco to beef up its AI chops for responding to AppDynmaics performance metrics—acquired through an AI partnership…or the purchase of another company.