12 Things Partners Need To Know About Cisco's Acquisition Of AppDynamics

"The Next Software Franchise"

Although Cisco's blockbuster $3.7 billion acquisition of AppDynamics has partners cheering, many questions remained about the networking giant's implementation, sales and go-to-market strategy.

Many of these questioned were answered during a conference call on Tuesday with the media and analysts which included AppDynamics CEO David Wadhwani and Rowan Trollope, senior vice president and general manager for Cisco's IoT and applications business, who will lead its new AppDynamics division.

"[AppDynamics] has the potential to build the next software franchise," said Rob Salvagno, Cisco's vice president of corporate development, during the call.

Here are 12 important highlights from the conference call that channel partners need to know.

AppDynamics Has A Direct Sales Strategy

"We sell into a very large market, predominately focused on and supported by a direct sales team," said AppDynamics's Wadhwani.

Jamie Shepard, senior vice president for strategy and healthcare at Lumenate, a Dallas-based solution provider who partners with AppDynamics, said the company initially needed a more direct sales force because it faced challenges finding solution providers with the correct skillset.

"AppDynamics had a huge challenge with the normal VAR community and it wasn't AppDynamics issue, it’s the VAR community because they didn't grow up applications-focused like we did," said Shepard.

Combined Offers Comi ng Soon

"We’re going to accelerate investment in growing [AppDynamics] existing sales model," said Cisco's Trollope. "It's the fastest growing software company out there … There's going to be opportunities in the near and medium term for us to combine and bring combined offers to the marketplace at least in the sales cycle. On the data center front, is definitely an area where we're looking to leverage our sales force on the Cisco side to tie those together and see if we can bring even more deals to the table."

Cisco Will Sell AppDynamics Direct And Indirect

"We will be able to deliver through our direct sales channel and partner organization where we too are very focused around the enterprise," said Cisco's Salvagno.

Cisco's Trollope said the technology would "open a lot more doors" for the company's 20,000-person internal sales force.

75 Percent Of AppDynamics Revenues Are Subscription-Based

"They have a model where 75 percent of their product revenue today is subscription-based," said Cisco's Salvagno. "From a Cisco perspective, we've articulated a strategy that has us transitioning into more software, more recurring revenue businesses. This is a clear example of us making that pivot."

AppDynamics CEO: We're Not Splunk

"The core difference between Splunk and us is we focused on watching everything all the time," said AppDynamics CEO's Wadhwani (pictured).

Wadhwani said the foundation of the products between Splunk and AppDynamics are very different. "Splunk is a log monitoring tool that requires instrumentation and a focus on analytics associated with what you instrument. AppDynamics is a monitoring tool and the key thing to recognized with that is, all of this is automated. Everything about how we go into an environment, how we learn about and recognize the application topology, how we watch every line of code to understand end user activities … or how customers are engaging and how business outcomes are being driven or how we alert when there's an anomaly detected," he said.

Enterprise Focused

"From the very beginning, we were focused on the enterprise," said AppDynamics' Wadhwani. "Some of the largest, biggest brands, the most complex environments – that was the sandbox for innovation that we had. That put us in a place that we understood how the enterprise was transforming their business at the technical level, at the user-engagement, and at the business level."

For example, he said the Nasdaq stock market is a customer that used AppDynamics to "help move workloads and embrace public cloud more."

AppDynamics Will Be Tied Across Cisco's Portfolio

Salvagno said Cisco is excited to tie AppDynamics across different areas "from infrastructure to IoT to security to data center. So it really plays across all those priorities."

"That sets us up for a clear path where Cisco can accelerate this business, based on both our capabilities at a sales level, where we share the same enterprise target customers, or from a technology perspective, where we have an opportunity to tie [AppDynamics] applications intelligence with what we're doing from a network intelligence point of view."

New Value For Channel Partners

Trollope said leveraging AppDynamics technology will create richer business outcome focused discussions for its channel community.

"As our partners sell existing Cisco infrastructure and solutions, they want to have that same conversation around value, understanding the business, understanding the value of the infrastructure in the context of business. So it's a very big positive for our partners," said Trollope. "When you're able to put the relevance of infrastructure – networking and data center infrastructure – into the context of the performance of your business, it's a much more interesting discussion, and it's exactly what customers have been asking us for."

AppDynamics Is A "Foundational Software Move"

"What this deal really represents is a foundational software move for Cisco," said Salvagno. "AppDynamics is truly a best-in-class software company that we've seen redefining the market based on their technology, based on their performance and the strength of their team. They've got a highly differentiated technology. It can be deployed across private and public clouds, and they really focus their efforts around the needs of enterprise customers."

AppDynamics Was Growing At Over 50 Percent

"From a financial perspective, they're growing [annually] at over 50 percent," said Salvagno. "AppDynamics is currently growing faster than any other publicly traded software company."

AppDynamics Strategic To Cisco's Internet Of Things Strategy

"Every customer comes to talk to us about IoT, it's about the application," said Trollope. "What we are going to see … is AppDynamics agents being deployed – not just in private and public cloud – but in your device, in your 'thing.' You're going to see AppDynamics in your 'thing,' and it's going to be in everything because you need to get visibility from the 'thing' all the way back into your infrastructure."

"Right out at the edge, we have analytics technology, and that's where I would see a potential to inject AppDynamics is running right at the edge of the network. It could be on the 'thing' or it could be at the edge of the network, or it could be all the way back where the app is running," said Trollope.

Cisco Was An AppDynamics Customer

Cisco has been a customer of AppDynamics for several years.

"Cisco's been familiar with us for quite some time," said AppDynamics' Wadhwani. "More recently we had the opportunity to get closer to the business via some partnership consideration that both sides were evaluating that really laid down the groundwork for the synergy potential that we see across both sales and technology and that just helped us bring us closer and the confidence to make this deal happen."