At the end of the first day's general session at this year's Juniper Americas Partner Conference in Phoenix, Kevin Johnson could be seen relishing the moment.
He and a parade of his top lieutenants had just finished telling more than 1,000 assembled Juniper partners -- 390 in person, and more than double that virtually -- how Juniper Network's recent acquisitions, product releases and marketing exposure are driving partner opportunities and Juniper profitability like never before. Triumph was in the air, and the session's exit music -- "Jumpin' Jack Flash" by the Rolling Stones -- had Johnson visibly fired up enough to be seen mouthing a few, punctuated verses in between pressing the flesh with a steady stream of smiling well-wishers.
The CEO of Juniper Networks is pretty pumped these days. And it's tough to deny the affable Johnson, now deep into his third year at Juniper's helm, his moment.
Juniper is battling for networking, infrastructure and security market share from a nimbler stance than bigger, bulkier competitors like Cisco and HP, and has delivered on some of its most ambitious product releases in years while also fattening up its executive ranks, putting some muscle behind Juniper's marketing, and making strategic acquisitions to complement what Johnson says is an expanding, $1 billion R&D effort.
Johnson joined CRN Senior Editor Chad Berndtson for an exclusive interview in Phoenix earlier this month, tackling everything from Juniper's acquisition appetite to software-centric partnerships, the differences between Juniper and Cisco and HP, the service provider-enterprise mix, and his stacked executive team. Excerpts of the conversation follow.
So, Kevin, one of the busiest years in Juniper history and it seems like it's going to continue to be that way. New products -- QFabric, packet cores -- executive appointments, acquisitions, everything. Partners like it, the aggressiveness of it. But it's a lot for them to absorb all at once. What do you want them to understand about your strategic direction right now?
I think a couple of big takeaways. The market trends of cloud computing and the mobile Internet are creating demands on the network that require architecture changes and a new network approach. And so, number one is understanding the market trends. Number two is understanding the investments we're making. I happen to believe that in these types of transitions and inflection points in tech, that's the opportunity for innovation to have massive impact and help transform the landscape of how computing is done.
The investments we're making in R&D, the investments we're making in sales and marketing, the investments we're making in partners are aligned with these trends in mobile Internet and cloud computing, and add up to massive opportunity. At the end of the day, if partners look and say, 'Wow, we see these market trends and we love what you're doing' and the innovation and architecture and technology and marketing and awareness and investments are there, I think we've accomplished what we hoped to do.
How would you define a strategically aligned Juniper partner? Be it a reseller or integrator or service provider, you have a reasonably broad partner mix now and to judge from the presentations at the conference, you want them to expand beyond what they've been doing -- whether that's as a security specialist, or a networking reseller background or something else -- to do other things with Juniper. Is that what a strategic partner looks like now?
Every partner has their own business plan and their own strategy and that's perfectly fine. The fact that partners understand what's going to make them profitable in their business, we're respectful of the way they want to run that business. The core of what gets us strategically aligned is a common vision sharing of what the new network is and what it can do for customers. From there, some partners might choose to focus on security, or service providers, or data center, and we want to enable them all to be wildly successful.
We're working hard to create opportunities that expand their revenue and profit generation in other businesses. Partners might look at traditional reselling of network technology, and I think the latest surveys show that Juniper provides the best margin and profit opportunity for partners that want to do that. We can also open up services opportunities that add to that. The third element is partners who want to innovate on software. We provide the vision, innovation and a full range of choices that the partner can make.
NEXT: Juniper Partners Need Software Competency
So, for a software competency: understanding the role of software in solutions and also being able to drive a software agenda in multiple ways, be it as an app developer or integrator. Is that crucial for a Juniper partner now?
I think most of our partners focus in some form or fashion on solutions. That involves not only systems, but also software and services and partners are very familiar with what role those play. There are multiple ways a partner can play in software. Reselling software from Juniper or other partners is one way, or they may decide they want to invest and develop their own portfolio of software offerings that help them further differentiate their solutions. More and more partners are making that choice. It doesn't have to be massive, multi-year R&D projects, it can be small, simple tools and utilities that their service professionals build as part of customer engagement, and gives them a portfolio of software they can add to the mix. I think there's a wide range of choices for partners.
I ask because a lot of partners with traditional hardware backgrounds, who came up selling networking and security gear with you and Cisco and others, are grappling with this idea that they need to become application specialists and understand software's role in their sales a lot more than they used to. Is that not the right way to think about it?
No, and I think even in the legacy approach to networking, even the hardware boxes in the past had software as a certain set of features. As long as partners understand the feature set in what they're trying to enable for customers, I think the form factor is irrelevant. Focus on the customer and design solutions that give them what they need.
At CRN, we had the opportunity in recent months to sit down with both [Cisco CEO] John Chambers and [HP CEO] Leo Apotheker to get a sense of where they want their ships to steer. Despite obvious differences between the two of them, we did hear, in each strategy, this sense of 'do more with us, absorb more of our pie, make yourself a more strategic partner or someone else will.' Any vendor wants a partner to sell more of their stuff and become more strategic, but can you talk about how your message to partners diverges from theirs?
Well, I think the whole concept of the new network is a thought leadership agenda that has impact for our customers, and when I use the word customers I say both Juniper customers and Juniper partners. The technology vendor or supplier has to have a vision for the future and is innovating in ways that are relevant for the customer and differentiated for the customer, I think that's job one. That's what the whole new network approach is all about: creating the thought leadership agenda and something that is compelling and relevant for our customers. If that's there and that's true, partners will want to be a part of that, wrap their value around it and build capabilities and solutions.
There are a lot of legacy vendors and approaches out there, but when it comes to networks, Juniper is an innovator. We're looking to the future and how to solve these problems in unique ways. That's why our message is relevant to customers and solves problems, and that's attracting more partners. And so, it's our job to innovate and tell the story, create the demand and invest and enable our partners.
Next: Juniper's Message Is Getting Out
How are you measuring the resonance of your message with customers? You have the high-level conversations with the CEOs and decision-makers. How do you know Juniper's message is resonating?
Well, it's a variety of things. I personally have a lot of one-on-one conversations with customers and have the opportunity to assess first hand whether the new network approach helps them. Another data point is broader awareness in the industry. And then you can certainly look at growth. Our revenue growth was north of 23 percent year-over-year, and our enterprise segment grew north of 30 percent. That kind of growth and the strategic relevance of conversations are all data points that reinforce we're on the right path.
When you're meeting with these customers, do they know you? Do they have an awareness and understanding of Juniper that wasn't there when you became CEO?
When I stepped into this role three years ago, the level of awareness was much different than it is today. Part of that is a function of we have put a stake in the ground with this thought leadership agenda, and made that agenda real with investments in R&D and the product portfolio that we've delivered. At the end of 2008, when the macroeconomic situation changed significantly on a global basis, we made a strategic decision to increase investment in R&D and customer satisfaction, and now we're reaping the benefits with the product set you've seen.
We've been very focused on the domain of networking and very thoughtful about the architectural transitions and innovation required to enable this next generation of mobile Internet and cloud computing. If we're thoughtful and we have impact, we will continue to grow: continue to grow in partnerships and in awareness, and every step of the way listen to our customers and continue to evolve based on that feedback.
How often are you meeting with partners?
When I'm in the field, I balance my time between customers and partners. I'm with partners on a regular basis.
Are you spending more time with partners now than you used to?
I'm spending more time now with partners and customers than I was two to three years ago, yes. When I started, we had to do the work: retool the leadership, focus the strategy, put the operating model in place to execute. That required some of my attention within Juniper to get that done. Now that we're in execution mode, I have a lot more time now to engage in the field than I had two to three years ago.
Next: Trapeze, Altor And Juniper's M&A Engine
You mentioned Juniper R&D, but we've also seen the M&A engine pick up like crazy in recent months. Acquisitions that Juniper's made like Trapeze and Altor seem to be exemplars of where you think the puck is going for networking. Is it safe to say that's what's driving these acquisitions?
Yeah, no question. We have a clear vision of the solutions that are going to be required for the mobile Internet and cloud computing, and the value creation activity is in our investment in organic R&D. That said, we saw a number of strategic acquisitions that complement that R&D well, that allow us to acquire companies with great intellectual property and great talent, and allow us to bring that to the portfolio of products.
Ankeena provided content distribution that ran on Junos with our MX3D router -- that's perfect synergy. With SMobile, it's the fact that we had Junos Pulse in an SSL VPN offering and can integrate antivirus, antimalware an parental controls -- another very strong strategic alignment. You look at Altor, the security software runs in our SRX systems, combined with Altor's security capability in the hypervisors of VMware, you have the opportunity to extend physical security to virtual security. And then of course Trapeze is very much aligned with the campus and branch focus and our EX switching products. We've been very thoughtful about strategically aligned acquisitions that complement the organic R&D and add to the customer value proposition.
So all of these are clear examples of where it made more sense to buy, rather than build?
Yes, in those cases. And Altor was a partner -- they partnered with us related to Junos. Ankeena had written software on Junos. Trapeze, we had a clear view of how the intellectual property complemented what we had done in Junos with our EX switching. And SMobile was writing to Junos Pulse. So three out of our of those were already partners writing to Junos or Junos Pulse or Junos Space, and Trapeze had a clear connection with our switch business.
Assuming you did kick the tires on Trapeze's wireless LAN competitors as well…
…why was Trapeze the best fit?
A couple things. When it comes to enterprise wireless LAN, the approach today is that most LAN providers have the wireless as an overlay on an existing switching network. Acquiring a company that had a big install base didn't serem like the right approach. We want to take the EX switching and solve problems in a meaningful way with the wireless asset, and do that in a way that also simplifies the approach and experience for the user and does it at a different economic benefit for the customer. Trapeze fit all those criteria.
Trapeze does have a much smaller footprint than a lot of those wireless LAN competitors. Juniper, however, has a lot of national partners who have good relationships with Aruba, Meru and the other guys, and now are being asked to feel out going to market with wireless LAN with Juniper. How do you square that with them?
I think we have a vision that's an end-to-end solution for what happens in the campus and the branch. Wireless by itself, without thinking about integrated security and how that translates to your switch infrastructure, is not the right solution, and so at the end of the day, we can combine what we do with wireless LAN and Trapeze with our SRX security, EX switches and Junos for a very unique solution for customers. We think that's a significant reason for partners to engage and make that the primary go-to-market solution for customers.
NEXT: Where Will Juniper Expand Next?
Will Juniper continue to be acquisitive? Are you looking to do more acquisitions at this rate?
I don't know if we'll go at this rate, but we will continue to be acquisitive. What you saw us do in 2010 is probably consistent with what we'll continue to do in 2011. Will we make four to five acquisitions? I don't know, but I think we'll make at least two, maybe three, maybe more. It'll be similar to the pattern you saw in 2010: strategic acquisitions that complement the broader agenda we're driving on the new network.
Any comment on the tech segments where those might occur?
Yes. Tuck-ins to complement your existing product areas?
They're all going to be tuck-ins to some degree. They'll be in the domain of networking. We're not confused. Our value-add and core competency is in the network. We're focused on networking and think there's a tremendous opportunity for new value to be created for customers in the domain of networking.
Will your R&D investment increase this year?
We will increase our investment from 2010 to 2011. In 2011, on a GAAP basis, we'll invest about $1 billion in R&D.
How much of an increase does that represent?
It's going to reflect about a 20 percent increase over the prior year, which aligns with our growth aspiration. We're growing top line revenue at 20-plus percent, and the fact is we've got many new ideas and products for innovation and that we think add significant value. So part of what we have to do is be very thoughtful about how we prioritize and sequence those ideas so that they come together and have a market impact and give us good return.
Are you happy with the current mix of enterprise versus service provider revenue at Juniper? Do you see that balance changing at all?
The mix of revenue for service provider versus enterprise has changed over the last three years. I think we had been about 75 to 80 percent service provider to 20 to 25 percent enterprise. Today we're close to, I think, 63 to 64 percent service provider and 36 to 37 percent enterprise, and that's a function of enterprise growing more rapidly than service provider and growing more rapidly because we added new addressable markets with our EX switches on the enterprise side.
But we're focused on innovation with service providers while we expand our enterprise business. For every dollar of R&D we invest, we look to monetize that in both the enterprise and service provider sides. The EX product line is sold to enterprise customers but also sold to service providers. We don't need to build separate products, it's more about building up the go-to-market muscle in enterprise, and that's what we've bee doing. I expect both sides to grow north of 20 percent, and we've increased the addressable market and I expect to have a good growth outlook for the next two to three years.
NEXT: Juniper Will Seek Additional Addressable Markets
Will you need additional addressable markets in the short term? The way that EX expanded that band of market opportunity for Juniper, will you need to do that again?
Within the domain of networking, there are additional addressable markets I think we can tap into. QFabric and our EX switching give us a strong value proposition in the data center to meet networking demand. With Trapeze, we've expanded our wireless capability for the campus and branch. A third example is with our PTX supercore solution, where we've expanded from the core routing into some of the optical electronics and the optical domain. We're going to innovate in ways that expand the addressable market.
The optical piece and the enterprise wireless LAN piece are both addressable markets in which Juniper can grow adjacently. So where else do you see that same type of expansion in the short term, given your presence in data center or any of the directions you're expanding?
You look at the foundation we've laid with our data center architecture, we can handle everything from the fabric to the security to the connection to the WAN. I think there's certainly more to do in the area of security. I think on the service provider side, much of it is building out the addressable market with the scenarios that run on the edge of the network -- the way that these service providers implement their billing and policy management to billions of intelligent devices connected to the Internet. There are many, many areas where we will continue to innovate.
Is your executive team where you want it at this point?
We have a world-class leadership team at Juniper. We've been very thoughtful in how we've sequenced changes and also the caliber of talent we've brought in. I'm very pleased with the caliber of the leadership tam and I think that part of the momentum and the progress we've achieved this year is a credit to the work they've done.