Cisco's Splunk Buy Hints at Importance of AI in Unified Communications

The long-discussed rumors of a Cisco-Splunk Merger came true on Thursday morning, with Cisco announcing a $28 billion acquisition that shows its commitment to expanding AI in unified communications environments.

The San Jose, California-based technology firm has had a solid fiscal year, with its 2023 revenue reaching some $57 billion, an increase of 11% when compared year-over-year – the firm’s highest rate of growth in over a decade – a spokesperson for the firm told Channel Futures.

It then appears that it would only make sense to spend some cash. This morning Cisco did just that, announcing that it would acquire Splunk, the San Francisco-based cybesecurity business founded in 2003.

With solutions that touch virtually every enterprise sector/vertical, including advanced threat detection, automation and orchestration, IT modernization for AWS, Microsoft Azure and other environments, the move would seem to be a sensible one.

As of July 31, 2023, Splunk was doing well too. Breaking down the company’s finances, Splunk reached almost $4 billion in annual recurring revenue, with 16% year-over-year growth. Its cloud sector earned the firm nearly $2 billion of that and accounted for an annual recurring revenue rate of 27%.

The deal, worth a reported $28 million, is still subject to regulatory and shareholder approval but is expected to clear. Look for the duo to focus its combined efforts on adding more AI in unified communications.

Back in February 2022 Cisco did not respond to rumors that it might buy Splunk. The Wall Street Journal reported that Cisco had offered $20 billion.

Analyst: Some Challenges Lie Ahead

In addition to an expanded portfolio, the pair will have a greater global reach and go-to-market strategy, said Cisco. Anurag Agrawal, founder and chief global analyst at Techaisle, told us that the rumor mill was spinning for at least three years.

Techaisle’s Anurag Agrawal

“Finally, it is happening, and to me, it makes sense,” he said. “The acquisition significantly expands Cisco’s security portfolio and accelerates its move to the security cloud platform. Plus, Cisco now has access to Splunk’s data platform for improving end-to-end observability and IT operations.”

Agrawal acknowledges, regardless, that integrating the two sizable organizations might prove challenging and time-consuming and may lead to customer churn.

“However, Cisco and Splunk will likely work hard to prevent customer and employee churn,” he told Channel Futures.

Set to Create one of the Largest Global Software Firms

Cisco has more than 86,000 employees worldwide, with Splunk having more than 8,000. That would make the merged firm one of the largest in the world. In addition to an increased global scale, there is to be a heavy focus on bringing more AI into unified communications.

As the duo has a complementary portfolio, with AI, security and observability being the primary focuses of the companies, we reached out to Cisco to see what the partner play for MSPs might be. The company pointed us to a blog written by Cisco CEO Chuck Robbins, where Robbins spoke about the drastically changing nature of IT.

We also reached out to Splunk for comment on what it might mean for MSPs. We were directed to a press release and a blog announcing the merger.

Stay tuned to Channel Futures for more on this developing story.