Cisco will acquire AppDynamics, an application intelligence software company based in San Francisco, for $3.7 billion, as part of a strategy to “transition toward software-centric solutions that deliver predictable recurring revenue.”

AppDynamics provides optimisation services to businesses covering user experience and mobile app engagement, and counts Nasdaq and Nike among its clients. Following the acquisition, the company will continue to be led by current CEO David Wadhwani, and will operate as a new software business unit in Cisco’s IoT and Applications Business Group.

Cisco made its move a day before AppDynamics was due to price a long-planned IPO following an investor roadshow.

It is worth noting the price Cisco is paying for AppDynamics is around two-and-a-half times higher than it paid to acquire IoT specialist Jasper in February 2016, and the deal is Cisco’s largest acquisition since it bought security company Sourcefire for $2.7 billion in 2013.

In a statement, Cisco said: “As things get simpler for consumers, they get more complex for companies trying to stay ahead of rising customer expectations. Together AppDynamics and Cisco will provide customers with intelligent and actionable insights, helping them make speedy business decisions and improve business performance.”

The acquisition is expected to close in Cisco’s fiscal Q3 2017, which covers the three months to end-April.

Michael Segal, area VP, strategic marketing, at Netscout, told Mobile World Live that Cisco’s acquisition strategy is indicative of “changes sweeping the enterprise as more and more companies become reliant on applications, services, and data, and is a shift that’s fuelling a rapid period of digital transformation.”

“Almost every aspect of business operations is now software-based with business success becoming intrinsically linked to the performance of applications, cloud computing, data centres, and other digital assets,” he added.

In November Cisco disappointed with a forecast revenue in its fiscal Q2 2017 (the three months to end-January) will fall by between 2 per cent and 4 per cent, citing weakness in orders from service providers.