Cisco Gets Strategically Serious with Jasper Acquisition

Whilst there's been a string of MVNO's consolidating in the recent past (Kore-Raco; Wireless Logic-CVC Capital Partners) - many driven as much by PE ownership as the management - it is some time since a significant truly strategic acquisition occurred, a la PTC/ThingWorx and Google/Nest.

In the time elapsed since these deals, it is likely that there has been much head scratching amongst global giants as to how and when they should make their entry into the vast and fast accelerating world of IoT. Cisco has now figured it out; whilst they may not have figured it out any faster than other exec teams in blue chips, they have decided to execute on strategy faster than the rest. This is a bold move; as was the PTC deal some years back now. First M2M, then IoT, for years now analysts have been predicting the huge growth in IoT connected devices. That growth is now materialising - core networks, low cost hardware, maturing markets and multiple network technologies (not least LoRa, Sigfox, Ingenu, NB-IOT... all vying for seemingly insatiable demand for an alternative to the legacy low data rate cellular options).

Then there is the role of the Connectivity Management Platform (CMP), much overlooked until now, but without which the forecast huge scaling of connectivity is extremely difficult if not impossible to control. The CMP has very much been out of the limelight as it is oft wrongly presumed that global cellular connectivity exists in a ubiquitous and easily managed state. So apart from this challenge of managing large scale of connectivity (across any wireless type of connectivity, across multiple cellular operators and across multiple territories) - which is a considerable challenge in itself (think about it for a moment; it's not so easy as just rocking up at an MNO, knocking on their door, and off you go with services ready and working) - what else did Cisco likely see within the CMP that Jasper had so carefully nurtured over the past decade?

I think the Cisco deal for a number of reasons validates the strategic value of connectivity management platforms.

  • CMP's are a rare breed - one can count the number of Connectivity Management Platforms on one hand; they aren't developed over night. Jasper - like Streams IoT-X has been a build and refinement over a decade. It's a mix of expertise in both software development, network operations/architecture and commercial/technical skills around how mobile network operators engage and integrate. It's a pretty unique combination of technical, operations and commercial skills and needs deep experience blended with very specific network knowledge - it is difficult to build these teams, it doesn't happen overnight; to build an enterprise grade platform is hugely challenging. On the one hand you have to be an agile software development house, and on the other you need to be able to engage and deal with MNO's, LPWA network and satellite operators - these together represent a real challenge. The road of M2M and IoT is littered with MNO's, SI's and others who have tried to self-build and not been successful. There is a reason why those companies with CMP's have been around for years and why there has been no new entrants into the sector - it takes years to build and the barriers to entry are high.
  • Whilst CMP's might be largely viewed as occupying a low position in the IoT 'stack', often attributable to the low revenue generation per subscriber /connection (ARPU), they are an essential element of the overall stack. Without being able to manage, control and expedite connectivity in a very efficient and effective way, then the whole roll out of global devices becomes increasingly difficult with scale. A small % of total connections if failing can result in a magnified erosion of trust, degradation and compromise of the overall business model, and ultimately erosion of goodwill in brand too. Brand value is important to Enterprises! Taken together this is all very costly - and this is important, it is a cost containment and management of cost (reduction of a wider cost set) that imparts value over and above the relatively thin margin taken from revenue. I think that many commentators on CMP's have overlooked this point to date.
  • It is also about scaling. Moving to the tens of billions of connections - and even with low margins, volumes at the billions level generate high revenues and resultant profits. With little further on costs than customer support technical maintenance and dev work on the platform; as scale happens these connectivity management platforms have the capability to move into the super profit zone.

These points we have recognised for years - hence Stream's focus on the pure side of connectivity management and data routing. Remaining agnostic to connectivity type.

I reckon Cisco gets most of the above; so I guess it's a matter of time before the many others move beyond figuring it out too and start to make their play. I see this also starting to shift the dynamics within the world of IOT Connectivity - whereby super virtual network operators start to evolve - a term I first coined in mid 2015 at the IoT Innovation Conference in Marseilles.

Cisco - the first Super Virtual Network Operator?

Now that's got to be seriously strategic!

For more comment and news from Nigel, follow us on Twitter, and 'Like' our Facebook page for more content. Connect with us on LinkedIn for all our business news.