The news this morning (leaked, as is often the case, over the weekend) that Cisco is buying Meraki isn't really all that surprising. After all, Cisco built its industry-leading position in WLANs via the initial acquisition of Aironet, which could trace its roots to the very beginnings of WLAN technology, followed by that of Airespace, one of the leaders in the second-generation "controller" era of WLANs (not to mention Linksys for residential and small business). With Meraki, Cisco immediately establishes a strong position in the third era, cloud-based Wi-Fi. In fact, in addition to strengthening Cisco's unified networking portfolio (yes, Meraki is also into wired networking to some degree, with lines of both security appliances and access switches), this acquisition forms the basis of a new Cloud Networking Group.
This acquisition, unlike most of the others involving Wi-Fi in recent years, is truly consolidative - one major player in enterprise-class WLANs is taking down another. Importantly, scooping up Meraki keeps their technology out of the hands of potential competitors. But this was no fire sale - Cisco is paying $1.2 billion for a company that's done so well over the years (they trace their roots in 2006 to the MIT RoofNet project, a metro-scale WLAN mesh research effort) that they're even giving away systems to qualified hot technology startups. It's clearly the cloud-based management that makes the firm so attractive now, an area of endeavor that I have long followed and praised. While I'm expecting all viable players in enterprise Wi-Fi to offer cloud-based management going forward, Meraki has clearly caught a big wave here.
But they're not alone - this acquisition also puts Meraki competitors like Aerohive, AirTight, and even giants like Enterasys into a much more visibile and even viable competitive position, along with companies like PowerCloud that offer system-independent cloud-based management. It's even fair to ask if the Cisco/Meraki linkup might be the start of a long-anticipated consolidative phase in the Wi-Fi space. There are still a large number of players relative to the overall age of the field, this driven largely, I believe, by the continuing high rate of innovation in basic technologies, like 802.11ac, and, yes, cloud-based management. I've frequently mentioned in talks I've given recently that we (Farpoint Group) usually put management capabilities in the top slot in RFPs we write, a complete reversal from just a few years ago when radio technology was most important. Add management and cloud, and you get at least $1.2B. Not bad, not bad at all.
The only curious element in all of this is that Meraki will constitute a new business unit, rather than be folded into the Wireless Networking Group - although both will report to VP/GM Sujai Hajela. Mr. Hajela noted on a call with analysts this morning that this acquisition is more about "software-based business models" and "Cisco learning from Meraki" (particularly with respect to those business models and culture, I believe) than the other way around, but I suspect the particular business-unit alignment implemented was chosen more to ease assimilation via cultural preservation than for any other purpose. Cisco will, I believe, eventually end up with a single cloud-centric unified product line, although even with this acquisition such will undoubtedly take several years to complete. Mr. Hajela also noted that Meraki essentially addresses a midmarket opportunity, and will not at least for now compete with Cisco' mainstream enterprise offerings - although I'm sure all involved are hoping for at least an influential relationship beginning almost immediately.
This posting was originally going to be a column on Cisco's recent announcement of enhancements to its overall applications strategy, in major part relating to Wi-Fi-based location and tracking via the ThinkSmart technology the company also recent acquired, as well as new capabilities for their Mobility Service Engine (MSE). In many ways, this announcement is just as important as the one I've analyzed above, and more on it later.