A pattern seems to emerging in the telecom equipment world: Win a contract with AT&T(s t) and you'll soon be acquired by Cisco Systems(s csco). In February, AT&T revealed its plans to reshape its mobile network in the data center model, and among its long list of vendors was little-known software-defined networking startup Tail-f Systems. On Tuesday Cisco announced its intention to acquire Tail-f for $175 million.
The same thing happened last year to another company. In 2012, Israeli self-optimizing network startup Intucell won a contract to turn AT&T's towers into dynamic cells that could grow and shrink as network demands changed. Eleven months later, Cisco bought Intucell for $475 million.
Based in Stockholm, Tail-f tackles the telecom networking component called the operations support system, or OSS, which is essentially the brains controlling the network and the services running over it. The problem is that the OSS has become a bloated, plodding, money-sucking beast. Tail-f is taking advantage of the trend to virtualize telecom infrastructure in the cloud by virtualizing and streamlining the OSS.
Cisco will incorporate Tail-f and its 75 employees into its cloud and virtualization group and give Cisco another weapon with which to attack the telecom infrastructure market. Ever since the advent of 4G technologies, Cisco has become much more than a IP router supplier for telcos. It's expanded become a dominant player in the network core with its acquisition of Starent Networks in 2009. Most recently it's been expanding its reach in small cells – tiny base stations that deliver loads of capacity in high demand areas – with its purchase of Ubiquisys.
Tail-f had raised $6.3 million in funding in two rounds, both led by SEB Venture Capital.