Cisco Invests $100 Million In Its Own Home-Grown Startup To Protect One Of Its Core Businesses

John Chambers

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We knew that Cisco wasn’t going to sit around and let a bunch of little upstarts knock it to its knees.The networking company has invested $100 million in its own startup to build something called “software defined networking” products.

The new company is called Insieme and if its products work well, Cisco will eventually buy it out for $750 million, says GigaOM.

Cisco doesn’t have a specific R&D lab. This “spin-in” is its typical method for building new products for new markets.

SDN is a major change in how networks are built. It is software that tricks servers into thinking they’ve got the network all to themselves when they are really sharing it with other servers. This solves a lot of network engineering problems, makes servers more mobile and is a big plus for cloud computing.

But it’s not particularly good news for Cisco. Cisco has been putting more and more features into its routers and switches and the software that manages them. With SDN, all of those smarts can be moved out of Cisco’s gear and enterprises can use cheaper networking products from Cisco’s competitors.

SDN has been, so far, dominated by open source software called OpenFlow. It was created by the people who founded a startup called Nicira. Nicira has big industry backing and will almost certainly do well.  But other startups have also launched based on OpenFlow, like Big Switch Networks.

Cisco’s big competitors, including HP, have jumped on OpenFlow. Until last week, Cisco had been vague about its plans. Last week, however, Cisco finally committed to becoming part of a consortium of companies that will work on OpenFlow.

This confirms earlier rumours that Cisco would be building its own SDN products to squash these startups, rather than buying one or partnering.

Word had leaked that it was pilfering talent from Nicira, Big Switch and another Cisco startup rival, Arista Networks, by promising engineers a nearly $2 million eventual pay-off if all went well. Apparently it worked. Five engineers from rivals joined, GigaOM says.

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