Cisco's Huge BroadSoft Buy Signals End of 'On-Prem World'

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Cisco on Monday announced an agreement to acquire BroadSoft in a deal worth $1.9 billion, or $55 per share.

Cisco’s Rob Salvagno

In announcing the move, Rob Salvagno, head of Cisco’s M&A and venture investment team, wrote that Cisco chose BroadSoft not only for its portfolio of cloud collaboration platforms and business applications – assets Cisco already holds – but for BroadSoft’s partnerships with more than 450 telecom carriers in 80 countries, including 25 of the top 30 globally, and some 19 million BroadSoft business subscribers.

Salvagno called BroadSoft’s portfolio “complementary” to Cisco’s Hosted Collaboration Solutions (HCS) line as well as its overall investments in cloud-based collaboration solutions.

“Following the close of the acquisition, Cisco and BroadSoft will provide a comprehensive SaaS portfolio of cloud-based unified communications, collaboration and contact center software solutions and services for customers of all sizes,” he said.

Co-founder and president of Avant Communications, Drew Lydecker, sees Cisco’s move as a big validation of SaaS.

“This is the biggest validation that we’ve seen that the on-prem world is officially over,” he told us. “Cisco’s acquisition of Broadsoft is also a validation that everything is moving to a software-defined, subscription-based economy.”

Avant’s Drew Lydecker

Scooping up Broadsoft also demonstrates that there’s a shortage of IT talent — and Cisco is recognizing it. “So, to have managed UCaaS platforms globally, Cisco is saying, ‘We want in that game,'” Lydecker told us.

BroadSoft employees reportedly will join Cisco’s unified communications technology group, led by Tom Puorro, VP and general manager, with the goal of expanding the appeal of the combined suite of collaboration capabilities across all market segments.

“We believe that our combined offers, from Cisco’s collaboration technology for enterprises to BroadSoft’s suite for small and medium businesses delivered through service providers, will give customers more choice and flexibility,” said Rowan Trollope, senior vice president and general manager of Cisco’s Applications Business Group, in a statement.

“We are excited about this transaction, which represents the culmination of a robust process undertaken by BroadSoft’s board of directors to maximize shareholder value,” added Michael Tessler, president and CEO, BroadSoft. “As businesses continue to move toward the cloud in search of simplicity and speed, joining Cisco will allow us to deliver best-in-class collaboration tools and services. BroadSoft’s hosted offerings, sold through the service providers and aimed at small and medium businesses, are highly complementary to Cisco’s on-premises and enterprise-centric HCS offerings.”

Cisco’s pending acquisition of BroadSoft proves that companies with a singular focus, like BroadSoft, 8×8, RingCentral, are big disruptors in the market.

“These vendors don’t do routers, they don’t do on-prem hardware, they don’t do carrier network services, they don’t do infrastructure as a service — they do UCaaS and they do UCaaS only,” Lydecker said, adding that he’s finding that companies with a singular focus are extremely successful. He points to Cisco’s acquisition of Viptela Inc., an SD-WAN company, announced in March.

Industry analyst Jon Arnold, principle at J Arnold & Associates, is at the BroadSoft Connections conference this week and says BroadSoft is happy with the deal — although it’s not clear what other offers were being considered.

“Announcing this at the start of their Connections conference changes the focus here, and as we hear about their road map, it will be interesting to see how all this gets folded into Cisco’s collaboration business unit,” said Arnold. “Considering that Cisco paid much more for WebEx, we need to closely watch whether BroadSoft’s portfolio remains in place, or if it becomes absorbed by platforms like Spark.”

This latest acquisition is expected to close during the first quarter of 2018, subject to customary closing conditions and regulatory review. Prior to the close, Cisco and BroadSoft will continue to operate as separate companies.