Aruba CEO Details Channel Ambition For Year Of 'Won And Lost' Market Share

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Dominic Orr has been president and CEO of Aruba Networks since April 2006, and in the past four years, it's safe to say opportunities for wireless LAN in the channel have both evolved and increased. The wireless LAN space is also more competitive than ever, but market share-wise, Aruba by most estimates remains a consistent number two to dominant Cisco.

Calendar year 2009 was kinder to Aruba than other networking vendors, and Aruba recently reported quarterly revenue increases that were 10 percent year-over-year and 8 percent sequentially for its first quarter of fiscal 2010.

And while channel strength hasn't traditionally been an Aruba forte in the U.S., Aruba's more recent emphasis on building out the VAR program -- including the hiring of networking veteran Bob Bruce to run channel efforts -- has many Aruba partners wondering if this is the year Aruba breaks out as a networking and infrastructure channel force.

Along with Bruce and Michael Tennefoss, head of strategic marketing at Aruba, Orr joined Channelweb.com Assistant Managing Editor Chad Berndtson to look at what lies ahead for Aruba's channel and the wireless LAN space as a whole. Excerpts of the conversation follow:

I wanted to look at some of the things that helped Aruba excel last year and are continuing to help you excel. Your first quarter was superb. How did you do it?

We started focusing on solving an extra set of problems, sometimes not related as much to mobility as what we called network rightsizing. People tend to over-provision. If you have a wiring closet that needs more switches, you tend to just double the switches so you don't have to go back to the wiring closet for another six months. But when the downturn came, people realized that a significant percentage of their wired resources aren't being used. I imagine that in your office, you probably have three to four Ethernet ports per user. However, you're continuing to pay 15 to 20 percent in annual maintenance, software upgrades and refresh for those ports. People who don't have budget can't refresh. At the same time, you're also realizing that a lot of your workers use laptops and move around and work outside the building. You don't need to upgrade your wired Ethernet switches so much, and you're realizing this is a good opportunity to re-engineer your infrastructure.

Adding 802.11n [wireless] connectivity actually solves your connectivity problems and enables the mobility applications you want, and at the same time, you're taking out switches, so you're paying for less maintenance. So the push toward rightsizing the LAN was a big factor for us. It gave us a very timely agenda to take in to talk to enterprises, because everyone has a reduced budget. Mobility projects have slowed down, but the rightsizing has been kind of a big drive for us to overcompensate for that slowdown.

There are two more factors that help us. One is the ratification of 11n [in September 2009]. Even though the universities lead the charge to deploy 11n, many enterprises tend to be more conservative, and many did say that until it's actually ratified, we'd rather not deploy it. 11n in the enterprise also costed more than double 11a, b or g access points. At Aruba, we introduced the AP-105, which coincidentally was timed with the 11n ratification, to reduce those costs. The lessening of the premium between n and a/b/g, coupled with the ratification, was a big kick-start.

Finally, we figured out a way to extend architecture where we created a secure roaming capability. People can go from building to building without losing connectivity and session applications and without security problems. Then, we found out we can with a little bit of tweaking extend that roam to home offices and branch offices. As a result, we have a new brand, Virtual Branch Networking, so now we can offer a single controller pointing to the user and letting that user roam around the main campus and branch offices. The combination of all these factors is responsible for the resurgence of revenue growth.

You mentioned the AP-105 and growth for 11n access points. On the earnings call in November, I think you mentioned that you expect about 50 percent of your AP shipments to be 11n by the middle of 2010. We've talked about some of the things catalyzing the 11n demand, but are you holding to that projection?

You either have a very good memory or you take very good notes. That is what I said. It looks like if anything, it may have accelerated. There's a strong possibility that 50 percent of units being 11n will come even slightly before that time.

In the AirWave division, we saw the introduction of AirWave On Demand, which is a software-as-a-service version of AirWave Wireless Management. That product is in line with what appears to be a cloud strategy taking shape from Aruba. Can you talk about why that's important and what Aruba's strategy for cloud deployments is?

Yes. AirWave is one of the most important strategies for our large enterprise customers. In most of those large accounts, people have a history of investing in other vendors, so by the time they choose Aruba, they're primarily looking forward for our 11n capability, but they obviously would like to ride the depreciation cycle for as long as they can for their existing equipment. What we have is a system that allows them to recognize their future and their past. The multi-vendor network management aspect -- and we are the only company in the wireless LAN industry that provides that -- is the value.

Why put it in the cloud? Well, when you go out and especially move to extend your business over the channel, you find fewer IT professionals in mid-tier accounts and also people who want to avoid capital equipment purchases. So basically AirWave On Demand allows a midtier account to buy the drinks by the glass rather than buy the bottle -- it's an ongoing op-ex kind of model. Servicing in the cloud also means they don't have to invest in network management personnel.

Channel partner feedback to us has been that they want to participate in the cloud computing phenomenon and derive some services revenue, and one of Aruba's major objectives is to differentiate ourselves from the incumbent vendor in the channel. We want our channel partners to be profitable with as many ongoing revenue sources as possible, whereas our major competitor [Orr is referring to Cisco] has a tendency to try to get it all to get the growth they need. Our core competency is creating products and platforms, and we would like to enable our channel partners to derive extra service revenue. AirWave is a very good way for our partners to do that.

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