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Before I get into the post — I’ve interacted with Sanjit from Meraki on a number of occasions and have tremendous respect for him – he’s build a great company with a fantastic group of folks – and congrats to him and the Meraki team.
For those of you who don’t know – I was the founder and CEO of Pareto Networks which was acquired by Meraki competitor, Aerohive, in 2011 for our cloud networking capabilities (see YouTube video for details). Pareto also danced with Cisco, so I have an appreciation of where they are likely coming from. Additionally, at Wiretap, we’ve advised a number of public and private companies on cloud networking in the last 12 months – specifically around WiFi, campus, and branch networking.
Meraki: A smart buy and smart exit
- Accelerate revenue growth into their WLAN business
- Upgrade the old, unmanaged Aironet AP business that still likely brings in $200M-$300M in annual revenue. And more importantly, protect that revenue stream – which based our understanding, was primarily in the mid-market that Meraki, Aerohive, Xirrus, and others are going after.
- Gain a Cloud-Networking Platform that enables them to create and sell new networking services to small / medium business as an ongoing service. Meraki was more than WiFi – as they also have an interesting (and free) mobile device management (MDM) solution
- Our understanding is that Meraki had a relatively low average deal size (sub $10k) which means you need to turn a significant number of deal every quarter to make your number. This is even more pronounced once you are a public company
- Gains enterprise class access points. What we heard from customers and channels were limitations in Meraki’s commodity WiFi radios, which created deployment problems in non-standard buildings. Cisco’s WiFi and radio chops will solve this.
One open question is how does Meraki’s technology, which overlaps with not only existing WiFi products, but also ASA firewalls, and ISR routers become integrated within Cisco’s portfolio.
Who wins from this deal:
- Aerohive: Meraki will be distracted for a few quarters integrating into Cisco. This should help Aerohive accelerate their IPO plans.
- Other private and small cap public WIFI vendors (Ruckus, Meru, Xirrus, etc) investing in Cloud-based networking. We’ve heard that just about every major networking company with a presence in campus, branch, or network security is looking to build or acquire a cloud-networking capabilities. Unfortunately, there are not that many of them to be acquired.
Who loses from this deal:
- Aruba: This is a direct assault on Aruba’s new target area for growth for their new cloud based WiFi solution. Given the Aruba and Meraki shared a board member – this had to create some awkward discussions.
- Mobile Iron: A common assumption in Silicon Valley was the Cisco would acquire Mobile Iron for MDM (it was after all, the Airspace team from Cisco’s last major WiFi acquisition). Now that Cisco has a free MDM solution, it’s doubtful they need to invest in Mobile Iron.
- Any cloud-networking company that lacks a WiFi component to their solution. WiFi has become the anchor for campus and branch networking. Many customer segments we speak with are increasingly willing to trust managing their campus and branch networks to cloud-based management solution. A decision we made at Pareto to initially focus on branch routers / security and not WIFI proved a revenue scale challenge. We quickly learned that you sell roughly 10X access points to every branch router and that the economic buyer often would base a large part of their decision on WiFi capabilities.
Is Meraki SDN? Does Meraki extends Cisco’s SDN strategy to WiFi?
SDNCentral’s definition of Software-defined Networking (n) is: a new approach to networking that allow network operators more control of their infrastructure, allowing customization and optimization that enables invention of and delivery of new types of network services.
Based on this definition, Cloud Networking and therefore, Meraki, aren’t exactly SDN since they offer network operators little customization or optimization. However the value proposition of agility, flexibility, speed to turn up new services are similar to many benefits of SDN.
In addition, WiFi has long operated under an ‘controller-based’ architecture. Legacy controller architectures, such as those from Trapeze (Juniper), Airespace, and Aruba, that required the data and control traffic to run though a controller are far removed from SDN. Newer ‘controller-less’ or cloud-controller architectures, such as Meraki and Aerohive are essentially controller architectures that do not require data traffic to travel through the controller – and are very SDN-like.
Given our experience working with clients to design and develop cloud-networking platforms and SDN applications — there are more similarities than differences between the two technologies. For example, both SDN solutions and cloud-networking from Aerohive and Meraki offer APIs (some open, some closed) that enable programming of the data plane. On the flip side, in SDN, the packet forwarding decisions are made within an SDN application (sometimes a controller) while in cloud-networking packet forwarding decisions are made by the network device under direction of a cloud controller.
So while I wouldn’t label Meraki an SDN company, nothing prevents Cisco from enhancing the Meraki platform to be a cloud-based SDN controller in the future.
Based on our end customer engagements, we see limited customer value for using SDN / OpenFlow to manage WiFi networks today. The beauty of the Meraki architecture (and other cloud controller based WIFI solutions) is that for the most part it ‘just works’ which is the benefit of the closed architecture (ala Apple) – and we just don’t hear customers clamoring for this to change. We think this is primarily because a) campus and branch networks are relatively static; where b) simplicity is a most desired value proposition which is generally best delivered by an integrated single vendor solution.
(Disclaimer: I have no financial interest in either Aerohive or Meraki).
- Featured White Paper from Aricent Group: Application-Aware Routing in Software-Defined Networks (6/11/2013)
- Arista Fireside Chat Video Two: Developing Your SDN Strategy (5/21/2013)
- Featured Interview: Radware CTO, Avi Chesla, Discusses SDN Strategy in Application Delivery And Security (5/16/2013)
- 5/17: Catch BROCADE’s Demo of OpenFlow in Hybrid Port Mode During SDNCentral’s DemoFriday™ (5/16/2013)
- Missed the Lunch? Catch the Video of Arista Networks SDN Essentials Seminar (5/15/2013)