Tech M&A this year includes hyperconvergence and software-defined WAN deals.
As the cloud and software continue to transform IT infrastructure, vendors are making moves to keep up. This year saw plenty of tech M&A activity as established infrastructure vendors bought up hot startups to expand their platforms with new capabilities for the modern enterprise.
Tech giant HPE made a splash in the hot hyperconverged infrastructure space with its $650 million SimpliVity acquisition while rival Cisco acquired its HCI partner, Springpath. Hyperconvergence has been one of the hottest trends reshaping the data center, and established infrastructure suppliers have been eager to get in on what's estimated to become a $31 billion global market by 2025.
Meanwhile, the market for software-defined WAN – another hot trend in enterprise infrastructure -- consolidated with the acquisition of two of the leading pioneers in the market, Viptela by the ever-acquisitive Cisco and VeloCloud by VMware. The deals left few pure-play suppliers in the fast-growing SD-WAN market, which IHS Markit estimates will jump from $137 million worldwide in the first half of this year to $3.3 billion by 2021.
Other technologies that IT heavyweights snapped up include flash storage and analytics.
Many of the acquisitions are driven by enterprise adoption of cloud and more specifically, hybrid cloud, Dan Conde, analyst at ESG told me in an interview. Hyperconverged infrastructure enables private cloud, and acquiring a leader in that market gave HPE the ability to offer customers a range of cloud options. "People want the agility of cloud on-premises for a variety of reasons," he said.
The SD-WAN craze, meanwhile, is driven by the need for companies to provide cloud access to their employees, Conde said. "They realize a lot of traffic goes to Office 365, G Suite, or Salesforce, and they better find a way to adapt their branch office networking and routing to access the cloud efficiently and securely," he said.
Despite the big SD-WAN acquisitions this year, he still sees plenty of opportunity in the market, including managed SD-WAN services. ESG research has found that many companies plan to buy SD-WAN from service providers, he said.
Continue on to review some of the top M&A deals that will impact IT infrastructure in the years to come.
HPE buys SimpliVity
Hewlett-Packard Enterprise made one of the first big acquisitions of the year with its purchase of hyperconvergence leader SimpliVity. The deal gave HPE a "vast customer base among SMBs, which have been responsible for a great deal of hyperconverged storage purchases to date," Tim Stammers, senior storage analyst at 451 Research, wrote in a recent report. While HPE already had a hyperconverged product, only a small number were deployed as true hyperconverged systems, he said
HPE acquires Nimble Storage
HPE fortified its position in storage even more with its $1 billion cash purchase of Nimble Storage, a top supplier of hybrid and all-flash storage systems. The acquisition, combined with its SimpliVity purchase, propelled HPE into second place in the data center storage market in terms of revenue, according to 451's Stammers.
Cisco purchases Springpath
Cisco had already partnered with hyperconvergence software startup Springpath, so it was no big surprise when it moved to acquire the company this summer. The $320 million deal culminated Cisco's venture into hyperconvergence, which began with its HyperFlex product, unveiled in 2016 and produced in partnership with Springpath. Despite its relatively late entrance into the crowded hyperconvergence market, Cisco is often cited as a top HCI vendor by market-research firms.
Cisco snags Viptela
When Cisco announced in the spring that it was acquiring top SD-WAN supplier, Viptela, it left some networking pros wondering and worried about how the networking giant would integrate the startup's technology. Cisco's own attempt at SD-WAN with its IWAN product has been criticized as too complex, but even after the Viptela deal, the networking giant said it planned to continue to develop IWAN. Cisco completed the $610 million acquisition in August.
VMware inks deal for VeloCloud
Consolidation of the SD-WAN market accelerated with VMware's announcement earlier this month that it plans to acquire leading SD-WAN supplier VeloCloud. The deal expands VMware's networking portfolio beyond the data center to the branch and edge. With Cisco and VMware acquiring the two SD-WAN market share leaders, the market is now a "two-horse race for the No. 1 spot," Cliff Grossner, senior research director at IHS Market, said in a statement.
“And we could see even more consolidation as vendors set out to add SD‑WAN to their capability sets, especially since the technology is key to supporting connectivity in the multi-clouds that enterprises are building," Grossner added.
Extreme acquires Brocade's networking business
Extreme Networks has been on a shopping spree in the past year, catapulting itself into a leadership position in the networking market. Following its 2016 purchase of Zebra Technologies' wireless LAN business, Extreme agreed in March to buy struggling Avaya's networking business for $100 million. Not much later, it struck a deal to purchase Brocade's data center switching, routing and analytics business for $55 million in cash.
After completing the acquisition, Extreme Networks President and CEO Ed Meyercord said the company expects to generate more than $1 billion in annual revenue. That would make Extreme the third-largest wired and wireless enterprise networking equipment provider behind Cisco and HPE, Jim Duffy, senior analyst at 451 Research, noted in a report earlier this year.
Extreme said it now counts 30,000 active customers, 3,000 employees, and 6,000 channel partners.
Riverbed snaps up Xirrus
Riverbed Technology, which has been expanding beyond its WAN optimization roots into SD-WAN, acquired WLAN supplier Xirrus for an undisclosed amount earlier this year. Riverbed said Xirrus' cloud-managed WLAN products would bolster its SD-WAN capabilities, but the acquisition has broader ramifications by making Riverbed a stronger competitor to Cisco Meraki, said Shamus McGillicuddy, senior analyst at Enterprise Management Associates.
(Image: Pavel Ignatov/Shutterstock)
Cisco buys up AppDynamics
Cisco kicked off the year with a big acquisition to advance its evolution into a software and services company, buying hot application performance monitoring startup AppDynamics for $3.7 billion. The deal halted AppDynamics' IPO plans and bolstered Cisco's monitoring capabilities with application intelligence. In October, Cisco added more analytics capabilities with the acquisition of Perspica, a supplier of machine learning and data processing technology. Cisco said the acquisition, its biggest so far this year, would speed its AppDynamics strategy.
Cisco makes a claim for Broadsoft
In October, Cisco shook up the unified communications market when it announced plans to acquire BroadSoft, a supplier of cloud-based calling and contact center services, for $1.9 billion. The acquisition makes Cisco the market leader in UCaaS, but raises some questions and potentially creates some market disruptions, Irwin Lazar, VP and service director at Nemertes Research, wrote in a No Jitter blog.
(Image source: Broadsoft)