Past Performance And Future Results
Folks forget that Cisco used to be very good at doing acquisitions, so is it premature to determine recent performance predisposes future results regarding Sourcefire?
It's neither healthy nor productive to pay attention to Twitter for too long. The echo chamber certainly echoes, especially in the face of huge news, reflecting everyone's opinion back and forth until it feels like a denial-of-service attack on my frontal lobe.
A case in point happened this week when Cisco announced the $2.7 billion acquisition of Sourcefire. The Twitter activity occurred in two waves: The first wave was a lot of folks sending well-earned congratulations to Marty Roesch and the rest of the Sourcefire team. That lasted for about two or three minutes. Then the negative nellies came out to play for the rest of the day. There was chapter and verse about how Cisco has bungled one security acquisition after another -- and prognostications it would do the same with Sourcefire.
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Personally, I'm not ready to shovel dirt on Snorty less than 24 hours after becoming $2.7 billion worth of bacon. And it's not because I'm a contrarian. It's because I've been around for a long time, and I remember when Cisco used to do acquisitions very well. Like when it did its first big acquisition of Crescendo in 1993. That product became the Catalyst, which has generated the GDP of Panama in revenue for Cisco over the years. It also provided many of the senior managers who drove Cisco through its heyday.
The company has done 160-plus deals; statistically, some of those deals turn out well, and some turn out pretty badly. Like everything else in today's world, you forget the good ones and fixate on the bad ones -- especially if you were a customer of the acquired technology and saw innovation crawl, customer support suffer, and the sales channel get a lot harder to work with. All of these are symptomatic of multibillion-dollar behemoths, proving over and over again that elephants aren't very good dancers (regardless of what Gerstner said back in the day).
The sensitivities around the Sourcefire deal are exacerbated not only because security folks are cranky and negative, always preparing for the inevitable kick in the groin, but also because a bunch of the bad deals happened in the security sector. The haters broke out their Wheel Group t-shirts once the deal was announced and got all nostalgic over what could have been. Oh, how the IPS business would be different today if it hadn't bungled that deal, right? To be clear, the issues Cisco had with these deals were macro issues regarding Cisco's leadership and suspect dedication to the security business.
IronPort is a case in point. When that deal happened, IronPort accelerated its momentum significantly, and it let the IronPort management team run the Cisco security business. For the first couple of years, that deal was a big success. Then the economy hit the crapper in late 2008. Cisco had to focus on its core business -- and it did. The former IronPort guys got tired of fighting for resources for security and went back to their entrepreneurial roots. The business became mature, and you'd think it were suffering. But it turns out Cisco still sells a lot of email security gateways because the distribution engine still works. But perception is reality, right? The market determined it was just another bungled deal from a company that bungled all of its security deals. Clearly that doesn't bode well for Sourcefire, right?
We could have had the same conversation back in November 2011 when IBM acquired Q1 Labs. It's not like IBM had a great track record of doing security deals successfully (remember ISS?). But it has done a good job of both integrating and accelerating the momentum of Q1's SIEM product and using that to drive its entire security business. How did IBM do it? It's all about the people. IBM (wisely) gave the keys to Q1's management team to run its new security business. It has also invested tremendous resources in the business.
That's what Cisco has to do. It has talked about putting Marty Roesch in charge of security strategy, and that's a start. It has to make significant investments to keep the Sourcefire team engaged and give it the resources it needs. If it starts losing the intellectual capital and suffers a significant mass exodus as it has in the past (and most other big companies suffer after acquiring smaller companies), the negative folks will be right.
In fact, there is a better than even chance the deal flames out. It's hard to maintain focus in an almost $50 billion revenue company and although these companies pay lip service to the importance of security, they keep the lights on selling switches and routers, servers, or databases. But it's too early to call the deal a failure. I prefer to let companies fall on their own swords in their own time.
And statistically most of them do.
Mike Rothman is President of Security and author of The Pragmatic CSO