Cisco today revealed it has signed a definitive agreement to acquire Splunk for $28 billion in cash. The deal will add Splunk, one of the most widely-used platforms for managing IT operations, to Cisco’s portfolio, joining the AppDynamics observability platform in addition to a wide range of IT infrastructure equipment.
Chuck Robbins, CEO of Cisco, told industry analysts the combined entity will be one of the largest software companies in the world. The Splunk and AppDynamics platform creates a comprehensive observability platform spanning applications, networks and hybrid cloud computing environments, Robbins added.
By combining AppDynamics with the data collected by the Splunk platform, the combined company will be able to provide greater insights into IT operations than any other company, added Robbins.
Splunk CEO Gary Steele said the acquisition represents the next natural, logical step for Splunk and furthers its long-term partnership with Cisco to keep IT environments secure and resilient. The two companies will also be able to apply artificial intelligence (AI) more effectively to IT operations, he added.
In its most recent quarter, Splunk reported revenues of $911 million, with cloud revenue accounting for $445 million, or 29%, of the total. Total Splunk revenues are forecasted to be between $3.925 billion and $3.95 billion for fiscal 2024.
Splunk previously acquired SignalFX, a provider of an observability platform, in 2019. It’s not yet clear how the platform might be integrated into the AppDynamics platform, but Robbins said there is little overlap between the observability platforms the two companies currently provide.
The Splunk acquisition comes at a time when it’s becoming more apparent that the need for observability extends well beyond DevOps workflows as organizations become more dependent on software.
Each IT organization will need to determine how long it will wait for the Splunk acquisition to close before investing further in observability. Historically, acquisitions of this scale have been accompanied by price hikes to help fund the merger once the deal is concluded.
In the meantime, IT and DevOps leaders will likely revisit the way IT is managed in the months ahead. Splunk came to prominence at a time when most workloads were running in on-premises IT environments. While the bulk of workloads continue to run in those environments, many workloads deployed in the cloud are being managed using platforms designed specifically for those environments. Splunk has been making a case for a hybrid cloud computing approach that assumes the management of on-premises and cloud computing environments will become more unified.
In theory, economic headwinds are driving more organizations in that direction to reduce the total cost of managing IT. But it’s just as feasible to extend cloud tools to on-premises IT environments as it is to extend legacy tools to the cloud. Despite the inevitable outcome, Splunk rivals will spend the better part of the next year coming up with offers to switch platforms both before and after the deal eventually closes.