Cisco’s strategic acquisition of cybersecurity company Splunk not only propels the company deeper into AI-enabled data-driven security and observability but also injects an impressive $4-billion into its annualised recurring revenues.

However, the challenge ahead lies in the seamless integration of these two entities to unlock their full potential, according to GlobalData.

Rajesh Muru, lead enterprise security analyst at GlobalData, says: “Cisco, over the last year, has continued to make several strategic announcements across security and observability, with a move to drive end to end security, with realtime data and AI. With a cash value of $157 per share, totalling $28-billion in equity, the Splunk deal propels Cisco into the forefront of the software industry. It marks a significant step in harnessing AI, enhancing security, and advancing full-stack observability capabilities.”

GlobalData’s analysis underscores an ongoing pattern of acquisitions in the observability and AIOps sector. This trend includes notable acquisitions such as New Relic’s purchase by Francisco Partners and TPG for $6,5-billion, Hewlett Packard Enterprise’s acquisition of OpsRamp for $39-billion, along with Moogsoft and Sumo Logic. And this potentially might not be the last acquisition in this space as both investors and tier one vendors aim to acquire observability and AIOp capabilities to their existing extended, detection, and response (XDR) security capabilities.

Muru observes: “Cisco’s acquisition could leave a significant number of Splunk’s customers uncertain as it has a very loyal customer base built and matured over time. The company has really listened to its users that has resulted in Splunk’s offering becoming the ‘go to tools’ in AIOps observability. Therefore, any form of product consolidation because of the acquisition in the short-term will no doubt create customer reservations.”

GlobalData acknowledges Cisco and Splunk product lines marry well in the security and observability space. Cisco will be able to acquire Splunk’s strong AI observability capabilities for hybrid environments, providing strong integration and visibility and control. Resulting in Splunk’s extensive data and security information and event management (SIEM) capabilities complimenting Cisco’s XDR to offer a compelling AI end to end security and observability solution to the marketplace.

Muru concludes: “There will be several product related hurdles to overcome for Cisco with this acquisition. Splunk’s observability platform is a leading product in the segment. Therefore, the challenge for Cisco will entail deciding which product it puts at the forefront in its product strategy, or if Splunk should be left as a stand along company, similar to AppDynamics and ThousandEyes There is also the prospect of the competition hotting up, with one of the leading tier one vendors in the security space acquiring an innovative pure play cloud observability player.”