If Cisco’s proposed acquisition of advanced networking startup, Insieme is any indication of current trends, enterprise cloud computing has officially gone mainstream. In a recent announcement to employees, Cisco has made it clear they plan to purchase the startup. In fact, they’ve already given Insieme a $100 million advance. The networking equipment giant plans to spend upwards of $700 million for the company.
The Delicate Art of the Spin-In
To be clear, this acquisition isn’t completely out of the blue like many enterprise-level startup purchases. Three Cisco employees who also had a hand in the development of a few other Cisco-related businesses founded Insieme. In fact, the company was developed from the outset to be purchased by Cisco. In the enterprise tech community, this business development model is often referred to as a “spin-in.”
While this is a cheap and effective model for developing a sister company or potential subsidiary, there is some potential fallout involved. Most commonly, this means an adverse effect on company morale. Essentially, the spin-in model can harm employee morale by turning a few key employees into rock star millionaires, while other employees sit on the sidelines and watch.
Whenever a large-scale company purchases a smaller company, there is always the question of why. In the majority of these cases, startup acquisitions have to do with trends, and how larger companies can capitalize on these trends. The same is true for the Insieme acquisition. The trend is enterprise cloud hosting, and many of these providers are migrating to software defined networking (SDN) solutions in large numbers. But SDN integration is not all about keeping up with the Joneses, for Cisco it’s largely about finding a scalable, cost-effective solution for network management. With nearly 60 percent of the world’s networks operating on Cisco technology, it’s no secret that the networking giant is aiming to lead the world in software defined networking solutions.
What SDN & Insieme Means for the Enterprise Cloud
It’s obvious to assume that enterprise cloud computing is the next big thing. Taking a look at the past few years’ big enterprise-level acquisitions reveals the growing need for effective ways to scale and deploy massive sets of data over a cloud system. With Insieme’s use of SDN technology, enterprise-level cloud service providers can inexpensively and quickly deploy massive cloud systems by remotely controlling powerful networking hardware through powerful software solutions.
Understanding where Cisco is coming from isn’t much of a stretch. The cloud has gained popularity because it provides a cost effective way to deliver and manage massive datasets quickly. Cloud hosting leaders are popping up around the globe, and some of them are scoring quite highly in Gartner’s Magic Quadrant. Cloud computing services don’t have to come from a major player to be just as effective, so companies like Cisco still have to watch what smaller companies are doing. Their acquisition of Insieme is a reflection of that.
Now that this is happening on the enterprise level, hosted networks have to step up their game. This means increased network agility, scalability and a much cheaper price. Cisco knew two things implicitly: that SDN technology was a key way to achieve this, and that spinning-in Insieme was a necessary risk, but one that would give them room to swallow up this massive new enterprise cloud computing market. Now we’ll just have to wait and see if Insieme is really worth that $850 million price tag.