If you go to a Meraki [reseller] partner website, you'll see two SKUs [stock-keeping unit]. You'll see a hardware SKU, and you can order that equipment. Next is a SKU for a one-, three- or five-year license to manage and support that equipment. It's a subscription system, or recurring revenue model. This is the software-based business model.
They make that a very simple and attractive way to do business for midmarket customers. And because of Meraki's velocity of innovation [in its products], that's an incentive to midmarket customers to continue to update or renew their subscription, because of the value they get from it.
What's the Meraki platform and why was that such an attraction for Cisco?
It's about how they make it really simple for the midmarket businesses, which usually don't have IT staff, to be able to deploy a network. The guy who's deploying it doesn't need to be a network expert. You can deploy the Meraki hardware on premises, just plug it in, and then manage via the cloud, without needing network experts. And it comes with very strong network security and network and application management and control.
Customers can get a switch, router, a WLAN, a controller, and just plug it into the Internet. That device "phones home" to the Meraki cloud, and boom! It's there. It's very simple to deploy: We're talking minutes.
For us, we get a midmarket play for our Unified Network strategy, announced a few months ago. The focus is on the midmarket segment. We'll continue with our Cisco enterprise portfolio for more complex networks.
So where and how will Meraki fit into Cisco?
Today, we're focused on the cloud. We're going to preserve the Meraki product line and culture, and continue to grow all of this.
As we evolve, we want to add more products to that cloud platform. That's the first thing. Second is the whole Meraki development culture: They've been able to achieve a very high velocity of innovation. They can introduce in software new features in a matter of days. When you log in, the latest updates are downloaded, customers can try them out, and these spread to the rest of the customer base very quickly. This [kind of rapid innovation] is very attractive to this market.
They've made it very simple to go to market and for their products to be "consumed" in this midmarket. We want to build on that.
Meraki initially declined Cisco's buyout offer. How did you change their mind?