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AI World Conference & Expo · Boston, MA · December 11-13, 2017

This syndicated post originally appeared at Zeus Kerravala's blog.

Earlier this week Cisco and Citrix made some noise when they announced an expanded partnership. The partnership brings together the market leader in networking and data center infrastructure and combines it with the market leader in desktop virtualization. The expanded partnership should be a “win-win-win” for both organizations and their customers, as the two companies can bring their respective strengths together to deliver greater functionality through joint development. Some partnerships are nothing more than PowerPoint integration, but this one should have some teeth. As much as I like this partnership, I’m a firm believer that Cisco should pony up the cash, stocks or whatever else it needs and actually buy Citrix.

I’ve covered Cisco for many years and I’ve long felt that Citrix would be a great acquisition for the company. Cisco has stated through the years it didn’t want to be an application vendor (although UC manager and wants to deliver infrastructure). Citrix is infrastructure, it’s just application infrastructure. Given the current trends of cloud computing, BYOD and device evolution, Citrix would certainly command a hefty premium over its current $12 billion market cap, but I still think it would be worth it. My personal belief is that if an acquisition is a good acquisition, you can’t really pay too much. For example, if Cisco had paid 10x what it did for Selsius, would anyone really care now? After all, that technology purchase eventually made Cisco the market leader in VoIP. Conversely, if an acquisition is a bad one, then you can’t pay too little. There are many examples of this so I won’t make anyone look bad by mentioning one.

As for Citrix and Cisco, some may look at this and think it’s far too competitive with VMware because of VMware’s dominance on the server virtualization front. This may be true, but Cisco and VMware have both stated that they can work through areas of competition, such as the acquisition of Nicera and the virtual switch, and the most important thing is to give customers choice. This would be another example. Now, I wouldn’t expect to see Cisco go crazy and come out with an aggressive VMware replacement program, but I do believe the two could co-exist.

Another perceived negative side effect of this is that Citrix makes much of its money from Microsoft, and there may be no greater partnership in tech than that between Citrix and Microsoft. Both have made a significant amount of money off of each other over the years. While the battles between Cisco and Microsoft in the unified communications space have been well documented, Cisco and Microsoft have a strong relationship in the data center. Both companies would understand the value each would bring and they would want to disrupt it. One more point here is that given the fact that the corporate world is moving to a multi-OS model, Citrix, whether part of Cisco or an independent company, will be less reliant on Microsoft moving forward. Citrix’s main goal was to work with and expand the reach of Windows desktops. While that’s still important, Windows is fading and multi OS has now come closer to the norm.

With respect to cloud, the Citrix-backed CloudStack orchestration layer has garnered a significant amount of attention from network operators. OpenStack clearly has the lion’s share of media hype and enterprise interest, but CloudStack has quietly infiltrated many of the largest network operators in the world. Given Cisco’s significant presence in these networks and the service providers’ reliance on Cisco, it would make sense to have Cisco involved more deeply at the evolution of CloudStack.

NetScaler fills an obvious product gap for Cisco. Part of this week’s set of announcements was a reference-sell agreement between Cisco and Citrix. While this may turn into more long term, it would certainly give Cisco a strong product of its own for long-term strength in the ADC market. Given the rapid growth in the ADC market, the Netscaler asset would be one of the crown jewels of the acquisition.

Staying with product, Cisco has been making a strong push into the VDI space with its own VXI end-points. They’re in the VDI hardware space already, so why not add the software to it and deliver a complete solution? Cisco prides itself on the architectural sell and this would be a more complete architecture. I also believe the Citrix desktop virtualization software to be superior to that of VMware, particularly when it comes to handling multi-media traffic. Cisco could make this part of its Medianet and collaboration architectures.

Cisco typically makes smaller acquisitions because larger ones often have cultural mismatches (think Compaq-HP) but in this case, from my experience, the two companies are very similar culturally. Both CEOs spend a significant amount of time with company culture and both are concerned with creating a work environment that fosters innovation, so I don’t think the culture part of the merger would be a problem.

I know there’s the whole issue of repatriating cash to allow Cisco to do a deal this big, but there’s an election soon, so maybe this might get some attention from the government post-election. Also, with the smart people at Cisco, I’m sure they can think of a way to do this if the desire is strong enough.

Again, I’ve always thought this would make sense. Given the evolution of the data center to an environment where there’s value in having a bigger stack than the next guy, I think this makes even more sense now.

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Zeus Kerravala

Zeus Kerravala is the founder and principal analyst with ZK Research. Kerravala provides a mix of tactical advice to help his clients in the current business climate and long term strategic advice.
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