Dive Brief:
- Cisco’s $3.7 billion purchase of AppDynamics became official on Wednesday, providing Cisco an opportunity to move further into the subscription-based software space in a shift away from its struggling network hardware business.
- Prior to its purchase by Cisco, AppDynamics was on track to be one of the fastest growing publicly traded companies in the enterprise software space. Cisco bought AppDyamics Jan. 24, just days before it was planning on going public.
- Going forward, AppDynamics will continue to be led by David Wadhwani as a new software business unit in Cisco's IoT and Applications business, broadening the Cisco's suite of software offerings.
Dive Insight:
Cisco has actively moved toward the software subscription model since last summer, when Cisco CEO Chuck Robbins said the company intended to create and begin testing its own network software subscription model.
Under Robbins, Cisco has become increasingly interested in subscription-based services, where it can maintain steady income. Though the company can grow capabilities internally, sometimes the quickest way to provide a new offering is through acquisition. And if you want to break into subscription-based offerings, AppDynamics is a safe bet. Nearly 75% of AppDynamics’ product revenue came from subscriptions for the nine months ending October 31, 2016, according to Cisco.
AppDynamics basically monitors the performance of a company’s software applications running on-premises or in the cloud, an area where Cisco sees a lot of potential. Companies that can gain better visibility into their systems and prevent crashes or slow response times ensure a better customer experience and reduce the possibility of lost sales. With Cisco’s power to scale the AppDynamics solution, the union of the two companies could be fairly impactful.
Current AppDynamics customers include Charter Communications, Allscripts and Autotrader. The company competes with businesses like New Relic and CA Technologies.
