If there's a little bit of swagger emanating from Riverbed Technology's top executives these days, they've surely earned it: the WAN optimization powerhouse has continued to grow, cementing its position as a channel play and keeping it ahead of Cisco and the emerging class of new WAN optimization-oriented startups looking to claim some of its market share.
Earlier this month, Riverbed went live with a cloud-ready version of its Steelhead WAN optimization appliance, and also entered the cloud storage market for the first time with a product called Whitewater. Couple that big-splash announcement with two acquisitions it's made in the last six weeks -- CACE Technologies, for packet capture and analysis tools, and Global Protocols, for satellite networking expertise -- and the company's bulked up that much more.
Following the Cloud Steelhead and Whitewater debuts, CRN had a chance to catch up with Jerry Kennelly, Riverbed CEO, and Eric Wolford, senior vice president of marketing and business development, for a quick discussion of Riverbed's progress and vision for the new year. Excerpts of the conversation follow.
Riverbed is often thought off as the leader in WAN optimization, and we've seen, with these announcements, your broader cloud strategy begin to take shape. But that's kind of where you've been leading to all along, no? It doesn't seem quite accurate to describe Riverbed as a WAN optimization company that also now has a cloud strategy, too.
Kennelly: The real value proposition we've been saying is data center consolidation: allowing knowledge workers the ability to get to their applications from one or two corporate data centers rather than distributed assets. What we've come to learn in the last year, is that half of data center consolidation is really the creation of private clouds. We've been reaping cloud revenue all along -- it's a very natural extension of what we do.
The cloud has been coming for a long time -- it's coming, really coming, like a freight train -- but there are some impediments to its broad adoption. It's something that will enable a broad set of companies to buy something off the shelf from Riverbed, and make easier the confusing cloud world almost immediately. We're in the position of having the dominant technology needed to enable cloud computing, and it's a great position.
The raw performance of cloud means you'll be further away from your applications than before. We solve the problems of distance, and latency, and bandwidth concerns. Plus, when you let go of your IT resources and entrust them to a third party, you have concerns about security and ease of use. So we put emphasis on how it's encrypted and how it's simple and available. That's comforting to a CIO who is making the first jump off the cliff and going bravely into the world of cloud.
You've made a number of acquisitions of late, including CACE and Global Protocols. How do they fit into your strategy?
Kennelly: We live in the world of Layer 4 through 7 application delivery networking. Cisco is Layer 2 and Layer 3 plumbing, and while the last two decades have been the decades of plumbing, the next two are going to be the decades of the application layer -- that's where the money's going to be. That's why we're growing and they're not.
We announced six new products in the year already, three of which were internally developed and the others were purchases and acquisition. The CACE acquisition helps us build out our product set in our Cascade [WAN optimization] product group, and gives us more quality. Global Protocols is a small company in D.C. focused on the Defense Department, and gives us a leg up on our DoD and federal business. Satellite, for anyone who does satellite networking, suffers massive network delays: the packet has to fly up to our space and back down again. That's a market perfect for optimization.
Next: Acquire, Or Be Acquired?Will you continue to acquire, and if so, will they be tuck-ins or more strategic mergers?
All of the above, I'd say. I'd buy three more companies right now if I could, but it's hard to find acquisition targets that are profitable and that fit our profile. We're here in our ninth year of business and we're not obsessed with acquisitions in our core market. We're doing well.
How is the competitive landscape changing? Cisco remains your biggest WAN optimization threat, it seems like, but there are all kinds of smaller companies, such as Certeon, that are looking to position themselves as alternatives to Riverbed.
Wolford: Cisco is by far our main competitor, by three or four times the frequency over any other competitor. After that, it's a big drop-off, then there's Blue Coat, then another big drop-off, and then Juniper and five or six others. You mentioned Certeon and that's a very small number of engagements, which is true of the other small companies. The opportunity in WAN optimization for a start-up is going to be very difficult because we're already the players. It's hard to get a toe-hold, and you have to get customers to learn with you on your products when they could already buy, from us, a 6.0 or 7.0 version of a product. If we're talking cloud gateways, we do see plenty of competition there, but for the most part, our competitive battle is with Cisco.
Kennelly: It's an interesting market. You want to overcome latency issues, and latency's caused by the laws of physics, so you either have to cache data, or reduce packet trips. There is no third way, and there aren't two guys in a garage right now figuring out a third way to overcome the laws of physics, so there's no fundamental change coming. We have the market, because each one of our [releases] is more robust. Each one has more zings, and we just added to it again.
You mention expanding into cloud storage. Are there other areas where Riverbed should expand or will need to expand going forward?
Wolford: If you look back, we started as WAN optimization, and since that point, we have now moved into an adjacency I'd call over-the-WAN application management. The other adjacency we expanded into with this release is cloud storage. But not to be missed is that the current market for WAN optimization is growing. This is not like we're in the eighth inning of a nine-inning game; this is still probably the second inning. There is a very large, greenfield opportunity in front of us with the current product set; some 90 percent of remote offices still don't have any acceleration. So we don't want to lose focus on the great market in front of us. We're always looking for adjacencies, but we're not desperate for adjacencies.
Will you look to be acquired?
Kennelly: One of the natural phases is to be acquired, and another is have something that's a whole and fundamental thing, where, if the executive team is right, it can be a huge standalone company for decades to come. We think we're in the latter camp, and so do our stakeholders. In four months, as a standalone company, we've doubled the value of our stock to shareholders. When you're acquired, maybe you get a 30 to 50 percent premium and then the buyer goes in and messes up your beautiful technology. You never know what's going to happen. A long-term stock price is the best outcome, and that's the path we remain on.