Juniper CEO: Innovation Trumps Market Uncertainty To Drive Partner Success1:15 PM EST Wed. Jan. 25, 2012
The last time CRN sat down with Juniper Networks CEO Kevin Johnson, in April 2011, Johnson affirmed that Juniper was in "execution mode" -- firing on all cylinders in technology, sales, marketing and partner enablement and fresh off several acquisitions that were poised to expand Juniper's growth into key areas.
Fast forward to January 2012, and Johnson and his company have a few bumps and bruises to show for their year: a round of layoffs in the fall of 2011, earnings disappointments that led to a revised forecast for Juniper's fourth quarter of 2011, a downgrade from the "leaders" quadrant to the "challengers" quadrant in Gartner's recent Magic Quadrant for enterprise firewalls, and frustration on the part of Juniper partners and customers over Juniper's response to technical flaws in several Juniper SRX services gateways.
That Juniper is growing, however, is an inarguable fact. Johnson touted year-over-year growth of 15 percent heading into calendar 2012 -- short of a hoped-for 20 percent but nothing to sniff at -- and at Juniper's global partner conference in Las Vegas this month, he and his team set about explaining to partners why their investments in Juniper programs and Juniper products would continue to pay off in the new year.
Johnson joined CRN in Las Vegas for a wide-ranging discussion of Juniper's progress. The interview took place during Juniper's quiet period -- Juniper is scheduled to report Q4 earnings on Thursday -- so some subjects were off the table. Excerpts follow:
A lot to talk about Kevin but we'll start current. You had an earnings warning this month tied to what you described as weak demand in service provider spending, and the speculation on Juniper, particularly from the analysts, is concern for the mix of service provider and enterprise business. Are you happy with that balance of roughly two-thirds service provider, one-third enterprise? Do you need to change it?
Our strategy is to be an innovator focused as a pure-play on networking. For every dollar we invest on R&D to innovate, we create solutions applicable to both service providers and enterprise customers. So it makes complete sense that we would continue to innovate in the domain of service provider and enterprise, because it's basically the same set of products. You take our MX edge routers, for example, we sell them to service providers on the edge of their networks, and we sell them to enterprises to connect their data centers for the cloud. I think strategically we are focused as a pure-play and as an innovator in the domain of networking, and I think that's the right thing for this company.
So the mix is OK the way it is?
Look, the mix is what it is. We're in a quiet period so I can't comment on Q4, but the strategy is right. We innovate in the domain of networking in a way that has a high degree of relevance in customer value in both service provider and enterprise, and we continue to grow in both those sectors as we continue to evolve as a company.
But it's not concerning that you have to respond to the vagaries of when service providers have a tough quarter? 'Overexposed' is the word the analysts use.
We're in a quiet period, so I'm just not going to comment on that. But we love our service provider customers. It's the heritage of the company and we're going to remain focused on service provider customers even as we expand into the enterprise sector.
Next: Juniper's Expanding Value Proposition In Software
You came from Microsoft and have brought in some other execs who worked at Microsoft. What is your vision for Juniper as a software company?
I joined Juniper now about three and a half years ago, and if you look at how we evolved as a company, we've established a leadership team that's come from many areas of high tech: IBM, Nortel, Sun, Alcatel-Lucent, HP. What we've done is assemble a very talented management team that comes from the diversity of high tech companies, and they bring relevant experience to driving this business.
The second part of the question has to do with software in the domain of networking. When I came to the company, three and a half years ago, about half the employees at Juniper were engineers, and today still half the employees are engineers. This is a very engineering-centric company. The thing I find interesting is that 75 percent of those engineers are software engineers. What delivers the value for us is certainly an investment in silicon and the systems, but a big investment in the Junos operating system. What we've done here in the last few years is to build software on top of Junos. Software that runs in a hypervisor, software that runs on mobile phones, tablets and PCs, software that when we look for solutions for service providers around content distribution networks, we can run software on our MX Edge platform. MobileNext for mobile packet core -- that's software. What we want to do is create impactful solutions for our customers that leverage the work we do with systems, but extends into software the enables a much broader range of solutions and a more flexible way for customers to deploy those solutions.
During your keynote, you brought up Firemon, an example of a partner that bundled a security solution leveraging Junos Space that could then be monetized and sold. That's an isolated example, but how do you encourage more of that behavior with Juniper partners?
The number one thing we've done is create a software developer kit and the toolset for developers broadly, where it's customers, partners, or independent software vendors, to innovate on top of Junos Space and on top of Junos. We've seen dramatic growth in the number of organizations that have embraced that software developer kit, and are doing that uniquely. Some of the organizations innovating on Junos are customers, who have some unique need or feature they want to enable and they see a way to play a role in enabling the solution.
Certainly for partners, it allows them to add another revenue stream for their company. They make money by selling technology products and professional services, and now they can develop innovative technologies on top of Junos and Junos Space. What we're enabling partners to do is expand the portfolio of offerings they have that allows them to drive revenue and profit. If they see a way to improve their margins, they will find interesting ways to invest.
Looking at Juniper's product portfolio, where do you see holes?
Certainly the number one drive for our execution as a company is organic R&D -- the tech we invent and build organically. But over the last two or three years we've also complemented that with a number of acquisitions. We did five acquisitions in 2010 that I would characterize as tuck-in acquisitions: companies that had very interesting intellectual property that related to Junos, and talent and skills in specific areas. Ankeena was an example of a company that we acquired and they became the base of our MediaFlow content distribution software. We acquired SMobile and integrated their [technology] with Junos Pulse for anti-virus and anti-malware. Trapeze filled a gap we had in enterprise wireless LAN.
I think we filled the gaps we identified two or three years go. Now we will continue to focus on things we think will give us synergy -- things that help enhance the MX platform for new services, or things that can help continue to evolve our offerings in the data center for network management. But I think we closed the gaps, frankly, that we had three years ago and now have a very compelling product portfolio. It's the richest product portfolio the company has had in its history.
So when you're looking at areas to supplement, to add to, to enhance as you mentioned, where might you look to acquire next?
Well, it's probably not appropriate for me to comment on any specific area or specific company, but the principles we have used in the last three years will hold true. We look for a strategic complement in the domain of networking that makes financial sense and will drive value creation for our shareholders. Our track record over the last three years has been consistent and will be consistent in at least how we think about M&A.
Next: Juniper's Security Pains
As we've talked to a number of Juniper partners both here at the show and in general, there's a lot of focus on your recent security challenges, from the Magic Quadrant firewalls downgrade to some of the things Bob [Muglia, executive vice president, software solutions] and Stefan [Dyckerhoff, executive vice president, platform systems] acknowledged from the stage about SRX. How do you get these things back on track?
I think the team has done a very good job of transitioning to the SRX and really hardening some of the features customers asked us to build into the SRX. The place you need to look at is the thought leadership agenda. Security is a very dynamic marketplace; we did the acquisition of Altor [in 2010] and the virtual gateway software we gained can secure servers in the VMware hypervisor. I think that's a big opportunity. The fact that we have Junos Pulse on these end devices and the fact that Junos Pulse can create value by the unique features we have. I think you'll see Bob and Nawaf [Bitar, senior vice president], who now leads the security business unit, be more vocal about this next thought leadership agenda they're driving in the domain of security.
The firewalls question comes up a lot, and now you have vendors such as Palo Alto Networks and F5 Networks very publicly challenging Juniper as a security vendor and talking up customer wins displacing Juniper firewalls. What is that competitive threat, in your eyes?
In the domain of security, there are lots and lots of very small companies focused on niches within security, and I think that's because the security threat landscape continues to evolve. The bad actors invent some new way to launch an attack and a new company comes up with a thesis or theory about how they can defend against that attack. And so you have a very fragmented industry with lots of players, and in a way, that's good, because you create a broad ecosystem of innovators that are working to protect customers.
At the end of the day, it does create complexity for the customer, however, because they're going to be looking for more of an end-to-end solution. That's our opportunity with the broad footprint of security we have the in the network combined with the broad footprint we now have on the end device with over 35 million enterprise devices protected with Junos Pulse, and with this virtual gateway software. We need to focus on the things we can do broadly from an end-to-end security standpoint, but also recognize that the security market is going to have lots of players focused on different niches.
Juniper is prided for not rushing out products, so why do you think you've had so many challenges with the SRX? That's been universal feedback from partners -- that there have been consistent quality issues with the SRX products.
You think about the evolution from ScreenOS and the NetScreen acquisition and those features that were ported to the SRX, and the SRX, which provides this fantastic scale when it comes to securing the network. With that scale and the features we provided, I think a number of customers asked for a wide range of features that would enable them to do new things, and as those features were shipped I think there was a period we had to go through to harden those with customers. So I think a big part of that was there was such a demand from customers for new features in the SRX and that created a situation that took some time to get the solution hardened in the marketplace.
Is it fair to say you rushed it?
I don't think so. Looking back, there are things we could have done differently. Maybe we rushed too many features at once, but I don't think we rushed the product. In the spirit of trying to respond to customer needs, I think we were doing all the right things and perhaps we could have done some things to sequence those features in different ways.
Next: Juniper's Johnson Looks Ahead
What are you seeing as the largest customer pain points in 2012 and 2013, and where should VARs place their bets in terms of growing their business based on addressing those pain points?
Let's start with service providers. The explosion of mobile Internet traffic and how to carry that traffic and enable services to end users in an efficient, effective way creates a huge amount of opportunity, whether in things like content distribution network to manage video or mobile packet core to enable video, I think mobile Internet is the big opportunity there.
In enterprise, it's the inflection point of both mobile Internet and cloud computing. Enterprise customers are dealing with this explosion of data, and more and more compute applications focus on compute cycles, and as a result, enterprise have to figure out how they can build these virtualized data centers -- call them private clouds -- in a way that can handle the scale of the data they are using. So in the enterprise, I think data center is a huge opportunity. With the 3-2-1 architecture we've introduced and QFabric, we're providing our partners with some phenomenal thought leadership assets to meet that opportunity.
When we met last April, you said Juniper's R&D spend was going to be about $1 billion for 2011. Will it be the same this year? Increase or decrease?
Well, since we're in a quiet period, I can't comment on that. We'll have to wait until after the earnings call.
Did you end up spending about $1 billion?
Again, I can't comment.
Looking at your major competitors, Cisco had a tough year and it retrenched with partners and now has this focus called partner-led where Cisco is very publicly putting a lot of new resources into channel programs. Can you comment at all on investment in channel programs by Juniper, and whether that's greater than what we've previously seen?
Certainly I'll comment on Juniper. The Partner Advantage program we've rolled out and communicated has investment greater than it's ever been. We're at a point where we've got this rich set of products that we've taken to market, and this new network platform architecture, and our partners are a key vehicle for us to take these things to market, so we're putting resources behind that and that's evidence by both this global partner conference and the attendance.
The competitive mix overall hasn't changed much in the past year or two, but what do you make of Huawei?
We have a lot of good competitors in this domain and Huawei is one of those competitors. I think they're a very large competitor and will continue to be a large competitor for us. When I think about the competitive landscape, the one truly unique thing about Juniper is that we are driving a differentiated thought leadership agenda. It's not "do we have any large competitors" -- we always have large competitors, we're a 16-year-old company -- it's "what allowed us to get to this point in innovation." When you meet with executives in every part of the company, you find we're embracing innovation and finding new ways to do things differently. That formula has allowed us to launch and grow a company and get to this point and that will continue to be successful independent of the number or size of competitors in the mix.
We had a chance to talk with your MX product team about some of the lower-end routers targeted at midmarket sales. Does Juniper want to push downmarket? Is there a play for you in small business at all?
Small businesses are in many ways going to be some of the biggest consumers of public clouds. They're going to look to managed services providers and service providers to enable that. We're not targeting small businesses from the perspective of we want to sell some data center directly to them, but indirectly, we are. The fact is we're working with our large service provider customers to build managed services offerings and service provider customers are then targeting small businesses. Indirectly, I think we're enabling technology to be available to small businesses. The MX is a good example.
Next: Growth Of Juniper's QFabric
In your high-level conversations with the C-suite, what's been key to getting customers to understand QFabric? What's the aha, lightbulb moment for explaining your competitive advantage there?
For them it's business value. You have a solution that lets them implement their data center and consume 75 to 80 percent less power in the network and do it with less capital expenditure and at a much lower total cost of ownership. For a CIO and a CXO, those are going to be very compelling things. Then, as they take a look at their organizations and have data center architects do speeds and feeds and benchmark it, the fact that QFabric can win on the technical benchmarks means we're seeing more and more traction behind the product. Some partners here have been talking about the sheer number of opportunities they have for working on QFabric deals.
So has early adoption of QFabric been in line with expectations?
Whenever you introduce a technology that has a new architecture in it, you know the sales process is going to take some time, because architecting data centers and building data centers with a new architectural approach is a period you have to go through to educate customers and be a part of their planning process. In terms of the wins we've secure, we're very pleased with the progress, but we've also realized it's going to take time. We'd like it to happen faster but the fact is that with an architectural sale like this, it's going to take time.
What are your thoughts on OpenFlow and its influence over networking?
We're at the table and we're participating and having the dialogue, so we'll see how it unfolds. I think we've recognized that there's some interesting concepts there. Will those be able to scale? The important thing for us is that we're at the table engaging and having the dialogue and being part of it.
Are C-suite customer leaders more willing to spend this year? Do you think the enterprise spend this year is going to be more robust?
Since we're in a quiet period, I just can't comment on any view of spending patterns in 2012.
Well are they at least optimistic? More cheerful maybe?
I understand the question, but those things get interpreted. So I apologize, but we're in a quiet period and I can't comment.
Looking ahead beyond 2013, what's your challenge? What keeps you up at night?
The challenge is to continue to shape the long-term agenda of the company. We have a three to five year product roadmap, and we have to be careful about how we're allocating resources. We will continue to do that. There are macroeconomic things we can't control but that we have to be aware of, and we have to be agile and respond to those. I think we do a pretty good job of that.