With its $1.4 billion acquisition of IoT cloud provider Jasper Technologies, Cisco wants to help enterprises pivot from "static" product sales to recurring service contracts -- and help itself do the same.
"Many of our customers are looking to transition their business from a static product to a connected service," said Rowan Trollope, SVP and GM of Cisco Systems Inc. (Nasdaq: CSCO)'s Internet of Things and Collaboration Technology Group, on a conference call Wednesday with Cisco and Jasper Technologies executives. (See Cisco Buys IoT Cloud Provider Jasper for $1.4B.)
"Our customers are sprinting toward this connected future, but complexity is really hobbling their progress," and a combination of Jasper and Cisco can help customers reduce that complexity, Trollope added.
Cisco is also looking to transform its business, shifting away from a reliance on hardware by generating a greater proportion of its revenues from software and services, including cloud services. (See Cisco Gives Its Software Licensing a Makeover.)
Jasper, a privately held company with a global, cloud-based Internet of Things service platform, will play a role in that business transformation. It delivers its service to 3,500 enterprise customers -- including major names such as Amazon Kindle, General Motors , Ford, Harley Davidson and Heineken -- over the networks of 27 service provider partners including AT&T. (See GM: 10 Car Models on Road With AT&T's LTE.)
Jasper's cloud service connects a variety of devices -- including cars, jet engines, and even implanted pacemakers -- over cellular networks. The Jasper SaaS platform manages connectivity, as well as providing security and data analysis. Cisco was drawn to Jasper by its scale as well as its recurring revenue business model, noted Rob Salvagno, VP corporate development for Cisco.
Transforming industries Jasper's major vertical industry is automotive (connected cars). CEO Jahangir Mohammed -- who will run Cisco's new IoT Software Business Unit under Trollope -- said on Wednesday's call that cars "used to be isolated on the road," but "the car is becoming a bundle of connected services." These include entertainment, diagnostics, information, WiFi hotspot, navigation services and more: For example, in the case of an accident a connected car can automatically signal for an ambulance. To deliver all that, the car receives continuous software upgrades.
General Motors is a prime example of a product company that is generating new business from IoT-related services. The auto giant uses Jasper for its OnStar service, which is set to boost the auto giant's profits by $350 million in the three years to 2018, Mohammed noted, adding that about 70% of new cars will be connected by 2020.
And it's not just cars: IoT capabilities are enabling this kind of business transformation across more than 20 different industries, including retail and commercial security, Mohammed said.
Complementary businesses Cisco sees its technology portfolio and customer base as complementary to Jasper's strengths. Jasper's primary success has been in transportation -- "the world of movable things," as Trollope describes it -- and making use of cellular connectivity. It houses its centralized software in colocated data centers and provides connectivity, monitoring and billing services to its clients, which are charged monthly on a per connected device basis.
"Deep innovation and partnerships with global service providers are very important," says Jasper's Mohammed.
Cisco, meanwhile, has had success with its WiFi-centric IoT strategy in manufacturing, oil and gas, and as a supplier and partner to smart city initiatives, enabling smart meters and other advanced forms of edge networking. Cisco provides the lower level of the stack for Jasper's service, namely low-power connectivity and mesh networking.
Cisco also provides real-time analytics capabilities that complement Jasper's offering. In addition to providing a ruggedized IoT gateway used in industrial, transportation centers and utilities (the company's largest IoT revenue driver today), Cisco also provides a cloud software stack to analyze data coming from those devices. A jet engine, for example, generates terabytes of data every day that needs to be processed and analyzed. Cisco uses the term "fog computing" to describe how it pushes IT resources to the network edge to provide analytics, Trollope says. A combination of analytics and automation allows customers to turn data into actionable insight, he adds. (See Cisco Builds Analytics Into Network Edge.)
Combined, Cisco and Jasper can change businesses drastically, Trollope claims. "This is absolutely transformative," he says. "The capabilities of the combined platform provide customers with everything they need to build a connected IoT business."
IoT is already having a transformative effect on global business and is influencing the strategies of the world's largest and most influential companies, especially those in the communications industry. Among recent developments:
- Cisco partner Ericsson AB (Nasdaq: ERIC) on Wednesday launched a marketplace for sharing IoT patents. (See Ericsson Develops Industry Patent Licensing Plan for IoT.)
- France's Orange (NYSE: FTE) is rolling out low power, wide area (LPWA) networking to 17 French cities and beyond as part of a plan to generate €600 million (US$655 million) in revenues from Internet of Things (IoT) services by 2018. (See Orange Hails LoRa Breakthrough as Bouygues Ups IoT Game.)
- Major wireless operators are scrambling to adopt strategies to take advantage of the Industrial Internet of Things. (See US Giants Carve Out Role in the Industrial IoT .)
- Qualcomm on Tuesday outlined an architectural framework to organize the different bandwidth, latency, throughput, and power requirements of various IoT devices. (See Qualcomm Looks to Tame Wireless Zoo.)