Cisco Systems, Inc. today announced the purchase of Reactivity Inc. for $135 million, adding a mature XML processing appliance to its stagnant Service-Oriented Network Architecture (SONA) intiative.
Reactivity XML Gateway products -- designed to speed Web services processing, provide XML messaging security and supply policy enforcement for SOA governance -- will become part of Cisco's Application Networking Services (ANS) Advanced Technology offerings, which is an important part of Cisco's SONA strategy.
The acquisition was driven by the need to add XML processing support to Cisco's existing ANS product offerings, said Sangeetta Anand, vice president of product management for ANS at Cisco. Although specific details are still being worked out, she said, the plan is to incorporate Reactivity's technical experts and sales representatives into the ANS team. Cisco remains focused on networking and is not moving into the SOA software application area, where it will continue to work with partners including SAP.
"Our focus is on the application networking services area," she said. "Cisco is not in the business of delivering packaged applications."
However, the growth of SOA was a driving force in the acquisition, Anand said.
"With the rapid transformation within enterprises moving towards SOA and Web 2.0 and a much greater leveraging of XML, the focus on acquiring Reactivity was really to get the best of breed and best in class XML capabilities," she said. "All of which work within the framework of an SOA architecture and SOA services."
In terms of SOA application development, Anand said Cisco's ANS is designed to make the XML processing more efficient and secure. "The capabilities we are looking at from Reactivity facilitate and accelerate the move to SOA and Web 2.0 services," she said. "The capabilities we get with Reactivity, [include] security, message level transformations, logging and auditing capabilities, and a very good management interface to manage the XML-based appliances."
In the data center, Anand said the Reactivity appliance will fit in with existing Cisco hardware including application load balancing switches and Application Control Engine (ACE). "Reactivity will sit between the load balancers, the application switches including ACE."
Ron Schmelzer, senior analyst at ZapThink LLC, said the acquisition may help SONA gain traction that has so far eluded it.
"Specifically, Reactivity adds robust security and policy management capabilities to the Cisco platform where it was sorely lacking," Schmelzer said. "Indeed, it seems that the SONA platform movement hasn't yet resulted in as much market traction as originally supposed, and so it's possible that this acquisition can give Cisco the kick in the pants it needs to effectively take advantage of a growing opportunity for management of XML and Web Services traffic."
Bradley F. Shimmin, principal analyst for application infrastructure with Current Analysis, was more positive about Reactivity's fit in Cisco's strategy. "This acquisition speaks to Cisco's Service-Oriented Network Architecture (SONA) initiative, taking it beyond rhetoric and marketing partnerships to give the company a tangible XML messaging platform from which it can extend its performance and management reach into SOA solutions from partners such as SAP, Oracle and Microsoft. It also positions Cisco nicely for potential direct competition with the likes of IBM, CA and HP in the emerging SOA Application Performance Management (APM) market."
The acquisition of Reactivity, founded in 1998, by Cisco continues the pattern of major vendors buying startups with XML appliance technology, including IBM's purchase of DataPower in 2005. In November, IBM reported that the DataPower's XML hardware accelerators, now re-branded as WebSphere DataPower SOA Appliances, scored 40 new customer wins in the year's third fiscal quarter. Early this month, sources at Reactivity had said the company had record sales in its two most recent quarters. Anand said she could not comment on Reactivity financials while the acquisition is still in process.
"Cisco's acquisition of Reactivity is further evidence that the markets for XML, Web Service, and SOA are experiencing significant consolidation," Schmelzer said. "With IBM adding Datapower to their line-up, Intel adding both Sarvega and Conformative, and F5 Networks further maturing their offerings, the addition of Reactivity to Cisco's offerings goes a long way to signaling that we're in the era of incumbents increasingly dominating the space once pioneered by the startups."
"Of course, there are certainly outstanding startups like Layer 7 Technologies, Forum Systems, and companies like Xambala and Tarari still making waves in the market," he added.
It appears to be a sellers market for the startup XML appliance vendors as Cisco is paying roughly $30 million more today than IBM spent to acquire DataPower.
The exponential growth in Web services is fueling the demand for appliances that can speed XML processing, L. Frank Kenney, research director at Gartner Inc., said this past summer when Reactivity announced the latest versions of its products.
"With this advent of using more and more XML and Web services, there's more processing," Kenney said at the time. "That's processing XML, parsing the XML, scanning the XML for malicious content and bad code. That causes a burden on the network. The network starts to strain under the weight of all the increased XML and Web services traffic. What Reactivity brings to the table is the ability to offload some of that processing and reduce bottlenecks and improve performance."
When the deal is finalized Reactivity products will be folded into Cisco's Datacenter Switching and Security Technology Group (DSSTG) headed by Jayshree Ullal, senior vice president.
Even with the Reactivity technology, Cisco will have its work cut out for it in moving beyond its network area of expertise into the SOA application world, Schmelzer predicts. "Cisco is a network-focused company trying to enter the application space," he said. "We'll have to see if Reactivity helps them make the entry into that market or just confirms that they aren't able to do it. They have been able to enter the VoIP space, though, and that's a sign that it can work, but voice is more network-y than applications."
Following the completion of "standard closing conditions, including applicable regulatory approvals," the Cisco announcement said the deal is expected to close by April 28, 2007.