In the biggest technology transaction of the year so far, Cisco agreed on September 21 to buy cybersecurity firm Splunk for a staggering US$28 billion. With the potential to help organizations integrate their IT operations across various aspects such as applications, data, infrastructure, security, and networks, this acquisition is highly significant. Cisco’s purchase of Splunk clearly indicates that the convergence of IT operations and data analytics is a priority in today’s digital business landscape. Read on for our expert analysis of the deal.
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Why did Cisco acquire Splunk?
Cisco has wanted to buy Splunk for some time due to multiple business and revenue synergies. Cisco will immediately gain approximately US$4 billion in recurring revenue from subscription-based services. Cisco’s revenue is currently split between products (74%) and services (26%). By increasing services, Cisco will be better positioned to compete with hyperscalers, cybersecurity providers, and platform providers to capture the major portion of enterprises’ IT spend.
Cisco has somewhat lagged behind competitors in the cloud wave of enterprises’ technology spend and has experienced a decline in its collaboration product suite, making its cybersecurity portfolio a key investment area. The deal will act as a catalyst for Cisco’s business transformation, heightening focus on subscription-based revenue and, in the long run, Artificial Intelligence (AI)-driven integrated IT operations.
Key benefits Cisco’s customers will see from this acquisition include:
- Cybersecurity development: The cybersecurity space will most immediately be impacted by the acquisition of Splunk, the leading security analytics platform in the market with a highly loyal customer base. This platform will enable Cisco customers to transition from threat detection and response to threat prediction and prevention by leveraging generative AI (GAI) to improve visibility and data usage
- Observability platform: Splunk’s comprehensive and highly regarded observability capabilities could complement Cisco’s products and platforms. Splunk has strong integration capabilities with most of Cisco’s products across data centers and networks. With the acquisition, clients can expect better visibility, and with the incorporation of AI and analytics, they can effectively utilize the terabytes of available data
Beyond this, the biggest benefit that customers can anticipate from this deal is the potential for integrating IT operations across the entire stack – solving a problem of siloed operations and insufficient end-to-end visibility that has plagued enterprises for years. Cisco’s acquisition of Splunk is a clear signal that the integration of IT operations and data analytics is a priority in today’s digital business landscape.
Enterprises stand to gain many benefits through an integrated IT operations approach, including optimized resource utilization, single pane of glass view, agile and prescriptive problem resolution, enhanced security, improved collaboration between IT and the business, cost savings, enhanced user experience, and data-driven decision making aligned with business outcomes.
Cisco and Splunk union in the data-driven AI world
This combination of synergies, coupled with the power of AI, can result in a comprehensive suite of solutions that can help organizations more effectively achieve their IT and business objectives.
Among the potential benefits are:
- Single pane of glass view: The integration of Cisco’s networking solutions with Splunk’s analytics tools can offer end-to-end visibility into an organization’s infrastructure. This visibility would enable companies to identify bottlenecks, improve performance, and optimize their IT operations
- Advanced threat prevention: With the combination of the IT telemetry data and Splunk’s powerful analytics, threat detection capabilities will be enhanced. Organizations can proactively identify and respond to security threats, reducing the risk of data breaches and other cyberattacks
- Improved performance: Efficient troubleshooting through preventive diagnostics can create a world where IT systems are always available and efficient
- Business-driven IT operations: By accessing rich data analytics, businesses can start to make data-driven decisions that positively impact their top line, whether optimizing supply chain operations or improving customer engagement
Cisco is not the first to move in this strategic direction. IBM, for instance, recently acquired Apptio to gain end-to-end visibility across the IT stack and build its cloud-agnostic IT operations model. All hyperscalers have been expanding their capabilities through acquisitions in the cybersecurity space to provide a unified view of the IT environment.
In the long run, the acquisition of Splunk is likely to be highly beneficial for Cisco.
This significant deal will act as a catalyst for Cisco’s business transformation, heightening focus on subscription-based revenue – a strategy other providers of all sizes have seen success in.
If Cisco gets this right, its customers will benefit from an array of operational benefits across the IT stack. It also has the potential to make the IT stack always available, secure, and aligned to business outcomes.
To discuss the potential of this acquisition and what it means for businesses, reach out to Titus M at [email protected].
