If there was any doubt that there’s a rush to acquire SDN startups, this morning it’s been confirmed. Cisco Systems (CSCO) has announced its intent to acquire Tail-f Systems, one of the hottest SDN startups — named to the Top Ten in our “SDN Revolution” report — in a $175M deal to bolster its Software Defined Networking (SDN) technology.
Cisco is paying $175 million in cash and retention-based incentives in exchange for all shares of Tail-f.
Tail-F, headquartered in Stockholm, Sweden, is probably best known for being one of a gaggle of startups selected for AT&T’s coveted Domain 2.0 program, its list of potential future vendors in its SDN network plan. Tail-f makes a management system for orchestration and managing of applications deployed in an SDN network environment.
The real value of Tail-f’s platform is as an “overlay” network that ties together software elements in a network. It enables network operators to manage all of their services and network devices from a single network interface. Its last known funding round was $6.3M on Sept. 14, 2011, though company officials have been mum on recent financing. Its largest investor was Sweden’s SEB Venture Capital.
Tail-f was named one of the “Top Ten” startups we identified in our SDN report, released earlier this month. The report pegged the value of $150M, so the $175M valuation makes sense, and it proves our point that competition for SDN startups is rising and that values are moving up.
Cisco says the acquisition will help it move more rapidly toward and open, virtualized environment.
“The acquisition of Tail-f accelerates Cisco’s cloud virtualization strategy of delivering software that increases value to our customers’ applications and services, while supporting Cisco’s long-standing commitment to open standards, architectures, and multi-vendor environments,” states the release.
Tail-f has filled in an important niche in the new SDN networking approach, the goal of which is to build a new software-based network built of open, dynamic components. The Rayno Report has built an SDN architectural view which can be seen below. Tail-f falls into the “orchestration” category. Basically, the software sits at the top of the stack and helps network providers automate the deployment and management of applications.
What Tail-f does not do: It does not make an SDN controller or OS, the core pieces of infrastructure behind SDN. This probably makes it a good fit for Cisco, which last year set the stage with its core SDN pieces in its big $900M SDN acquisition, Insieme.
The Tail-f deal is an impressive move for Cisco, though. There are a limited number of “hot” SDN startups around, and Cisco has shown it wants to move fast. This is another bold SDN move for Cisco, and it shows the company is serious about building out an SDN ecosystem — or at least beating others to the punch.
The downside? Expect critics and networking expers to ask if Cisco will really keep the Tail-f platform “open,” as it’s main value was in allowing service providers to connect to a wide range of different vendor hardware. That means being able to manage all vendor devices, not necessarily just Cisco. Many networking experts will be watching closely to see if Cisco is serious about keeping SDN a truly open environment.
Tail-f employees will join Cisco’s Cloud and Virtualization Group led by Gee Rittenhouse, vice president and general manager, according to Cisco. The acquisition of Tail-f is expected to be completed in the fourth quarter of fiscal year 2014.