Cisco acquires network security startup Observable Networks

Cisco has made another acquisition in the enterprise security space — underscoring the ongoing market demand for security services amid a growing threat of cyber breaches and malicious hacking among businesses that are moving to cloud-based infrastructures.

Today, the IT giant announced it has acquired Observable Networks, a company based out of St. Louis that provides real-time network behavior monitoring to help IT teams detect anomalies that might be related to security breaches, focusing particularly on cloud deployments.

Terms of the deal have not been disclosed. Observable has been around since 2011, founded by Patrick Crowley (who is its CTO), and it has raised less than $5 million from investors, according to Crunchbase. The company was estimated to be valued at around $16 million in its last round of funding in May 2016 (which to me seems a bit low).

Observable’s CEO Bryan Doerr notes in his own blog post that all the startup’s employees will be joining Cisco as part of the deal.

Cisco said Observable’s cloud-native forensics applications — priced in tiers using a SaaS model based on the size of your business and the number of endpoints secured — will become a part of its Stealthwatch solution, which is part of the company’s Security Business Group led by David Ulevitch. Ulevitch joined Cisco when the company acquired his own security startup, OpenDNS, in 2015 for $635 million.

Indeed, Cisco has made a number of security acquisitions over the years to build up that aspect of its business: two recent deals in addition to OpenDNS include Lancope for $453 million and CloudLock for $293 million. In June of this year, it also unveiled a new initiative around cloud-based security services, which included a service to detect malware in encrypted traffic.

Cybercrime is projected to reap some $6 trillion in damages by 2021, and businesses are likely to invest around $1 trillion over the next five years to try to mitigate that.

This deal is significant not only because it underscores the ongoing interest in security solutions, and subsequent consolidation in that area, it also highlights the fact that Cisco — a company that makes switching and routers for servers — is continuing to build up its business in applications and cloud services as more companies move their businesses into cloud-based or hybrid architectures.

In fact, its push into new security services in June was seen by some to be a direct attempt to offset its declining legacy business.

“The acquisition of Observable Networks supports Cisco’s strategic transition toward software-centric solutions,” Rob Salvagno, Cisco’s head of M&A, writes in the blog post announcing the news.

Other acquisitions in the cloud-based security market include Hexadite, acquired by Microsoft; Palerra, acquired by Oracle; and Adallom, also acquired by Microsoft.