AppDynamics explains logic behind its US$3.7 billion acquisition by Cisco

AppDynamics explains logic behind its US$3.7 billion acquisition by Cisco

The company's streaming data model attracted Cisco

Following a US$3.7 billion acquisition by Cisco, AppDynamics is already looking to access Cisco's enterprise customer network as it plans to keep up the pace with the big hitters in the new wave of enterprise software vendors.

Cisco completed the acquisition of AppDynamics in March this year for a reported US$3.7 billion, nearly double its pre-IPO unicorn valuation of US$1.9 billion.

Speaking at the AppD Summit in London recently, CEO David Wadhwani said that the primary reason for the acquisition from Cisco's side was its belief in the underlying streaming data model that had been built at AppDynamics, not just in how it could help Cisco, but in its ability to further penetrate the enterprise market.

Cisco and AppDynamics were close partners before the acquisition, and Wadhwani said: "Cisco realised through the partnership conversations that we were having that the data model could make their networks even smarter."

He gave an example of embedding AppDynamics monitoring into networking hardware so that it can prioritise traffic from customers making a transaction, or who are marked as loyal customers, even if bandwidth is constrained at times of peak demand.

"They also realised that our data model could make their security offerings much more precise, and finally the impact our data model would have on enterprises in the broadest sense," he said.

For AppDynamics the main benefit will be access to Cisco's vast pool of enterprise customers.

Wadhwani said that at the time of its IPO the sales team was reporting that it was "closing every deal" it initiated, but that Cisco will help them "knock on more doors". This ties into Wadhwani's strategy to align AppDynamics with other high-growth enterprise software upstarts, of which he identified Splunk, Workday and Palo Alto Networks.

Wadhwani reiterated that AppDynamics will operate as a standalone business unit within Cisco's IoT and applications business, reporting to senior vice president Rowan Trollope. Cisco is keen to continue its pivot towards more recurring revenue, rather than traditional licence agreements, through more software subscription type deals.

AppDynamics posted revenue of US$158 million in the nine months leading up to October 2016 as it prepared to list publicly.

Post-acquisition roadmap

Since being founded in 2008, AppDynamics has moved from specialising in real-time application and infrastructure monitoring to what it now calls "business monitoring".

Wadhwani offered a potted history of the San Francisco-based company: "AppDynamics started our journey nine years ago at the application tier, with Java, then .NET.

"We then added infrastructure visibility, whether it is SQL or NoSQL databases, server monitoring to see if the hardware your app was running on was actually effecting the code or the application, and more recently networking capability monitoring. Finally there is end-user monitoring to track users in the browser and in mobile apps and we are now rolling out support for IoT."

AppDynamics already counts major banks like Barclays and airlines like United as customers of its app monitoring software, and is pushing further into the retail space now that it can offer granular end-user monitoring, such as issues at the login or checkout point of an app.

Wadhwani spoke about the shift in enterprise IT, from systems of record to systems of engagement: "Five years from now I think it is indisputable that we will be focused on systems of intelligence, that let us make decisions faster and more accurately."

The idea is that the AppDynamics real-time monitoring platform could become the platform for more automated and proactive incident response, a capability Barclays spoke effusively about earlier in the keynote.

"AppDynamics is in a unique position with the data model that we have and the streaming insights capabilities that we have to lay the foundations for all of you to fuel the machine learning and AI investments that you make over the years," Wadhwani said.

In short, AppDynamics, like many of its peers, is making a big future bet on AI and machine learning. Where Cisco comes into that equation beyond its wallet and its rolodex is yet to be seen.

This article first appeared on Computerworld UK.

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