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Cisco Grabs AppDynamics to Deepen Insight Delivery

Fresh on the heels of Cisco's Spark Board launch on Tuesday, the company announced its intent to acquire AppDynamics, a privately held application intelligence software company, for approximately $3.7 billion in cash and assumed equity awards. The deal is expected to close in Cisco's third-quarter of fiscal year 2017, ending April 30.

AppDynamics operates in the application performance and monitoring space. The eight-year-old company was in the process of going public -- "deep into the IPO process," and having raised its price range just hours before Cisco swooped in to acquire it, said David Wadhwani, AppDynamics CEO and president, during a joint media and investor briefing about the acquisition. As an AppDynamics customer for several years, Cisco recognized the synergies between their respective business models, added Rob Salvagno, Cisco VP of corporate development, in explaining the decision.

With AppDynamics, Cisco gains the ability to supplement the analytics and security capabilities it already delivers via products like Tetration with visibility into application performance across the network, said Rowan Trollope, SVP and GM of Cisco's IoT and Applications business, during the call. Such visibility "has never been more critical to running their businesses. ... Our customers have needed to instrument and get insight into the applications all the way from the customer down to the code," he added.

Cisco will now be able to provide a complete solution for intelligent network and application performance decision making -- infrastructure and applications analytics paired together to provide visibility and insight culled from both the network and the apps riding on top of it, Trollope said.

The deal represents a foundational software move for Cisco, which has been pivoting toward software and subscription-based revenue, Trollope noted. Given that AppDynamics has been growing at 50% annually and that 75% of its customers buy on a subscription-based model, according to Wadhwani, the synergy is readily apparent here.

Thomas Wyatt, VP and GM of Cisco's Cloud Analytics Group, shared perspective on how enterprises using Cisco's UC Spark cloud platform and services might benefit. "Collaboration apps are critical and their health and performance is vital," Wyatt told me in an email exchange. "AppDynamics monitors applications and end-user business transactions in real time, providing businesses the ability to react to issues before they surface. For example, if a video conferencing call is having performance issues such as video latency or lip sync problems, AppDynamics will provide the visibility to quickly identify the root cause, recommend a fix, and help remediate the issue."

Post acquisition, Wadhwani will continue leading AppDynamics, and will become a new software business unit inside of Cisco's IoT and Applications business, which Trollope heads.

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