Aerohive: Cloud Vision Behind Pareto Acquisition

Aerohive Networks on Tuesday confirmed it has acquired Pareto Networks, a cloud networking startup with emerging strength in the channel. Aerohive plans to integrate Pareto's routing, VPN and cloud services technologies into its own platform, and plans on an ambitious new product rollout in the second quarter of the year, according to the company.

Financial terms of the deal were not disclosed. Pareto was founded in November 2007 and launched an array of enterprise cloud services in June 2010, with designs on being, as its executives told CRN at the time, the "marquee vendor in cloud networking."

Those services, which provide secure networking functions such as VoIP management, video, IP address management, authentication, Web security, SSL VPN tunneling, are managed by network administrators remotely, using Pareto's cloud. They're priced on a subscription model starting at $228 per location, per year.

In August, Pareto went live with a channel program, and in September, it named Daniel Ryan, a former McAfee senior vice president, its CEO.

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"They pioneered in this market when they released in 2010, and they had the vision to really go after this cloud-based network," said David Flynn, Aerohive's CEO, in an interview with CRN. "The portfolio has a lot of very interesting technologies that fit in nice with what we do, as well as number of pending patents. We've been very successful in midmarket and some of the distributed enterprise environments, and we were heading into this market, but Pareto allows us to accelerate our timeline."

Aerohive wasn't out looking for acquisitions, per se, Flynn noted, but in Pareto, saw established technology in many of the areas Aerohive was hoping to develop, with fairly minimal overlap.

Pareto was also looking at ways to extend its capabilities into the Wi-Fi arena where Sunnyvale, Calif.-based Aerohive plays, Flynn said.

"In general, acquisitions are distracting, and you try to grow organically if you can," he said. "But this one fit. We were hiring engineers -- this was in our operating plan to head into this market -- and all of a sudden, we said, 'Look at Pareto. Man, they have an awful lot of what we want. They're also two blocks away.'"

Aerohive, a challenger in the cutthroat wireless LAN space, has built a buzz of its own in the channel behind its "cooperative control architecture." The approach allows customers to deploy 802.11n access points (AP) with controller functions contained in the APs themselves, thus eliminating the need to buy controllers.

That set-up, according to Aerohive, takes important jobs like data forwarding away from single point of failure in the wireless infrastructure, and it also means it can offer lower overall price points.

It's the area of cloud-based networking, however, where many of Pareto's services will come into play for Aerohive. For starters, most will be integrated with Aerohive's HiveOS platform and HiveManager Online offering, which offers Wi-Fi and VPN via the cloud.

According to Flynn, Aerohive will "take a pause" on selling Pareto's current solution, though its customers will continue to be supported as Pareto is integrated into Aerohive and will be brought into Aerohive as quickly as possible.

The Pareto employees who join Aerohive will be mainly engineers, Flynn said, although the company is negotiating with co-founder Matthew Palmer to take on a potential consulting role.

Aerohive will part ways with Dan Ryan, Pareto's current CEO, Flynn said.

"He's a great guy and he will go on to become a CEO somewhere else," he said.

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The combined portfolios of Aerohive and Pareto give Aerohive a lot of additional firepower. On the networking functionality side, for example, it can take the RADIUS services, meshing, bridging, Layer 2 VPN and IPSEC VPN capabilities it already has and add Pareto's Layer 3 VPN, WWAN backup, integration with third-party security services and other tools.

On the cloud side, Aerohive and Pareto are both strong in cloud management and IT provisioning, but Aerohive offers on-demand upgrades and Pareto can bring end-user provisioning, geolocation, Google Maps integration and iPhone and iPad applications to the table.

In the second quarter, Aerohive plans to deliver the first of many products that leverage both companies' capabilities, in hopes of extending its cooperative control architecture to branch routing in the cloud. Beefed-up branch and telecommuting routers are on the way, along with a VPN gateway and new APs for 3G and 4G wireless WAN, according to Aerohive.

"One very important thing in our cloud services platform is new functionality that's going to come right out the door," Flynn said.

How Aerohive will price cloud services going forward hasn't yet been determined, he said.

"We're looking at the Pareto model and we will determine what we're going to use," Flynn said.

Aerohive's pickup of Pareto is only the latest in a string of recent mergers and acquisitions affecting the networking channel, particularly in wireless. The most recent was in November, with Juniper's acquisition of Trapeze Networks.