Cisco to Buy IoT Platform Provider Jasper for $1.4 Billion

The deal will enable Cisco to offer a more complete IoT portfolio as customers transition from selling products to selling services, officials say.

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Cisco Systems officials are looking to significantly upgrade the tech vendor's capabilities in the Internet of things with the planned $1.4 billion acquisition of Jasper Technologies, a private company that has built an IoT platform that makes it easier for enterprises to connect their products through the cloud.

Executives for both companies announced the deal Feb. 3, saying the combination of their product portfolios will create a much more complete IoT offering. Cisco offers much of the back-end data center systems that enterprises and service providers use to build their public and private cloud environments, and software and services on the other end, from analytics to collaboration.

Jasper offers the platform that customers can use to connect their products through the cloud and then manage those connections, making it easier for enterprises to embrace the Internet of things. The platform connects any product via mobile networks run by service providers, and then offers a software-as-a-service (SaaS) to manage those connections.

"It gives customers everything they need to build connected businesses," Rowan Trollope, senior vice president and general manager of Cisco's IoT and Collaboration Technology Group, said during a conference call with journalists and analysts, adding that it reduces the complexity involved in connecting products at scale. "What that means is that our customer can connect a car, a jet engine, a pacemaker or an ankle bracelet easily."

Jasper has more than 3,500 enterprise customers and 27 service provider partners, all across more than 100 countries, according to Cisco officials.

Cisco customers increasingly are looking to transform themselves from companies that sell products to ones that offer connected services, Trollope said. The IoT gives them that capability, and the combination of solutions from Cisco and Jasper will make that transition easier, from the data center systems through the connections to the analytics and other services at the end.

"Our customers are sprinting toward this connected future, but complexity is hobbling this progress," he said.

Jasper CEO Jahangir Mohammed said during the conference call that the "IoT is about transitioning product businesses to dynamic services businesses."

After the sale is completed later this year, Mohammed will run Cisco's new IoT Software Business Unit, reporting to Trollope. Cisco officials said the company will build upon Jasper's IoT service platform by adding new services, such as enterprise WiFi, security for connected devices and advanced analytics.

The IoT is expected to grow rapidly over the next several years as more systems, sensors and devices become connected to the Internet and each other. Cisco officials are predicting that by 2020, there will be 25 billion connected devices worldwide, from cars and home appliances to industrial systems, medical appliances and baby monitors. Forecasts from other industry observers vary, but all agree that the growth rate will be steep. Cisco officials also say the economic impact worldwide could hit $19 trillion worldwide by 2020.

IDC analysts are predicting that spending on the IoT will jump from $698.6 billion last year to almost $1.3 trillion in 2019.

Cisco has been aggressively building out is IoT capabilities for the past few years through acquisitions, partnerships and in-house development. In July 2015, the company rolled out its IoT System, a collection of new and existing products that touch everything from networking and security to management and analytics. The products offer users a complete set of tools to manage not only complex and diverse sets of systems, endpoints and platforms needed for the IoT, but also the massive volume of data they will generate, officials said.

In November 2015, Cisco announced a partnership with telecommunications giant Ericsson that will help both push deeper into a range of emerging market segments, including the IoT, software-defined networking (SDN) and network-functions virtualization (NFV).

Responding to a question, Trollope said the Jasper deal will have no impact on the Ericsson partnership, noting the potential size of the IoT market and the expected need for broad solutions.

"It's a big industry and we have to solve it across the board," he said. "It's such a growing industry right now that there's a lot of room."

During the company's most recent quarterly financial call in November, Cisco CEO Chuck Robbins said the company is growing its business in both private and public clouds. Robbins noted that the company's business with the largest Web-scale companies grew more than 20 percent during the quarter. In addition, Kelly Kramer, executive vice president and CFO, said that total deferred revenue had grown 10 percent, with product deferred revenue increasing 16 percent and services growing 7 percent. The growth in deferred revenue is an indication of Cisco's continued transition from just selling products to selling services that come with recurring revenues.