Cisco Buys Cloud Management Vendor SolveDirect

The deal follows through on Cisco's promises to expand its enterprise IT portfolio and to focus on buying companies outside of the United States.

Cisco Systems, which is looking to become a larger enterprise IT solutions player, is buying SolveDirect, whose technology is designed to make it easier for businesses to connect to cloud infrastructures and securely share data with partners and customers.

Cisco announced the deal March 25, though the networking giant did not disclose any financial details in its acquisition of the Austrian company.

“The move towards multi-sourcing and cloud services is accelerating the development of large ecosystems of companies—from enterprise IT and manufacturing, to SaaS [software-as-a-service] providers—that need to share data in a secure and scalable way,” Hilton Romanski, vice president and head of corporate business development at Cisco, wrote in a March 25 post on the company’s blog. “Most of the interactions between these service partners today require manual effort, growing cost and complexity for an organization as their number of service partners grows.”

SolveDirect’s cloud-based solutions help drive operational efficiencies by offering “enterprises and service providers a flexible way to integrate with service partners, and automate sharing of processes, data, and workflows in real time by eliminating manual practices and bottlenecks,” Romanski wrote.

The 13-year-old company’s cloud services management solution, ServiceGrid, helps to automate such tasks as workflow, data sharing and governance as enterprises collaborate with partners and customers in the cloud. “The SolveDirect acquisition aligns to Cisco’s goal of developing and delivering innovative solutions that streamline data and workflows across a unified network,” Romanski wrote.

SolveDirect will be folded into Cisco’s Services Platforms Group, which is led by Senior Vice President Mala Anand.

Cisco has been aggressive in recent years in buying companies that help build out its portfolio in such areas as cloud computing, video and collaboration. According to Romanski, such deals are “a key part of Cisco’s build, buy and partner innovation strategy.”

That acquisition strategy increasingly will focus on companies overseas. Like many major tech companies, about 80 percent of Cisco’s available cash—which right now reportedly is at about $46 billion—is held overseas. Cisco CEO John Chambers for years has been vocal about U.S. tax policy and has urged the government to allow for companies like his and others to bring some of that cash into the United States at a corporate rate lower than the 35 percent.

Chambers has said the situation has made it more difficult for Cisco to hire workers in the United States. In an interview with CNBC Feb. 13, he said that unless such the U.S. government offers such a repatriation of overseas cash, he will focus his acquisition interests on companies outside of the United States.

“If the majority of our money remains outside the U.S.—and this depends on tax policies—that’s where you'll see us acquire going forward,” Chambers said. “I'm a very loyal American citizen and company, but in terms of future growth, unless tax policy changes, you will see that occur outside the U.S.”

Of the 11 companies Cisco bought in 2012, nine of them were in the United States, though the largest deal—$5 billion—was for British-based NDS Group, according to Cisco figures. However, all three companies acquired by Cisco this year—Intucell and Cognitive Security in January, and now SolveDirect—are foreign entities.

In a New York Times blog March 23, money manager Robert Olstein is quoted as saying that what companies like Cisco—and Apple and Microsoft, which hold massive amounts of cash in offshore accounts—should do is bring the money into the United States themselves and pay the taxes on it. Then they could use the remaining money to buy back shares, a move that Olstein said drives up share prices by as much as 20 percent.

“These companies have been letting the tail wag the dog,” he told the Times. “They’ve been letting taxes determine their strategy, and that’s a basic mistake. You should never do that. You should have a good solid moneymaking strategy first, and only then worry about taxes.”