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Megadeal delivers immediate financial benefits but...
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Splunk architecture is an old man walking and...
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True value depends on Cisco undertaking massive cloud upgrade
Cisco Systems announced last week that it will plunk down $28 billion to acquire Splunk, an observability and security software vendor.
The deal’s bumper size prompted general giddiness from the financial analyst types (sneaky key bumps and beaucoup bonuses all round, bros) but in the more erudite world of cloud infrastructure, where Silverlinings floats, the response has been significantly more nuanced.
What’s going on? Time to debunk Splunk. [Ed. note: That’s enough Splunk rhymes, please.]
In an ideal 21st century world, businesses want their applications to be cloud-native and distributed. But Splunk was founded in 2003 BC (Before Cloud), which means that its platform is cloud-retrofitted and siloed.
Like, ruh roh!
This isn’t just semantics.
“Technology that is born in the cloud usually has a faster development clip, and better feature velocity, as well as improved scalability,” said Mauricio Sanchez, senior director, enterprise security and networking research at Dell’Oro Group.
“Is Splunk’s [current] architecture going to be the platform for the future? I doubt it,” says Peter Firstbrook, distinguished analyst at Gartner. “So they have that challenge ahead of them. This will be a big indicator of Cisco’s seriousness. Are they going to push the state-of-the-art with a big conversion to cloud-native?”
Doing that work could pay off bigly for the vendor by resolving Cisco’s customers’ No.1 beef.
“The biggest complaint about Cisco is that they buy products and then don’t integrate them,” says Firstbrook.
Splunk could be the integration engine that pulls its new parent’s bewildering product portfolio together, he says, though he points out that it’s not optimized for this function today.
So why is Cisco buying Splunk? Like most things in America today (politics, healthcare, the justice system) the answer comes down to money, moolah, boodle.
Splunk has annual revenues of a scoot under $3.9 billion, enough to pump-p-p-pump-pump Cisco up to the No. 2 spot in security software. Equally important, Splunk’s money comes in the form of that sweet, sweet recurring revenue that Cisco investors crave.
Net of net, is buying Splunk a good move by Cisco? All signs point to ‘maybe.’
Long-term success will hinge on whether Cisco is prepared to cowboy up and do the original development required to level up the platform to a cloud-native world.
If nothing else, the deal is a symbol of how much Cisco has changed from the days when Chambers was in charge, when it earned a peerless reputation for acquiring highly differentiated cutting-edge technologies that helped companies successfully manage critical business transitions.
But here it is, two decades later, spending a personal best $28 billion on a company whose core technology is markedly long in the tooth.
Would JC have done this deal? Doubtful.
Send me your thoughts via a Letter to the Editors here.