chanpipat - Fotolia
Cisco agreed this week to acquire Jasper for $1.4 billion to add cellular connectivity to its wireless IoT portfolio, which primarily offers low-power options for static devices. Cellular is typically used for devices in motion, such as cars.
"Cellular mobile connectivity was something we really didn't have," said Jim Doran, a vice president of strategy in Cisco's IoT group.
Jasper acts as a broker between enterprises and cellular carriers, Doran said. The company provides cloud-based software that manages wireless IoT connections and billing. Jasper takes a share of the revenue going to carriers.
Companies using its service include Coca-Cola, Microsoft, carriers AT&T and Telefónica, and automakers Tesla Motors, Nissan and General Motors. Customers of the Silicon Valley startup include 3,500 enterprises and 27 cellular providers across 100 countries.
Cisco, which expects to complete the acquisition by the end of April, plans to run Jasper as a separate business. While declining to discuss product roadmap, Doran acknowledged that Cisco could eventually use Jasper's cloud-based software in other IoT applications.
"Generally, that's a very interesting direction for us to go," he said.
Broadening its portfolio of cloud services is an ongoing strategic initiative for Cisco as it adapts to an increasing number of customers looking for software to manage their networks instead of hardware, which accounts for the largest portion of Cisco's business. The majority of Cisco's cloud services today are in security and managing Wi-Fi networks.
While Jasper adds an important piece to Cisco's wireless IoT portfolio, the company's technology is only a mechanism for delivering a limited set of IoT services. Cisco will continue to increase its service list through acquisitions, said Timothy Zimmerman, an analyst at Gartner. Services Cisco could consider include a cloud option for building and deploying IoT applications. Rival Amazon Web Services provides that service today.
Competition with Ericsson AB
Jasper competes directly with Ericsson AB, which signed a broad technology partnership with Cisco last year. While the acquisition might seem at odds with the agreement, analysts said the wireless IoT market is so young and evolving so fast that Cisco could find working with Ericsson more profitable than competing with its partner.
"If Ericsson and Cisco would be willing to work together, they could actually create an environment where they elevate the quality of these connectivity management solutions for everyone in the industry, and therefore help to increase the prices charged to carriers," said Steve Hilton, an analyst at the research firm MachNation.
Gartner's Zimmerman agreed, saying, "I don't see where there are any issues this early in the market."
Doran acknowledged the competition between Jasper and Ericsson was something Cisco would have to navigate. Nevertheless, "we're committed to the alliance that [Cisco and Ericsson] have together, and we'll find a way to make it work," Doran said.
Cisco and Ericsson are targeting an IoT market that will grow from $698.6 billion last year to nearly $1.3 trillion in 2019, according to IDC. The manufacturing and transportation industries spent the most on IoT last year. Over the next five years, industries expected to have the fastest IoT spending growth include insurance, healthcare and consumer.
Analytics unlock business value of IoT
Seven risks of deploying the Internet of Things
Bringing Internet of Things into facilities management