Cisco announced that it’s acquiring SD-WAN startup Viptela for $610 million in cash. Here’s my quick take with some facts and a few comments.

The Facts

3 Product Lines: With this acquistion, Cisco now has three SD-WAN products in its portfolio: Cisco IWAN, Meraki SD-WAN, and Viptela.

Welcome Home: Viptela will operate within the Enterprise Routing team. That’s a bit of a homecoming for Viptela’s current CEO, Praveen Akkiraju, who spent almost 20 years at Cisco, including a stint as SVP and general manager of the Enterprise Networking business.

Cloud Is Key: Cisco touts Viptela’s cloud-based management and pricing model as a key asset. For one, it helps simplify deployment and operation. For another, it dovetails with Cisco’s efforts to smooth out the fiscal ups and downs of sales cycles by increasing its stream of recurring revenue. Cisco noted as much in its press release, writing that the acquisition “…supports Cisco’s strategic transition toward software-centric solutions that deliver predictable, recurring revenue.”

The Commentary

Three SD-WAN product lines is at least one too many. However, Cisco will carry forward with all three separate products because it can slot each one into a market category:

Meraki SD-WAN: For existing Meraki customers who want simple hybrid WAN at the branch

Viptela: For full-bore, large-scale SD-WAN deployments and customers that want all the SD-WAN goodness, such as application-based policy enforcement.

IWAN: For the cloud-phobic and for customers that require “advanced routing features” (which I read as complex and expensive deployments—a Cisco favorite).

Hands Off

I bet Cisco will give Viptela a good deal of freedom around product development rather than force it to align with Cisco’s overall portfolio. That’s because Cisco took a similar tack with Meraki.

Consider that Cisco has owned Meraki for almost five years, but there’s been very little technical integration between the WLAN maker and the rest of the company. For instance, Prime Infrastructure, Cisco’s unified wired/wireless management platform, can monitor Meraki switches, but they’re still managed in Meraki’s console.

And rather than strongarm Meraki into using Cisco’s ISE for policy enforcement, which Cisco’s Aironet WLAN uses, Meraki relies on its own Systems Manager software to handle device onboarding, authorization, guest management, and so on.

Like Meraki, Viptela has touted operational simplicity as one of its strongest selling points. I think Cisco is smart enough not to tamper too much with that formula.

A Decent Price

$610 million is a lot of money, but I don’t think it’s too much. Fortune notes that Viptela has raised approximately $110 million in venture funding, and was valued at around $825 million. So while Cisco gave investors an almost 6x return, it didn’t pay full market value.

In addition, while the current SD-WAN market is small (around $225 million in 2016), IDC predicts a 90% growth rate through 2020, to $6 billion. As Cisco sees its market share shrink in switching and routing, this acquisition buys it the kind of torrid growth that Cisco used to enjoy.

Who’s Next?

I’m curious if Cisco’s move will kick off a further round of consolidation in the SD-WAN market. I’ve got some ideas about which big fish might be circling, but those ideas are a little too murky to commit to a blog post just yet. This may be a good topic of conversation for an upcoming Network Break.