A few days ago, Cisco announced that it was acquiring IoT platform provider Jasper Technologies for $1.4 billion. The amount is the equivalent of Jasper’s latest funding round, which is a testimony to Jasper’s market traction during the last few years. Jasper focuses on the emerging IoT lifecycle management space providing capabilities to automate and manage the deployment of IoT solutions. The acquisition represents a great addition to Cisco’s IoT software portfolio, with very interesting implications for the IoT market.
From the strategic standpoint, Jasper offers a great solution for Cisco and its customers to manage, scale, and monetize their IoT services. Jasper reportedly has over 3,500 customers and 25 IoT service providers that have been using its platform across 100 countries. While Jasper can be classified as an IoT platform, it doesn’t directly compete with the IoT services provided by cloud providers such as AWS, Microsoft, or IBM. Instead, Jasper focuses on managing and automating the lifecycle of IoT services and solutions. From this perspective, Jasper not only provides Cisco with an extremely relevant customer base, but also with a highly developed IoT platform that can be extended with Cisco’s native IoT services such as security, advanced analytics, enterprise Wi-Fi, etc.
Financially, Jasper’s acquisition can be considered one of the biggest M&A events in the IoT space. However, the price represents about 1% of Cisco’s current market cap ($115 billion). Also the tech giant has been very vocal about the potential of the IoT market—estimating that it will be worth about $19 trillion over the next decade. Regardless, the acquisition represents a strong validation of Cisco’s commitment to the IoT space. In addition to its profound impact in the IoT technology landscape, we believe Cisco’s acquisition of Jasper has very interesting implications for enterprises embarking in IoT initiatives.
5 key implications of Jasper’s acquisition for the enterprise IoT market
1. IoT management platforms are leading the market
Cisco’s acquisition of Jasper represents a strong validation that IoT management services, such as analytics, management, or security, are generating more traction in the market compared to IoT solution development services. This trend is similar to what we experienced in the enterprise mobile space in which mobile device management (MDM) was the first—and arguably the only—generation of platforms that developed meaningful revenues and market share.
2. Consolidation in the IoT market is happening early
Cisco’s acquisition of Jasper represented one of the biggest M&A events in the IoT market, a signal that consolidation in the space is rapidly growing exponentially faster than previous trends, such as enterprise mobility. From that perspective, we should expect M&A activity in the IoT space to continue aggressively as incumbents are forced to remain competitive. Also, the recent correction and volatility in public markets is making for a more attractive M&A climate. This trend might make it harder for enterprise IoT startups to survive as standalone companies.
3. IoT incumbents continue to play hard early
Complementary to the previous point, Cisco’s acquisition of Jasper is another sign that top enterprise software companies are committed to lead innovation in the enterprise IoT space. This tendency is completely opposite to what happened in the enterprise mobility space in which innovation was mostly led by startups, and enterprise software incumbents were notoriously late to the market. Companies like Amazon, Microsoft, IBM, and Salesforce have already released some of the top enterprise IoT platforms in the market. The acquisition of Jasper will secure Cisco a place as one of the lead enterprise IoT platform providers in the current market.
4. Cisco is now relevant with IoT manufacturers and consumers
One of the unique aspects of the Jasper IoT platform is that it was not only used by enterprise customers, but also by IoT service providers and manufacturers. This unique market position will offer Cisco’s IoT solutions a series of distribution channels typically hard to develop by other enterprise IoT platform providers.
5. Its getting harder for IoT standalone platforms to compete
The acquisition of Jasper is another example of the competitiveness in the enterprise IoT market and the challenges faced by IoT platform startups trying to survive as standalone companies. Cisco’s Jasper joins companies such as Microsoft, Amazon, Salesforce, and IBM providing very innovative enterprise IoT platforms while also leveraging their extensive distribution channels and customer-based networks to develop meaningful market share. As a result, standalone enterprise IoT platform startups are starting to feel pressure to remain competitive and differentiated in this market.
Who gets acquired next?
After a sizable acquisition like Jasper’s, it is conceivable that enterprise software incumbents will look for other targets to continue expanding the value proposition of their IoT offerings. The ideal targets could be direct competitors of Jasper, as well as enterprise IoT platforms with relevant traction and customer base. Despite the rapid growth of the enterprise IoT market, the group of IoT startups with real traction in the space is not very large and, therefore, they are likely to become a M&A target. Exciting times.
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