Light Reading

Cisco to Buy Hot Startup Tail-f for $175M

Ray Le Maistre
6/17/2014
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In what could signal a significant shift for the IP networking giant, Cisco Systems has struck a deal to acquire Swedish network management specialist Tail-f Systems for $175 million in cash and retention-based incentives.

Tail-f is not a massive company -- it has just 75 staff and its revenues are estimated to be below the $30 million mark -- but it has an unrivaled reputation in its particular area of excellence: managing and orchestrating multi-vendor networks with software tools based on the Netconf and Yang standards, capabilities that have attracted a great deal of attention from network operators considering their SDN and NFV strategies. (See Netconf & Yang Go Mainstream.)

Those network operators include two of the world's leading and most influential Tier 1 operators, AT&T Inc. (NYSE: T) and Deutsche Telekom AG (NYSE: DT). (See Deutsche Telekom: A Software-Defined Operator, Deutsche Telekom Selects Tail-F, and AT&T's Cloud Future Takes Shape.)

But one of Tail-f's strengths and attractions is that it has been an independent company that supports open architectures -- being acquired by Cisco Systems Inc. (Nasdaq: CSCO) is going to raise questions about whether its valuable network management capabilities will be swallowed by the IP giant and its pioneering work will come to a halt, even though Cisco has been talking about its support for Netconf and Yang this year.

In an exclusive interview with Light Reading, Tail-f CEO Fredrik Lundberg said Cisco is keen to continue all the relationships (operator and vendor) that the Swedish startup has brokered, and has committed to the standards-based vision of open network architectures that Tail-f has long preached. "We have made a difference in the industry and that will only increase as part of Cisco. They get it and are committing to the multi-vendor and open architecture vision -- this is a real chance for Cisco to get into software orchestration, and we will be a strategic asset in an important change journey at Cisco."

Lundberg added: "We are obviously very excited. We believe this will be good for us and for the industry. We are now past some milestones with Netconf and Yang, and now we will be turbocharged. We have worked so long to get the industry excited about Netconf and Yang and now we have reached a critical point -- service providers are requesting it and the industry has realized it is important. We feel optimistic about continuing our journey, and Cisco will give us a great channel and the chance to address new parts of the market," said the CEO, who added that Tail-f is now deployed at around 15 customers, most of which have not yet been identified.

And while Tail-f has long been associated with the network management challenges associated with the introduction of SDN capabilities into large networks, Lundberg notes that once companies look into the capabilities of Netconf and Yang they understand that there are very real opportunities to simplify network management and operations right now in existing networks. "Where we see significant interest right now is in service orchestration in multi-vendor networks delivering layer 2 and layer 3 VPNs," notes the CEO.

Real opportunity for Cisco
Tail-f will become part of Cisco's Cloud Virtualization Group headed up by Gee Rittenhouse, and while Lundberg says the whole team is moving across to its new parent, he's not sure the company name will survive.

Heavy Reading Senior Analyst Caroline Chappell says if Tail-f is going to become part of Cisco, then the Cloud Virtualization Group is the best place for it to be. "That part of Cisco needs to support multi-vendor capabilities, so that's a good sign, but there will be elements within Cisco that will fight against that. It'll be interesting to see what sort of company Cisco can be -- this is a real opportunity for it to show that it can be an open company."

Chappell compares Cisco's opportunity to that of IBM in the late 1980s, when the mainframe giant transformed itself into a software-and-services company and came out a better, stronger company.

"That could happen to Cisco," she says. But Chappell warns that people will be "deeply suspicious of what Cisco's intentions will be. Is it buying Tail-f for its own use or will it embrace open architectures?"

If Cisco funds Tail-f and preserves its autonomy, "it could do great things for Cisco and its reputation," she notes. "Tail-f has attracted a lot of attention and interest, and is the only multivendor service orchestration vendor on the market with a transactional capability based on Netconf and Yang. It is unique and a powerful tool. Cisco can also take this to the enterprise market too. This is a real chance for Cisco and I really hope they don't blow it."

Lundberg recognizes that there will be skepticism about Cisco's motives. "It might be hard to persuade everyone. We recognize that and so does Cisco, so it will take time. But our ConfD product [multi-protocol device configuration] will still be available to the market," says the CEO.

Quite what Cisco will do with Tail-f will be a hot topic of discussion today at Light Reading's Big Telecom Event (BTE) in Chicago. (Check out all the news from the event at our dedicated BTE News Site.)

Hot property
With its Tier 1 operator support, Tail-f has been attracting the attention of multiple large companies that also wanted to buy the company, according to the industry rumor mill.

So was there a bidding war? Lundberg refused to comment at all on whether Tail-f had been approached by other suitors, but Heavy Reading's Chappell believes that Cisco won the day in a competitive bid.

The returns look decent for Tail-f's investors, though Lundberg wouldn't talk about how much Tail-f had raised from its backers. He did, though, note that the most recent round of funding was in May 2013. Prior to that the company appears to have raised only about $6 million, with SEB Venture Capital the lead investor.

— Ray Le Maistre, Circle me on Google+ Follow me on TwitterVisit my LinkedIn profile, Editor-in-Chief, Light Reading

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rubyliu
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rubyliu,
User Rank: Light Beer
6/18/2014 | 5:58:40 AM
Re: Software Technology
Tail-f employees will join Cisco's Cloud and Virtualization Group led by Gee Rittenhouse, vice president and general manager, according to Cisco.

Lau Marrine
w_mc10
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w_mc10,
User Rank: Light Beer
6/17/2014 | 4:37:56 PM
Software Technology
It is interesting that Tail-f's software is largley written in Erlang, the same programming language used by Whatsapp. See the WSJ article:

http://blogs.wsj.com/cio/2014/02/24/facebook-whatsapp-messaging-service-written-in-exotic-erlang/

Erlang was developed by Ericsson 20-ish years ago, several of the key people behind this technology left Ericsson and now work for Tail-f.
dwx
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dwx,
User Rank: Light Sabre
6/17/2014 | 2:38:05 PM
Re: Interesting move for Cisco
Many of the recent IETF drafts covering new YANG models for various functions like ACLs, Service Chaining, OAM, etc. came from Cisco before this purchase.  I don't think the future of YANG is really in jeopardy at this point now that the large vendors are behind it.   

I'm not sure what Cisco will do with Tail-F's components.  NCS may be integrated into their current Prime suite of applications, which IMHO would be terrible because they aren't very good.   I think they are going to have to remain vendor-agnostic however or risk losing Tail-F's larger customers.   Much of what Tail-F was doing is custom developing solutions for providers, and Cisco can at least put resources behind that.   Much like Granite, Remedy, or even something like Peoplesoft, the underlying engine is the same but they are all usually highly customized for their clients.  

I also agree the future of the ConfD product seems a little hazy.  ConfD is kind of a middleware for configuration and they offer middleware components in other areas like video.  I could easily see the product being killed off also.  
philgr99
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philgr99,
User Rank: Lightning
6/17/2014 | 2:12:03 PM
Interesting move for Cisco
While NCS is the jewel Cisco will want out of this acquisition it will be interesting to see how they maintain the ConfD business that has helped NetConf and Yang become a reality and, I assume, still make up the vast majority of Tail-f's customer base. I can't imagine the equipment vendors using ConfD will be comfortable with the new owners.

For Cisco, a software product like ConfD is a new beast and will require very different business practices to remain successful. Cisco has made steps in supporting multivendor networks with Cariden and other products but this takes it to another level. It will be interesting to see if the rest of the market players are ready for it or if it stalls the adoption of NetConf and Yang.

 

 

 
billcowardxx
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billcowardxx,
User Rank: Light Beer
6/17/2014 | 11:04:46 AM
Innovation via aquistion
Innovation via aquistion,

We've been working with Tail-f for 6 months now in our NetArch lab and I'm curiuos to learn how this will effect our invested time and efforts. I think if Cisco integrates the Cariden suite of products with the multivendor tail-f capabilities would be a valuable orchestration solution to many MSOs. 
Phil_Britt
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Phil_Britt,
User Rank: Light Sabre
6/17/2014 | 10:56:27 AM
Only time will tell
Cisco has had a recent history of not getting full value out of its purchases, and not being very successful (based on stock price movement) in entering new markets. Only time will tell if this transaction breaks the mold or is more of the same.
DOShea
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DOShea,
User Rank: Blogger
6/17/2014 | 10:52:36 AM
Cloud roster
I guess this is one way for Cisco to get onto AT&T's cloud roster. I believe there were come analyst observations that Cisco could be the biggest loser as AT&T pulled together this project.
DanJones
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DanJones,
User Rank: Blogger
6/17/2014 | 10:34:23 AM
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