Market Insight

Jasper Acquisition Adds “Essential Ingredient” to Cisco’s IoT Platform

February 04, 2016

Sam Lucero Sam Lucero Senior Principal Analyst, IoT Platforms

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Event Overview

  • Cisco announced on 3 February 2016 its intent to acquire Jasper, which offers a leading cloud-based IoT service delivery platform, for $1.4 billion. The deal is expected to close in April 2016.
  • The acquisition of Jasper will significantly expand Cisco’s recently formed IoT Software Business Unit. Jasper CEO Jahangir Mohammed will run the unit under Rowan Trollope, Cisco senior vice president and general manager, IoT and Collaboration Technology Group.
  • The Jasper platform fits well within other Cisco IoT assets, including non-cellular wireless and fixed connectivity assets at the low end; and data connectivity and analytics assets higher up the stack. Cisco will continue to develop the Jasper platform and add new services, such as industrial Wi-Fi, IoT security, and advanced device analytics.
  • Jasper was founded in 2004 and headquartered in Santa Clara, CA. The company has about 385 employees and works with 27 mobile operator group partners to serve 3,500 enterprise customers in more than 100 countries.

Our Analysis

IHS views Cisco’s acquisition of Jasper as strongly positive for both companies. As the IoT becomes a mainstream technology trend affecting most industries and markets, major ICT vendors across the board have announced strategies to play a key role in the development of IoT technologies, services, and standards. It is clear that there is a tremendous opportunity in providing software for IoT services. However, IoT deployment and support requires an end-to-end approach that encompasses a variety of functions, including support for multiple forms of fixed and wireless connectivity; data management and storage; application enablement; and integration with internal enterprise systems.

 Benefits to Cisco

The addition of Cisco’s service platform fills an important role in Cisco’s IoT portfolio. Cisco supports other methods of connectivity, including fixed as well as low-power options such as LoRA; however until now cellular management was not directly supported by Cisco. For both companies, communication service providers represent an important channel; meaning Jasper should integrate relatively seamlessly into Cisco’s strong channel strategy.

In IoT, as in many other areas, Cisco’s go-to-market strategy has and continues to be centered on its gear even as it moves more deeply into software and services. In IoT, the company continues to generate the most IoT revenue from its ruggedized gateways. However, the company has devoted significant focus and investment over the past two years in expanding its platform of IoT software and services, both to drive equipment sales and to deepen relationships with its customers. As part of that effort, Cisco has been building an IoT software unit and developing a more comprehensive IoT software ecosystem strategy. The addition of Jasper not only provides Cisco with one of the two leading cellular IoT service delivery platforms, but also gives Cisco a very talented and experienced management team that hopefully will imbue Cisco’s IoT software efforts with a sharper strategic focus.

Acquiring Jasper gives Cisco an enormous step forward in creating a global footprint of IoT connectivity for its customers. Although Jasper’s Control Center IoT service delivery platform is clearly the market leader in the view of IHS, it faces very stiff competition from Ericsson with its Device Connection Platform. With recent wins by Ericsson, the market is nearing a duopoly status, comprised of Jasper and Ericsson, and trailed by several MVNOs, new IoT service delivery platform entrants, and the various operator self-built platforms. While Control Center forms the “glue” for the M2M World Alliance  of nine major mobile operators groups, Ericsson’s Device Control Platform likewise is the basis for the Global M2M Association of seven major mobile operators.

A curious wrinkle of the announcement is that Cisco and Ericsson themselves have just announced a major global strategic partnership to collaborate closely across their respective portfolios. Accordingly, the Jasper acquisition puts Cisco into direct competition with Ericsson in this area. Clearly, that partnership covers a far wider array of activities than IoT service management – IoT was identified as one of three motivators for the partnership – however, at least in early days, IoT does not appear to be a primary focus for the partnership. Still, the Jasper acquisition will provide a source of some ongoing friction as Ericsson and Cisco begin to work more closely in IoT.

Benefits to Jasper

The deal also makes sense for Jasper. Although the company has been incredibly successful to date, there are potential storm clouds on the horizon. For one, the wider IoT space is moving toward a platform model that encompasses a number of functional layers, including the service/connectivity layer. As shown in the figure below, Jasper focuses mostly on the “Connectivity Management” layer of the overall IoT platform stack. 

While Jasper’s traditional tight focus on connectivity management (“service delivery”) has been very successful to date, the underlying trend in the market now is increasingly toward more comprehensive IoT platforms that encompass the five functional layers shown above. More so, a number of leading ICT players, such as Huawei and Amazon Web Services, are focused on a larger IoT ecosystem view, encompassing hardware, as well as functions such as security, analytics, and professional services, often through close partnerships with other technology vendors. Acquisition by Cisco gives Jasper firmer footing in this more comprehensive IoT platform go-to-market model.

Second, Cisco’s global enterprise sales channels should dramatically boost Jasper access to customers.  Though Jasper has benefitted from working through its operator partner’s business sales channels, Jasper has often been put in the position of having to help educate operator staff and bringing deals to the operators themselves. Cisco has a global marketing and sales footprint that should help accelerate this process, in addition to the relationships Cisco has that may not be available solely via Jasper’s operator partners.

Finally, competition in the cellular IoT service delivery / global footprint market is moving away from “just” Ericsson and a small number of MVNOs, to broad-based entry by major ICT vendors like Huawei, Fujitsu, Amazon Web Services, and others. While Jasper can forge partnerships, as it did with IBM, its roster of deep-pocketed competitors will only grow larger over time. At the same time, some innovative new competitors, such as Stream Technologies, are starting to provide a vision of IoT service delivery at what Stream calls “Internet-scale pricing”, i.e. by implication potentially much lower pricing than Jasper. Indeed, for Jasper’s management team, this may be the perfect moment to “exit stage left” into the warm embrace of deep-pocketed suitor.

Implications for the IoT market

For the wider IoT market, Cisco’s acquisition of Jasper is not likely to drive much of a shift away from the underlying secular trends discussed above. In the estimation of IHS, it is likely that the acquisition will enable access to a much broader array of connectivity technologies than just cellular. Jasper has been laser-focused on cellular connectivity, and has done so to good effect. However, the IoT market is increasingly shifting to a “multi-connectivity” model. Indeed, many of the operators that have developed their own platforms in-house have done so at least in part of manage devices connected over wireline, short range wireless, RFID, and low power wide area networks (LPWAN). While Cisco says it will enable industrial-grade Wi-Fi access, IHS expects this will rapidly be expanded to other connectivity technologies as well.

Furthermore, IHS believes Cisco is likely to make additional acquisitions to fill out other aspects of its IoT platform / ecosystem play that it does not already have in house. In particular, IHS would assume that an application enablement platform company, a data management company, or a big data analytics company would be prime targets for near term acquisition by Cisco.

 

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