Cisco is to acquire Internet of Things (IoT) service platform provider Jasper Technologies for US$1.4 billion (£974 million). The privately held company is based in Santa Clara and delivers a cloud-based IoT service platform to help enterprises and service providers launch, manage and monetise IoT services on a global scale.
The proposed acquisition will allow Cisco to offer a complete IoT solution that is interoperable across devices and works with IoT service providers, application developers and an ecosystem of partners. Cisco said it will continue to build upon the Jasper IoT service platform and add new IoT services such as enterprise Wi-Fi, security for connected devices, and advanced analytics to better manage device usage.
Jasper CEO Jahangir Mohammed will run the new IoT Software Business Unit under Rowan Trollope, Cisco senior vice president and general manager, IoT and Collaboration Technology Group. The acquisition is expected to close in the third quarter of fiscal year 2016, subject to customary closing conditions.
The two companies said that Jasper’s current mobile operator partners and enterprise users will see no change to Jasper’s core business and that no products or services will be discontinued.
Frost & Sullivan Digital Transformation principal analyst Sheridan Nye, commented that the price Cisco is paying is believed to be as much as 20 times the company’s annual revenue in 2015. Although Jasper's revenues were not disclosed, they are believed to be in the range of $70-$75 million in 2015.
Nye said that Jasper’s Control Center SaaS platform enables enterprises and communications service providers (CSPs) to provision cellular connectivity and manage IoT devices and services. The company has built up market dominance over the last 10 years since starting out as MVNO in the earliest days of machine-to-machine (M2M).
Having grown in parallel with the burgeoning market, the company productised its platform and developed the scalability that has made it a market leader. Today it boasts over 3,500 enterprise customers and connectivity partnerships with 27 operator groups, including AT&T, NTT, and Telefonica (which formerly part-owned Jasper), among others.
Jasper made no secret of its intension to launch an IPO last year, according to Nye, but in the end that never came. ‘The value of a pure connectivity play was likely to have been less attractive to investors than other hot growth areas such as data analytics and machine learning,’ observed Nye. ‘A sale to a vendor with end-to-end ambitions in IoT was therefore sure to deliver a higher return.’
Nye noted that the price premium reflects the importance to Cisco of completing its IoT stack. Its existing portfolio spans fixed and wireless protocol edge gateways, data management and analytics, but it lacked the mobile wireless connectivity piece. With the projected growth of IoT devices on the move – such as cars and wearables – Cisco’s lack of a cellular platform was a substantial gap that could only get bigger.
Nye pointed out that up to now Jasper has largely concentrated on providing services for major mobile operators and other CSPs. However, she commented: ‘The operators now seem somewhat relegated to the back seat. Cisco brings many thousands of enterprise customers as well as the ability to extend and integrate the platform capabilities with other IoT solutions and back-end enterprise systems.’
Nye said that Jasper’s SaaS model depends on basic per-device, per month fees, but the price of connectivity is falling. A growing proportion of Jasper’s revenues are therefore believed to stem from consulting and integration.
The potential to grow this high-end business is limited by the number of major operators and undermined by investments they choose to make in their own IoT platforms. With Cisco, in contrast, Jasper’s addressable market opens up to many more customers, she said.
Questions have been raised over how the Jasper deal will affect Cisco’s global alliance with Ericsson revealed late last year, which is also designed to bolster the company’s mobile wireless play.
In Nye’s view, although Ericsson has its own IoT connectivity platform, the customers are mainly tier-2 operators so competition with Jasper is partial. Cisco’s Trollope claimed news of the acquisition was well received by the Ericsson leadership and added: “This is a really big market and no one is going to address everything.”’
Cisco chief executive officer Chuck Robbins, said: ‘I am excited about the opportunity for Cisco and Jasper to accelerate how customers recognize the value of the Internet of Things. Together, we can enable service providers, enterprises and the broader ecosystem to connect, automate, manage, and analyze billions of connected things, across any network, creating new revenue streams and opportunities.’
‘IoT has become a business imperative across the globe. Enterprises in every industry need integrated solutions that give them complete visibility and control over their connected services, while also being simple to implement, manage and scale,’ said Jahangir Mohammed, Jasper chief executive officer. ‘By coming together, Jasper and Cisco will help mobile operators and enterprises accelerate their IoT success.’