Let’s keep this acquisition in perspective. Cisco Systems is buying Arroyo Video Solutions for $93 million. That’s about 1 percent of what Cisco paid for Scientific-Atlanta (closer to 2 percent if you figure the S-A deal net cash). So this is less about the San Jose networking giant shifting toward video and cable industry – the $7 billion it spent for S-A made that clear – than it is about Cisco expanding its on-demand portfolio and Arroyo finding a congenial home. Six years ago … To reiterate (because it’s still hard to process), Cisco now has a lot of video technology. True enough, Cisco’s move into video had been halting. In 2000, it spent $369 million in stock for PixStream. The aim was to accelerate Cisco’s move into broadcast-quality video over broadband networks. It didn’t happen. Cisco Senior Director of Internet Protocol TV and Video Deployment Kip Compton, who was involved in the PixStream acquisition, says the technology was "excellent" but that the timing was "very poor." As the tech bubble burst, Cisco exited that business. Not to beat a dead horse, but times have changed. "The biggest thing is that S-A is part of our company now," says Compton. Cisco with S-A nonetheless lacked certain on-demand technologies. That gap yawned wider as the on-demand story has turned into what Compton calls a "compound growth curve" driven by the increasing number of terminals that can receive on-demand content, increased usage, and the growth of high-definition content. The bottom line is that Cisco saw an opportunity and Arroyo as a good way to exploit it. Brains and CDN Brainpower is clearly part of this deal. "The team is exceptional," Compton says. "Paul (Sherer) and Drew (Major) get a lot of credit, but they really assembled an impressive team through and through." To pile on with the credit, however, we note Sherer was the former CTO at 3Com, the founding chairman of the Fast Ethernet Alliance and contributor to some 30 patents. For more background, see this interview in an archived edition of CT’s Pipeline.
As for Major, he is a co-founder of Novell and is described in the Cisco press release as a recognized expert in "network operating systems, distributed systems and content delivery networking (CDN)." The reference to CDN is telling. A hot topic in the dot-com boom, CDN lived to fight another day. One example of the CDN approach to moving content around that surfaced in the cable arena was Comcast’s Next Generation On Demand (NGOD) initiative. As it happens, that interface-heavy project was associated with Compton, who before returning to Cisco was for several years a member of the advanced engineering team at Comcast. (For more on NGOD, at least as of late last year, see the related diagram in this article from the January issue of Communications Technology http://www.ct-magazine.com/archives/ct/0106/0106_stateofthe.htm.) As for how VOD is related to CDN, Compton indicates that the latter would encompass PCs and mobile phones as well as set-tops. "We started to realize, that in addition to the … urgency around VOD, we were wanting to deliver content to a lot of devices and formats," he says. Compton says Arroyo’s software-based approach facilitates field upgrades and the addition of different formats, could be integrated with Cisco’s networking platform, and enables network optimization through advanced clustering of servers. Software vs. hardware The Cisco approach differs from that embraced by both Broadbus Technologies and Motorola, which is acquiring the DRAM-based server vendor reportedly for $186 million. Motorola pushes a "Seamless Video Anywhere" message, but opted for purpose-built hardware to advance that goal; Cisco is content to let others manufacture the platform. "We have a lot of products where we leverage standards hardware. We’ll take a server from an OEM supplier," Compton says. "We’ll actually put in our own software, and sell it as an appliance." Arroyo’s software has its fans. "There are two major thing that it does that make it special," says Eve Griliches, IDC research manager. "One is that it can virtualize all of the servers …. Another thing that they have, which is less sexy, is the high availability, redundancy capability." Griliches also expects that the Arroyo algorithms, apart from providing visibility into a distributed set of servers, could integrate well with a Cisco 7600 or CSR 1200 series routers. Another point may bode well for Arroyo within Cisco is that it’s a start-up with less than the usual start-up mentality. "The two founders have run very large companies before," Griliches says. "My guess is that with the people they have, they are on the fast path for integration."

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