Techzine Talks on Tour
Techzine Talks on Tour is a podcast series recorded on location at the events Coen and Sander attend all over the world. A spin-off of the successful Dutch series Techzine Talks, this new English series aims to reach new audiences.
Each episode is an approximately 30-minute discussion that Coen or Sander has with a high-level executive of a technology company. The episodes are single-take affairs, and we don't (or hardly) edit them afterwards, apart from polishing the audio up a bit of course. This way, you get an honest, open discussion where everyone speaks their mind on the topic at hand.
These topics vary greatly, as Coen and Sander attend a total of 50 to 60 events each year, ranging from open-source events like KubeCon to events hosted by Cisco, IBM, Salesforce and ServiceNow, to name only a few. With a lot of experience in many walks of IT life, Coen and Sander always manage to produce an engaging, in-depth discussion on general trends, but also on technology itself.
So follow Techzine Talks on Tour and stay in the know. We might just tell you a thing or two you didn't know yet, but which might be very important for your next project or for your organization in general. Stay tuned and follow Techzine Talks on Tour.
Techzine Talks on Tour
Behind Cisco's billion-dollar AI investment strategy
A little bit of a change of pace this week, as we talk about how big technology companies invest in other companies and what underpins their acquisition strategy. During Cisco Live we had the opportunity to sit down with Derek Idemoto, SVP of Corporate Development and Cisco Investments.
The pace at which Cisco launches products and services in the past four to five years is quite stunning. Especially when compared to the rather pedestrian pace at which the company moved forward prior to 2020, the difference is striking.
Cisco's strategy has never been to build everything from scratch, at least not in the past three of its four decades. It has done many acquisitions and also invests in a lot of companies. Sometimes investing turns into acquiring after a while, sometimes it doesn't.
In our chat with Idemoto, we talk about the rationale behind Cisco's approach. We specifically touch on the billion-dollar AI Investment Fund it set up last year. We dive into how Cisco determines when to invest and when to buy, what that means for the rest of the organization, what are some interesting areas of investment at the moment, and much more.
The work that Idemoto and his team are doing is a crucial part of how Cisco operates. It is therefore a crucial part to understand if one is to understand Cisco properly. If only because it means that the statement by Cisco President and CPO Jeetu Patel that Cisco is "the world's largest startup" actually holds water. It can move surprisingly quickly because of all of the investments and acquisitions, even though these also put a strain on the own organization.
Listen to this - in our humble opinion - interesting conversation now.
Welcome to this new episode of Tech Scene Talks. I'm at Cisco Live and I'm here with Derek Idemoto. You're the SVP Corporate Development and Cisco Investments, if that's correct.
Speaker 2:Right, that's right, yeah thanks for having me, Simon.
Speaker 1:Welcome to the show. So just maybe briefly, what is it that you do? So I mean, we have your title, Sure, what does?
Speaker 2:that entail Sure, sure. So, and especially at a fortune 50 company like Cisco, it can mean a lot of things. But in the way we think about it, the I lead the team that looks at external innovation and tries to harness that by bringing that, that learning or and sometimes companies, into Cisco, and that can take the the form of acquisitions or investments or partnerships or any number of the toolkit that would emanate from our overall strategy.
Speaker 1:Yeah, and I think it was about a year ago when you launched the AI Investment Fund.
Speaker 2:I think that's right. Yeah, how is it going? I appreciate you covering that. First of all, it's going great. I mean, a year feels like dog years, right, it feels like the year has gone by and it's been seven years in the AI world. So we launched a fund just to back up last June of 2024.
Speaker 1:So why did you launch that fund? Maybe that's a good starting point.
Speaker 2:It's a great question. We have been investing and acquiring companies for well over 30 years now. We made our first acquisition in 1993, a company called Crescendo, and about the same time we've been investing in startups ever since. So this is three decades of acquisition startups, investing hundreds of services we've invested in. What we want to do is really amplify that and go bigger and faster, but also with an element of making sure that there's partnership opportunities strategically and commercially that we can develop as a result of our investments.
Speaker 1:Do you think AI warrants that kind of approach or demands it basically because it is going so quickly anyway that you need to accelerate the investment.
Speaker 2:I think you took the words out of my mouth. I mean absolutely. It is going so so fast now and there's so much external development. The cloud era taught us that you could stand up a company with a cloud instance pretty inexpensively. Ai I mean think about what people are doing right now with chatbots and agents. In some cases, it's even easier.
Speaker 1:Well, it's also much easier, and I think companies tend to repeat mistakes from the past, right. So the mistakes that they made with cloud, you don't want them to make in AI, because that's even. Maybe the consequence can be even worse than if you do it wrong in cloud, right? So you need to think about that a little bit more than maybe you were used to before. That you do. That's a great question.
Speaker 2:I've never been asked that before. Maybe that you were used to before, that you do? That's a great question. I've never been asked that before. Philosophically, I mean, I think the paradigm with AI has been so pronounced and profound that I'm not sure if the same rules of how you build a company 10 years ago or 15 years ago apply. I think that for Cisco right, we're in every aspect of AI. If you think about the AI stack, everything from the silicon all the way up to the applications, we're in almost every one of those layers, and so when we think about what AI means for us and for our customers and partners, it's really up and down the stack and there's development and innovation taking place at every single layer.
Speaker 1:And if you want to be relevant in all the layers, you need to invest and you need to know what's going on, right? So, coming back to the original question about the investment fund, right?
Speaker 2:Yes, I mean our reason for existence. This team is really again, like I said, to look at be the scouts for external innovation and in the cases where we invest versus acquire, we can talk about that. But on the investment side, we're there to partner and learn with these startups. So, being on, it's not enough just to be on the cap table of these companies right, making an investment, but be able to partner with them and learn from them, observe the board in most cases. That's why we do this.
Speaker 1:And do you sometimes, because those companies can be relatively small, very agile, very nimble. That doesn't really have the same ring to how probably people sort of perceive Cisco. In that sense, Do you learn a lot from those companies as well in your sort of approach to being more agile or to move more quickly.
Speaker 2:Yeah, I'll borrow this from our President and Chief Product Officer, jitu Patel, but he often says that Cisco these days and certainly I think this is true for sure under his watch is like the world's largest startup. So a lot of the tactics, the way that we're building things, the way that we're trying to integrate AI into how we build things right that emulates a lot of what startups typically do right Try and build something quickly, alpha it, maybe beta it. If you're going to fail, fail quickly. So a lot of these methodologies for how you build product have changed, I think, permanently.
Speaker 1:What's been the impact of what you do on how quickly Cisco is putting out new products, new features, new services? I mean it's been a lot of innovation over the past couple of years.
Speaker 2:Yeah. So I mean, there's so much evidence, I think in the last year or two, of how what I do in my corner of Cisco and my team does, which is invest and acquire these companies, these external innovation companies, coming in. There's so many fruits of that. I'll give you a few examples. So one is you know a lot of the companies that we have invested and we partner with. So one example in EMEA, for example, is Mistral, which is an LLM. It's based in France and we invested in them.
Speaker 2:That was one of the first investments we did out of our billion-dollar AI fund, and the key there was not just partnering with Arthur and team on just the investment side, but really trying to build something together. And it's now being incorporated into how Liz Santoni, who runs our customer experience group, is looking at renewals, for example, if we can turn on AI intelligence onto how to how customers may or may not churn, or how we can kind of get ahead of that, and and how we can help with adoption or renewal. That's, that's, that's the elements of the partnership that we really care about yeah, yeah, I can imagine.
Speaker 1:I mean that's.
Speaker 2:That's a very good example of right and then, and then, if you'll allow me, another one that we have done recently. So we invest in a company called robust Intelligence a couple of years ago. We then brought that company in about a year or so ago and that formed the basis for that team helped build our AI defense product, which I think you've seen now maybe a couple times throughout this show and also back in January.
Speaker 1:I wrote about it in January.
Speaker 2:Yeah, we had that mid-January event Very proud of that product first of its kind. Yeah, we had that mid-January event Very proud of that product first of its kind. So that acquisition, which originally was an investment, led to the launch of that product. And so coming back around to your question of how quickly are we incorporating the things that we do on this team into just Cisco's mainstream business and getting it out to customers pretty quickly and does it ever happen that you don't do it because you think we won't be able to keep up with how fast they're going?
Speaker 1:Does it ever happen in terms of investing or acquiring?
Speaker 2:Yeah, I mean, just to be perfectly candid, I mean the venture capital industry, and again, it's not a 100% hit rate, right, so you have companies that maybe are not as relevant. Here's the thing, though when we invest, we have that in mind and we understand sometimes, when we make an investment like any venture capitalist would, corporate or institutional the areas where that company maybe doesn't succeed is an alert or kind of a preview for us, a leading indicator of, hey, maybe this domain or this industry isn't going to pan out the way, maybe we're watching it right and that helps us develop what we're going to do.
Speaker 1:And just coming back to what you see happening in the market. So what are the current interesting AI trends where that sort of really pique your interest when you look at it from an investment or even potentially acquisition perspective?
Speaker 2:Yeah, so I think what we've done with the fund and we're, I want to say, a couple dozen investments into the fund now, so that's quite a throughput over the course of a year or so we're investing in all areas of the stack, like I said. So we're learning about the silicon side, we have an investment I'll give you some examples here On the silicon layer. We have an investment in a company called Grok. They're a GPU company. We're partnering with them and so that's at that layer. A lot of the other trends that I'm seeing and the companies we're investing in are on the cybersecurity side. What aspects of that? I'll give you another example. So one of our companies specializes in trying to figure out how to detect malicious, deep fake attacks. That's something where you're really not sure where that voice is coming from. Maybe we know someone that's been a victim there, but it's a problem that needs a great solution. So that's been a victim there, but it's a problem that needs a great solution.
Speaker 1:So that's another. It is one of the very few very tangible AI related attack forms, right Exactly, and it's very hard to spot.
Speaker 2:That's right. That's right. So we found a company called GetReal that we invested in there. Another company called Grooveai does tone and sentiment analysis. That's very important for us to understand. Fiddlerai is another one that is more observability of AI, and so all up and down the stack, you're seeing us. We also have invested in companies like CoreWeave They've now gone public, but obviously they're a large neo-cloud as well as other large companies like Anthropic and Scale AI.
Speaker 1:Yeah, and especially coming back to what makes you think something is a good fit or not, right I mean, I'm thinking about the sort of smallish acquisition you did of Splunk Only $28 billion. Who's keeping score? Only $28 billion, who's keeping score? An acquisition of that size? It must be extremely hard to see from the get-go whether that actually fits into Cisco's kind of environment as well. How do you wrap your head around that Sure?
Speaker 2:sure, how do you, how do you wrap your head around? Wrap your head around around that, sure, sure, so, so I, I would that Splunk is one of these acquisitions that obviously it was four times larger than anything we'd ever done before. The acquisition side you can trust that that came with a ton of both industrial logic, trying to figure out cultures, financial model, shared vision, all that stuff. But at its core, if we're going to be a great networking company, for example, we've got to be a great security company.
Speaker 2:If we're going to be a great security company, we have to be a great AI company. This is obviously all obvious now at present day. We acquired Splunk about a year and a half ago and if you're going to be a great AI company, you've got, and so what you're seeing, I think, also at this show today, is that all coming together right Security observability, splunk's digital resilience offerings, right all coming together with a telemetry across all of our devices all of the different data sets that we have right can really be brought into full force.
Speaker 1:That's really the thesis of the yeah, but I mean, at the end of the day, you also always run the risk of keeping two silos or keeping two stacks at the back. It's a huge sort of strain well, maybe that's not the right word, but on the organization to actually incorporate this completely into your stack. Right, that's a lot of work.
Speaker 2:Well, we recognize that they were a large public company 8,000 people so they've got a great organic business that, obviously that we've said in earnings calls is doing quite well. I'll also point you to the several announcements I think we made this week on all the product integrations that have been happening. So while we're integrating, of course, and while the business that we had taken over organically is doing quite well, we're also doing a lot of product integrations for new synergies.
Speaker 1:More generically, how do you, in your role and for your department, how do you react to stuff that you're seeing happening in the market in general? Does surprise technology advancements or whatever? If you're ever still surprised, I don't know. If you're ever still surprised, I don't know. Maybe you know everything already, but what do those things mean to your business units?
Speaker 2:basically, yeah, I'm trying to get to the heart of your question. First of all, I've got a great team that fans out across seven or eight countries, and we do a lot just globally, so our lens to innovation right SunEverset's we're looking at companies all over the place. What I think, though, it means for the startups is that, as we have endeavored to create more of a platform play with Cisco's offerings across security, observability, networking, collaboration we become a nice fit, I think, with the startups out there that are maybe offering certain things that we're not building internally. So whenever you build a platform, it's almost like a startup's API into what you're already doing.
Speaker 1:I think, making it more concrete. For example, I'm from Europe, especially over the past months. We all know why that is. There's been a lot of talk about sovereignty and about data sovereignty and about not really doing anything anymore with American companies and all these things. When that hits you, what's your initial response? In terms of oh, we need to invest in that because we need to know more about this, and how quickly can you actually do that?
Speaker 2:Yeah.
Speaker 2:So I think what? Here's the way I think about it. There is obviously an explosion of AI infrastructure being built right now, and whether you're talking about hyperscalers, whether you're talking about some of these neoclouds, whether you're talking about enterprises where I think a huge opportunity exists to unlock all the data there, talking about some of these Neo-Clouds, we were talking about enterprises where I think a huge opportunity exists to unlock all the data there. And I'll point you to there is a study that we've done which says, on the enterprise side, that there's, you know, a CEO survey 98% of folks want to, of CEOs want to push AI products, but only 1.7% are really ready. Yeah, yeah, this is where Cisco comes in in. Why are they not ready? They're not ready because their infrastructure isn't maybe up to par or maybe modernized. They're not ready because they don't have the right talent. They're not ready because they don't trust and it's not as secure.
Speaker 2:This is where we can come into play. And back to your question about sovereign AI yes, data centers have been set up around the world. I happened to be in the Middle East a few weeks ago, in both Saudi Arabia as well as UAE, and there's a lot of sovereign AI data center projects being built there. France is another one that we were in recently, and some announcements have come out there. So what I'm seeing is that all of these whether it's a hyperscaler, whether it's a neocloud that's going to be a regional, sovereign neocloud, and the enterprise themselves there's just a ton of opportunity and Cisco's prime position to play in all of this.
Speaker 1:Yeah, because I mean that's in my country. I'm from the Netherlands. I mean there's actually people are talking about building sort of a country cloud to. I mean that's also something that you need to be able to react to if you hear that in the market. Correct, I wouldn't do it if I were them. But I mean that's it's not my decision to make, but that is.
Speaker 2:Those are very big opportunities for you, data sovereignty is a huge factor in where these data centers are getting built these days. Yeah, and that exactly.
Speaker 1:Yeah, and I mean and it's only expanding right, it's only exploding, yes, exploding even more Right. And then so final question, especially looking at Europe how is the startup ecosystem doing there in your opinion and in your experience? Because obviously it doesn't have the best track record.
Speaker 2:Yeah, no. Well, maybe you're being humble, but I think from what I've seen in my years at Cisco, I mean it's been a fruitful place for us to both invest and acquire. I think at one point a few years ago, one of every three, one of every two or three acquisitions was coming from Europe.
Speaker 1:for us, oh, really, and so there was a year that.
Speaker 2:This is what I recall. We can go back and look at the data, but it has always been a fruitful territory and on my team we've always had people based there in different parts of Europe.
Speaker 1:So you're also invested so for you to pun in Europe in that sense.
Speaker 2:Oh, absolutely.
Speaker 1:You want to help the ecosystem there as well.
Speaker 2:Yeah, yeah yeah, we don't. You know, innovation is democratized. There's no one place. We're going to find it all over the place and we're going to be there too. So if you look at ciscoinvestmentscom as our website, you'll see more than a handful of companies from Europe there.
Speaker 1:Oh, all right, I didn't know that. Maybe I should do my homework better. The next time.
Speaker 2:No, no, no.
Speaker 1:We can give you that list. Yeah, you can. I can find it. I can download it All right. Well, I thought it was a very interesting conversation. I never had a conversation about Cisco investments before, so it's a first one for me as well. I usually have very deep technical conversations with people, so it's interesting to hear your story.
Speaker 2:Well, thank you for sparing me on that.
Speaker 1:Well, I thought maybe I won't ask you why the latest switch doesn't have a DPU and the previous one does, because maybe that's not the correct question to ask we could refer you to something for that. I already asked Martin Lund this question, by the way. So thanks for joining. Absolutely thanks, Sander.