Cisco has announced the acquisition of OpenDNS, a ten-year-old Internet security company, for $US635 million.
To understand what OpenDNS does, it’s first important to understand a fundamental part of how the internet works:
When you type a website name (like businessinsider.com) into your Internet browser (like Google Chrome or Microsoft Internet Explorer), that request goes back to your Internet service provider (ISP, like Comcast or Time Warner Cable), where it matches that name against a directory of IP addresses, which is essentially a web server’s home address. You can type “126.96.36.199” into your browser’s address bar to see this for yourself.
This is called the “Domain Name Service,” or “DNS,” and each ISP maintains their own directory servers. But those servers can be slow or unreliable, meaning that even on a fast connection, your web pages will be slow to load.
OpenDNS was founded by entrepreneur David Ulevitch in 2005 as an alternative to those ISP-specific DNS services that could offer faster, more reliable service. It was offered for free to consumers (enterprises could pay for extra features), and subsidized largely by advertising that would appear if you typed in a URL that didn’t work.
Last year, OpenDNS reported that it had 50 million consumer customers and 10,000 paying enterprise customers.
Over time, and especially in the face of competition from Google, OpenDNS discontinued its advertising strategy and started shifting its focus towards making web security products for businesses — a hot market in the wake of continued security breaches at the likes of Target, Sony, and Home Depot.
See, once your web traffic is travelling through OpenDNS servers anyway, there are all kinds of additional administrative powers it can give to IT departments on both computers and smartphones.
For instance, OpenDNS can be used to monitor employee web page usage and block offensive content. Plus, with its more advanced “Umbrella” product, it can detect unusual anomalies in traffic within the network to help security pros detect and deal with hack attacks, using artificial intelligence to guess where and when the next strike will hit.
Ulevitch himself was famously fired from the company before returning in 2014, ahead of bringing in new investors.
OpenDNS had raised $US51.3 million over five rounds, including participation from the likes of Sequoia Capital, Greylock Ventures, and Lowercase Capital (plus a personal investment from Lowercase’s Chris Sacca).
For the acquisition-happy Cisco, this is a natural fit as it works to boost its security product line. The deal is for $US635 million in cash, plus equity awards and retention bonuses for OpenDNS employees making the transition.
“By providing comprehensive threat awareness and pervasive visibility, the combination of Cisco and OpenDNS will enhance advanced threat protection across the full attack continuum — before, during and after an attack,” says Cisco’s press release.
Recently, outgoing Cisco CEO John Chambers squashed the rumour that it was going to buy FireEye, a hot security startup that partners with OpenDNS, for $US8 billion.