Riverbed CEO: Cisco Doesn't Own The Cloud

Jerry Kennelly, Co-founder, chairman and CEO of Riverbed Technology, on where Riverbed goes beyond WAN optimization.

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Playing that Cisco analogy a little further, it grew primarily through acquisition. Is that the model for Riverbed?

We've grown organically through our inside development and we desire to do acquisitions.  We acquired Mazu Networks, (whose products) we now market as our Cascade product. That's a network performance management and security product that plugs in very naturally with the Steelhead. We seek to do more acquisitions. It's tougher. The whole Layer-7 world is still somewhat new so there are fewer attractive targets for us in terms of acquisition. But we're very interested in doing that, and we look very hard. We have a high bar about what we would acquire, obviously, having just done one in nine years. But we've got plenty of cash, we've got plenty of management bandwidth. If we can find good targets, we will expand by acquisition.

Speaking of risk, other technologies in the past have become simply features that live on other devices. How long before that happens with WAN optimization?

Cisco, our biggest competitor, hasn't done very well in this market. They were going to put [WAN optimization] as a blade in a router. Well that's not a natural place for it.

Basically we put a powerful server at either end of a wide-area network link that has a lot of processor, disk, and memory. And you need all those to do the magic of compression, de-duplication and acceleration. Routers and VPNs, basically they're just little CPUs, hardly any memory, no disk, hardly any compute processor at all. In fact, the box that supports a router has nothing whatsoever in common with the box that supports network acceleration. It's much more natural to stick a router in [acceleration gear], and we've done that. We announced it within the last three months, a partnership with Vyatta, which makes a small router that just plugs into a Steelhead box. It's more natural to put that in a slot in a Steelhead box than it is try to put a big server tacked kind of artificially onto a router. Cisco has this ISR box where they have a slot for a WAN optimization board. The only thing that's integrated in that scheme is the power and the chassis. There's no other integration. It's a completely separate computer that just happens to share the power supply and be wrapped in the same piece of sheet metal. If you made it big enough you could park a Toyota in there and have it be a router, a WAN optimizer and a Toyota garage.

You're doing well making money off data center consolidation, but how much longer do you think that will be a cash cow for you?

It's 2 a.m. in a 24-hour day. Most of the estimates for the market are 6 to 8 million branch offices worldwide that are connected by network links. Everyone in the [WAN acceleration] market together has about 250,000 or 300,000 of those in total, so there's a vast amount of market left to come. It's still a young market. Riverbed is 9 years old, but if you look at our life-to-date revenue, which is something like a billion and a half, a billion of that all was achieved in just the last three years, we've been on such steep ramp. The functionality and the economics are so attractive that we think the adoption rate ultimately will be much higher. We're not claiming a hundred percent, but it's reasonable to think of 50% to 60% adoption rate for this over the next 10 years. That throws off a tremendous amount of revenue.

Again, these data center consolidations are a proxy for private cloud computing and then public cloud computing. The genie's out of the bottle on that. It's not going back. The ability to connect at the application layer across networks is going to be a permanent requirement of everyone. We've benefited by the fact that latency never goes away. Einstein was right; you can't exceed the speed of light. As long as people are geographically distant from their compute resources, they'll have to have our technology.

Recently Riverbed announced the Virtual Steelhead, and you also have the RSP. They seem to compete. Can you distinguish the different use cases?

In general we find IT guys want to buy appliances because it's a lot easier for them. We found there are certain corner cases in the market where people want specialized server form-factors because of space requirements, heat. The military has special ruggedized server boxes that can take a bullet and be dropped out of a helicopter and operate in dust and a 115-degree heat. We don't make that box, but they want to have a Steelhead out there anyway. So the Virtual Steelhead allows that. There are places in boats and submarines and oil platforms and news vans and trailers and construction trailers, again where people have a limited space and they like the Steelhead functionality, but there's really no room for a Steelhead box. The Virtual Steelhead has to address that market, which is really a corner case of the places we can't fill with our appliance Steelheads.

Read our CEO interview with Sybase's John Chen 

But there's a second market -- virtual data centers where people are going more cloud, have made dense server farms for their data center, don't really want a foreign appliance in there and just want to run the Steelhead that will connect them out to their branch offices, mounted on their dense blade server infrastructure, their data center in a virtual way. So the virtual Steelhead is for those two markets.

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