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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You talked of data consolidation as being a proxy for private cloud, which we'd push back a little on. Having a consolidated data center doesn't necessarily mean that data center has the characteristics of a dynamic IT infrastructure.

Either way, we get their business, whether they do it in the cloud format or in a very traditional corporate data center format. But yeah, I take your point. I'm not trying to push the cloud by the way.

Let's talk about that private cloud though. What's the next phase of growth for cloud and how does that affect your market?

What people want is less and less at the edge because it's expensive to deploy it or you have multiple instances, it's less secure, you have to patch it, you have to back it up, you have to have system admin personnel and resources. It's difficult to keep trained people over long periods of time. Everything that can be pulled back from a branch office and kept at that central data center is what people want to do. People will have a single access point to the network from their data center, then backhaul internally off their branch offices to reduce the security concerns. You'll see more online data available to be backed up across networks instead of through tape backups. So the ability to do disaster recovery, backup and archiving, never touching a tape, from big data center to backup data center across the WAN link, will become more important, and that'll be an important market opportunity for us. Then, the density of these big data centers gives us an opportunity to put our biggest machines to work. Data center consolidation will continue, whether it's the old-fashioned way or the new way. It's just what everybody wants to do. It's where the big ROI is.

Riverbed's talked very little about something called Cloud Steelhead. What is that?

Cloud Steelhead is something we're going launch in [Q4], so I don't want to pre-empt our launch. But think of it as a special version of the Virtual Steelhead to be mounted in public clouds like Amazon, or AT&T's offering or any public cloud provider. It has special features that give us the ability to capture the network traffic for the customer in the public cloud so he can do his acceleration, and also some features that service providers like as support for multiple customers. The special version of the Virtual Steelhead is intended to be for customers that use it when they're going to the public cloud provider.

Riverbed has a partnership with Verizon Business for a managed WAN optimization service. What kinds of customer are using it?

It's a relatively new offering, but we just got a great Fortune 100 customer out of it very recently. We've actually been doing business with Verizon -- one-off deals -- for almost four years now, and this business is driven by customer demand. End-user customers go to their service providers, they say I want a service, and by the way I want WAN optimization, and I want it to be Riverbed's WAN optimization. That's been true the whole time we've been in business. We've had relationships with all the service providers almost from the beginning. Verizon saw enough of this business and enough of this demand that they said we've done enough one-off contracts and went to a master contract. A Verizon salesperson can just go to his price list from corporate, and there's an item there that says Riverbed WAN optimization managed service. That should make the flow of business easier for everyone on both sides. What the big service providers are telling us is that in virtually every RFP now, there's a requirement for WAN optimization as part of the managed service delivered by the service providers. Verizon's a huge player globally in that market, and we expect to do a very good business with them.

What will desktop virtualization mean for WAN optimization?

There's a lot of interest in desktop virtualization. We've been an early partner of VMWare and we just released Version 6.1 of the Riverbed product, which works very well with the Citrix products for desktop virtualization. IT guys would like the guys out at the edge with their laptops and desktops to be able to move that up across the WAN, to do continuous data protection of their files and essential storage, and be able to manage the image of all the desktops in a way that's cheap and efficient. Desktop virtualization has the same problem as data center centralization, which is distance. It's an impediment to the performance of the desktop, either to boot it up or to get the image across the network or to do the continuous data protection. We help anyone who's doing desktop virtualization to make a cheaper, more powerful experience for the individual virtual desktops, number one. Number two, we have future products in development that will give you the ability to boot up your servers across the WAN and have an even more powerful desktop experience. I think it's come on a little slower than people thought. But it is coming, and products like ours, along with our good friends at VMware and Microsoft, will keep that trend going.

Will you be able to offer any help with the stresses handheld devices put on corporate networks?

We did come out two years ago with a reduced-footprint, software-only version of our product we call Steelhead Mobile that fits on laptops and turns the laptops of travelling knowledge workers into Steelheads, basically, so they can connect back to the Steelhead at the data center. The impediment with PDAs and handhelds has been that you have to have a certain amount of storage capacity to do these optimizations. That storage capacity is now becoming available cheaply and readily for these devices, so we're looking at the market opportunity. We get a lot of requests from people who would love to see their PDA, their cell phone or mobile device accelerated, particularly when people are trying to view video and get heavy files across the network onto a PDA. We haven't announced anything there but it is an area of possibility both in terms of the way our product works and now the ability to get enough storage on one of these devices to make it feasible. I think that's something that we can look at in 2012, 2013.

Let's talk about Cisco again. How do you compete against a company that has such a wide product range and has really strong customer support?

At the end of the day it's about the product. If you have the right product of the right quality and the right market window, and you don't stumble over yourself, you have a chance to have a good win. The fact that Riverbed exists -- it has the major market share in its domain up against someone who has the brand and distribution of Cisco -- is just a testament to how much more superior our product must be. Because if it wasn't we'd have been dust a long time ago. But their expertise was never in Layer 7. That's not a place they have any history of being in, a history of success in. They went against F5 (Networks) a long time ago and F5 beat them handily there and so have we. Nobody can do everything, be good in every domain area, forever. There are no supermen, and I think competing nine years with Cisco, I can tell you they are not supermen.

What's the biggest potential risk to your business, what's the biggest potential opportunity and how are you managing those two things?

I frankly don't feel a huge risk right now. This is the third company I've done from start-up, and there's a set of risks you face every time. It's financing risk -- can you get the money to build? There's product risk -- can you build it? There's market risk -- if you build it, will anybody want it? Then there's execution risk. We're past the first three and really down to the last one. Execution risk is dealing with your competition -- which we're very good at -- not stumbling over your internal operations, and then finally keeping a fresh product line, and keeping an eye the future horizon and trying to skate to where the puck is going to be rather than where it is now. And you know our original co-founder, Dr. [Steve] McCanne, is still very active in the company. We have top Ph.Ds, master's degrees, not just engineers but people who are visionaries and inventors and creators in the tech world associated with the company. We have a great view to the next three to five years. We have a tremendous backlog of innovative products in our pipeline that will be coming out that focus on exactly where the future of computing is going, and that's global IT -- that Layer 7, application performance for the workers of the world.

What's the likelihood that Riverbed gets acquired?

We're a public company and so the possibility always exists. The truth is we've come this far without that. We believe we're very early in a huge opportunity in that our customers who don't want us to be acquired, our employees who don't want us to be acquired, our suppliers, our management and our board -- none of them are interested in acquisition -- are better served both in terms of the quality of the product and for the ultimate value of the stock if we remain an independent company that fulfills its destiny with the size of the market that we're going to take down over the next five years. We're actually somewhat protected by Wall Street because Wall Street shares the vision of Riverbed and has awarded us a strong earnings multiple on our stock price. It's one of the top multiples. The type of people who would acquire you are the larger, slow growth companies, big technical companies. We're a high-growth, high-multiple company. They're all lower growth, low-multiple companies. It's actually dilutive for them to try to do an acquisition of us. So we have some protection on that front of things. We desire to be a standalone, independent company for a long time, and I think we're best served by that. And we're looking for a big, big win.

Read more about lans & wans in Network World's LANs & WANs section.

This story, "Riverbed CEO: Cisco Doesn't Own The Cloud" was originally published by Network World.

Copyright © 2010 IDG Communications, Inc.

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