Cisco to Extend its Reach in Software and Cloud Collaboration With Acano Acquisition
Nov 21, 2015
Cisco announced today its intent to acquire Acano, a next-generation collaboration infrastructure and conferencing software company.
Acano offers a software-based multitenant platform for audio, video, and web collaboration within a persistent work space. Acano launched coSpaces, its converged conferencing and team space collaboration solution, more than two years ago and has been growing at a rapid pace from the start. It has targeted large enterprise accounts as well as service provider partnerships to enable flexible cloud services. With a highly scalable, open and interoperable platform that can be deployed as a dedicated appliance or virtualized software, Acano has a leg up in the market in terms of performance, scalability and user experience. Its WebRTC capabilities and tight integration with Lync have won the company an impressive customer base. Backed by a seasoned management and development team, Acano has shaken up a few things for the more established vendors. Customers have largely chosen Acano for its approach to audio, video, and web conferencing on a single platform at lower costs. A big benefit for many of those customers has been the replacement of existing audio conferencing bridge solutions to save upwards of thousands of dollars every month.
By all means, this acquisition is significant news for the industry. Acano’s collaboration platform is well aligned with Cisco’s vision and push into software and cloud-based collaboration. Cisco has been focused on removing the traditional barriers to meetings by eliminating the silos between audio, video and web conferencing to make collaboration faster and easier. The acquisition is also synergistic with Cisco's increasing focus on mobile-enabled workspaces that fuse synchronous and asynchronous collaboration. Acano does have a fair degree of technology overlap with Cisco’s existing portfolio, including Spark team collaboration and WebEx web conferencing and video conferencing services. At the same time, Acano brings a level of interoperability (especially with Lync/Skype for Business) and scalability that Cisco solutions do not offer. It is not clear yet if the Acano client will replace some of the existing collaboration solutions in Cisco’s portfolio or mostly augment them.
In recent years, the collaboration industry has seen massive shifts and disruption. Users are moving in droves to next-gen software such as Slack, Hipchat, and Glip which are stealing the thunder from established UC vendors by offering flexible and inter-operable low-cost group chat with video and web conferencing. Particularly in the video conferencing market, the hardware-based, dedicated, and expensive infrastructure solutions are out of the door. Newer competitors such as Acano and Pexip as well as cloud service providers Blue Jeans and Zoom have disrupted the market. Cisco has made a concerted effort in recent years to move from its hardware-based products to cloud and software solutions and has seen impressive growth in its collaboration business. However, its efforts have been multi-pronged and as a result its collaboration portfolio has become a mish mash of multiple clients and architectures. Most of all, Cisco’s big push toward a unified cloud play has very much been a work in progress. This acquisition may provide the glue for Cisco to lead with a single architecture, a single client, and a unified cloud to compete more aggressively with its biggest rivals Microsoft and Google. It also positions Cisco to compete better against traditional video conferencing competitor Polycom, which offers strong native interop capabilities with Microsoft Skype for Business.
Mergers and Acquisitions remain a key part of Cisco's strategy. It is however ironical, in this case, that the Acano team is mostly ex-Cisco employees who left the company as a concerted team to develop and drive a new technology for next-generation collaboration. It speaks to how true innovation sometimes takes place outside of large companies. What is also interesting about this deal is the price tag of the acquisition. Cisco will pay a whopping $700 million in cash plus additional retention based incentives for Acano employees who join Cisco. It is estimated that Acano’s revenue reached approximately $25 million for full year 2014. According to some industry sources, Acano was on target to double that in 2015. Looking at the price-to-sales ratio of the acquisition, Cisco is paying about 14-16x which is unlike anything we have seen in the conferencing markets in recent years. It is clear that Cisco values the potential of the Acano platform to grow its collaboration business exponentially.
We consider the Acano acquisition to add tremendous value to Cisco's portfolio. It remains to be seen if the video and web collaboration market will heat up enough to justify these huge investments. One thing is clear, the industry is seeing rapid innovation with several new solutions and vendors disrupting the staus quo.
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