Cisco's M&A Strategy for the Edgeconomy

From today's Wall Street Journal, an interesting summary of how Cisco's M&A strategy has shifted to "platform" plays in the last few years.

"...Buying innovative small firms rather than developing new tech from scratch has long helped Cisco stay in front of the pack with a fresh stream of new products, while largely sidestepping the merger messes that peers often faced. The San Jose, Calif., company has gobbled up 126 companies since its first acquisition in 1993, most of them small, privately held and closely related to its networking-equipment business.

'Platform' Deals

But in the past five years, while spending about $2.5 billion on 44 companies in its core business, Cisco has spent more than four times as much -- $11 billion -- on a handful of new-style acquisitions that it calls "platform" deals. Instead of its typical two months to integrate companies, Cisco plans to take 18 months to two years on more-unfamiliar businesses."

 

What the WSJ misses is that Cisco has done more than focus M&A on Platforms.  Cisco has focused M&A on "Edge" deals over the same time period. Cisco's recent M&A activities represent a conscious effort on their part to execute a strategy for the Edge Economy. 

Where in the past Cisco's M&A strategy was focused on the "Core" of the enterprise, Cisco has been executing a new M&A strategy focused on the "Edge".   

Cisco's acquisitions of Linksys, Scientific-Atlanta and Webex provide "Edge" platforms that are prosumer-driven and enable Cisco to engage end users directly, not just IT departments within the enterprise.   

When combined with their earlier edge-related acquisitions like Tribe, Five Across and Reactivity, you see a conscious effort by Cisco to pursue a strategy for the Edge Economy by acquiring applications and platforms to build value through communities and networks of end users.

For me, the future state of enterprise software will be increasingly "edge-centric" where enterprise applications are on-demand, social, device-agnostic, prosumer-driven and visual/voice-centric ... and as a result, they unlock new value at the edge of the enterprise by making it easy to build, nurture and converse with communities and networks of consumers, customers, partners and enterprise users directly.

When looking at Cisco's shift in M&A focus through this lense, their move to "Edge" deals is strategically as significant as their shift to "Platform" deals.

Comments

[Paul Sweeney]

I think that this is pretty much on the money (i.e. accurate!). What I don't get is why cisco does not evangelise this position. I was at Telco2 in London last week, and their was not a peep from the big buys on enterprise 2.0 other than "outsourced/ managed IT" is up and to the left on this graph. How long before cisco buys a financial services platform, I wonder?

[Holly Wild]

Makes sense... acquisitions for Cisco business is the building block for Cisco’s future growth and competitive edge.