Peak performance

When Max Goldsmith and Nathan Chan look across the WAN optimisation market, they see an opportunity that is wide open.

Goldsmith, CEO at reseller XSI Data Solutions, and Chan, senior networking engineer, have started tapping into a market that is set to explode, bringing improved application performance and lower costs to customers linking branch offi ces and remote users to headquarters over a wide area network (WAN).

It is an idea encapsulated by a common marketing catchphrase: providing LAN-like performance over the WAN.

Along with their partners, vendors are frantically vying for a piece of the action as well, clamouring for a share of a market that research firm IDC expects to hit US$314 million this year and nearly US$611 million by 2009.

The latest salvo comes from Juniper Networks, which is taking a crucial step towards getting its recently acquired WAN and application acceleration appliances into partners’ hands with the launch of a new specialisation program around the technology.

Cisco Systems, meanwhile, is also grabbing for a bigger play, recently creating a new Application Delivery Business Unit and launching new products based on technology from several recently acquired optimisation vendors.

Eight months ago, XSI started selling WAN optimisation products manufactured by Peribit, which is now Juniper-owned. It also sells Allot bandwidth shaping products.

"We’re now at the stage where we are getting good installations and customer relationships," says Goldsmith. "It’s starting now to become good business and I think over the next year or so, it will become a better business." The reseller already has around 25 sites using the technology.

Last financial year, XSI sold about $4 million worth of Peribit WAN optimisation products across large sites.

"This year we’ll get up to $6 million or $8 million. In our $40 million turnover, it’s somewhat significant." XSI is Juniper’s only Elite certifi ed partner. For 20 years, XSI has been a storage-focused reseller and the addition of WAN optimisation products gives it another string to its bow.

"You’re seeing this stronger and stronger acceptance of data security and offsite backups.

"Having been one of the leading people in the backup market for many years, one of the issues with offsite is that users would love to do it offsite but [due] to the cost of the bandwidth, it just doesn’t work, it’s a nightmare. So this tends to resolve that issue," he says.

Goldsmith is adamant the technology works well but in the past customers have been apprehensive about claims relating to the performance of WAN optimisation.

All companies that have issues with bandwidth are potential customers and the ROI can be anywhere between three and six months, he says.

XSI’s Chan says the Peribit gear gives customers an average of around four, five or six times the throughput across networks. "We have a site between here and Japan — they run a 20Mb/s link and it’s sitting at 80Mb/s throughput across the network.

"That’s from here to Japan, where normally latency across that link would have a maximum throughput of maybe 1Mb/s or 2Mb/s even with a 20Mb/s pipe," he says.

Chan says that WAN optimisation completely gets rid of latency because they actually remove TCP from the WAN and run their own reliable data transport protocol. Companies that have long distance links between Perth and Sydney and overseas links can take advantage of the technology where latency is quite high.

"Even smaller links [can benefit]. We just did a site recently which had 64Kb/s links between here and other sites and even over into Papua New Guinea. Those 64Kb/s links are completely flooded with mail traffic are now getting equivalent to 256Kb/s. They are actually bursting up to 1Mb/s," Chan says.

Goldsmith agrees that a lot of resellers misunderstand this technology. "This way, we add genuine value," he says. Margins are around 20 percentage points, with the bigger bucks being generated through support, Goldsmith says.

WAN optimisation installations are extremely easy, Chan says. "It sits between the router and the switch so you literally unplug a cable and put a new cable in and everything is configured from one site. As long as all the boxes are plugged in line between different locations and you have a central management server, it picks up an IP address, connects back to the server, [asks] what confi guration it should have and bang, it’s up and running.

"You could deploy a whole 35 sites, and the length it takes to deploy it depends on how long it takes to plug the boxes in," Chan says.

Understandably, vendors and distributors too see great potential in WAN optimisation technology.

Brian Allsopp, regional manager A/NZ at Juniper Networks, says that Australia is a suitable market for WAN optimisation products due to the high cost of bandwidth.

WAN optimisation is Juniper’s highest growth market at the moment and a technology that customers want to talk about. Juniper acquired WAN optimisation technology from Peribit and Redline. "It’s a tool the affects the business user. Out of all the technologies that we sell, this one has the most profound affect on a business."

One big trend that is driving growth in WAN optimisation is companies consolidating their server infrastructure and applications to single locations, Allsopp says. "As that consolidation happens, they are really buying into placing this type of technology," he says.

In the past, companies tended just to throw more bandwidth on their networks as they started to get sluggish.

Allsopp claimed that the WAN optimisation market in Australia was worth US$23 million in FY2005, at an 87 percent growth rate.

And there are plenty of margins to be had for resellers selling WAN optimisation. "There are fantastic margins. The feedback we get is that it’s a compelling ROI, it’s a compelling technology and there’s good reward in it," Allsopp says.

Throughout November, Juniper held its first round of WAN optimisation technology training in Sydney, training 50 engineers across the technology with more reseller training to follow.

TechPlus Distribution has been moving WAN optimisation products from the likes of Exinda and Allot to the reseller channel for several years. But lately the market has been heating up, according to Paul Kern, managing director at the distributor. While the market is becoming more aware of it, people are still assuming that the way to solve and bandwidth problem is to throw more bandwidth at it, he says. And "it doesn’t matter how many times you tell them not to keep doing that," he says.

Bandwidth-critical applications such as VoIP are driving growth. "For example, if you don’t address how bandwidth is being utilised, VoIP won’t work," Kern says. Resellers still do not get it, he says. "I don’t think resellers have understood or got involved with bandwidth management," he says, adding that many resellers are not actively going out and selling it.

"They’ll take an order for it but haven’t understood how to sell it or why to sell it," he says. "Not a lot of resellers understand so the margins are pretty good — in the 20 plus [points] range on hardware plus the ability to add in services," he says.

Distributor Dovetail moves AscenLink WAN load balancers, which range in price from $5000 to $40,000. It would sell 10 to 15 of the smaller load balancers per month and one or two of the larger ones, according to national sales and marketing manager John Poulter.

Dovetail has been moving these products for around eight months and while it is still early days, Poulter says the problem at the moment is getting end users to realise the savings that they can make. "But when they evaluate it, they fi nd out that it is that good," Poulter says.

Dovetail resellers were interested in the technology and expected the market to grow rapidly pretty soon, he says. Reseller margins on the AscenLink products were above 25 points, "much better than a firewall," he added. The AscenLink gear competed against similar products manufactured by the likes of F5 and Radware at half the price due to the lack of brand awareness, Poulter says.

Players such as Cisco, Citrix Systems, F5 Networks and Juniper all snapped up smaller WAN optimisation and application acceleration outfits this year, part of the flurry of acquisitions, startup launches, channel program introductions and product announcements in recent months.

By completing the training and testing built into Juniper’s new Application Acceleration specialisation, partners can achieve certification to sell the WAN optimisation appliances Juniper gained through its July acquisition of Peribit Networks and the application acceleration appliance family it added through its purchase of Redline Networks in May. Juniper has rechristened the products as its WAN Acceleration (WX) and Data Center Acceleration (DX) platforms.

The new specialisation ushers around 150 worldwide partners inherited through the acquisitions into the Juniper fold.

Cisco’s new acceleration appliances, meanwhile, are based on technology picked up through its acquisitions of FineGround Networks in June and Actona Technologies last year, as well as internal development, says George Kurian, vice-president and general manger of the Application Delivery Business Unit at Cisco.

"We don’t make business unit decisions lightly, as you can imagine, so it clearly indicates that Cisco is taking an aggressive posture about a market and an aggressive posture about a set of market opportunities and competitors," he says.

"It clearly signals the intent for an aggressive set of product cycles and market-shaping activities." Cisco is recruiting partners for its application acceleration solutions. Kurian says many networking partners already have mature applications practices as well. Products coming out of the new unit will aim to bridge the two.

Australian WAN optimisation player Exinda Networks has had great success with its Optimiser WAN optimisation appliance, experiencing growth rates of up to 120 percent per annum last year. "Companies in this space are being valued at 10 times their revenue," says Con Nikolouzakis, executive director at Exinda. Two things need to happen for resellers and end users to understand the technology: resale education and creating end user demand, he says. "We’re just starting to see a lot of drive from the end users."

Channel players say they are taking leading roles to evangelise the developing WAN optimisation/acceleration space and educating customers on its benefits.

"A lot of people don’t know about it until we tell them about it. The sales cycle is long because we have to qualify the product, show them what kind of increase they can expect and show them on one of their links," says Jay McKeever, principal at Stormwood, a US-based solution provider that works with optimisation products from Swan Labs, acquired earlier this month by F5. "But once they go through the evaluation, they won’t let us take it out."

Stormwood expects to hit about US$200,000 in Swan sales in its first year with the product line, he says.

Driving market growth is the rising importance of applications, not only web-based ERP and CRM applications but the booming VoIP and video-over-IP markets as well.

As these applications reach mission-critical status, customers are starting to hit bottlenecks as they try to push that traffic out over the WAN.

"What’s driving this is the fact that companies are looking to deploy applications in a ubiquitous manner so they are accessible to anybody, regardless of which facility they’re at or if they’re off-site," says Andrew Segal, president of Vandis, a Juniper partner in the US with a seven-figure optimisation business built on Peribit and Redline technology. "When you say you want your applications to be available to everybody, you run into delivery issues," Segal says.

Those issues manifest themselves as slow application performance and network congestion problems some customers mistakenly try to address by adding more bandwidth, solution providers say.

But it is a tack that rarely rectifies the application performance problem, says Stormwood’s McKeever. "Customers are starting to realise that a bigger pipe doesn’t necessarily mean faster," he says.

For example, one large pharmaceutical company with international offices bought a full DS3 circuit for US$18,000 per month to solve its application performance issues. More bandwidth, however, did not cut down on latency caused by the incessant ‘handshaking’ utilised by TCP to transmit data between sites. "When it didn’t help, he came calling," McKeever says. Swan’s technology eliminated much of that latency, giving Stormwood a means of solving its new customer’s problem.

Reseller Frontline has been selling Packeteer PacketShaper and related products for close to 12 months.

Greg Wade, marketing development manager at local reseller Frontline, says that the WAN acceleration and control products are a good sale and the reseller is finding it can get in the customer’s door pretty easily and a quick ROI is extra attractive to potential buyers.

"If we are given the opportunity by the customer to demonstrate [the product] they find the statistics are pretty compelling and we’ve had a good success rate," he says. "It’s lucrative in terms of revenue and profit and is a growing segment of our business," he adds. He says there is not a great deal of professional services support business to be had from these products due to the available software tools that give customers good diagnosis of what is on their network.

Frontline has deployed Packeteer in its own offi ce. He recalled the one particular Frontline employee was downloading a great deal of information from the web in relation to cars, which the reseller was able to identify.

"The level of information is quite valuable. It gave us a clear understanding of the potential of this product to understand what’s going on in our network and the ROI was in four months," he says.

Bede Hackney, country manager, Australia and New Zealand at Packeteer, says the perfect candidates for WAN optimisation are any organisations that have branch networks and are spending money on bandwidth.

The company has around 1000 customers in Australia and is "nowhere near market saturation", according to Hackney. "These days, customers are starting to realise that upgrading bandwidth is not the answer. They’ve gone through that cycle enough to know now. ROIs in the range of five to six months are a common occurrence," he says.

Big resellers and integrators like Dimension Data, Equant and CSC — its top reseller partners — recognised early the potential value of the market, Hackney says. "The margins are attractive and there’s good revenue opportunities in government, fi nancial services and primary industry," he says.


Diving into the data centre

Customers are also looking at data centre consolidation strategies. By moving their equipment out of the branches and into the data centre, they gain centralised management over their infrastructure, resulting in lower costs, tighter security and improved regulatory compliance. The trick is to consolidate without losing performance, and WAN optimisation is key to that, solution providers say.

"The value proposition is like nothing I’ve ever seen," says Hayes Drumwright, CEO of Trace3, about products from Riverbed Technology, which Trace3 has been selling for about eight months. Riverbed’s Steelhead appliances combine WAN optimisation, WAFS and application acceleration to speed data delivery to branch offi ces.

Trace3 has hired three staff members for its Riverbed business, which is on target to reach at least US$1.5 million this year and is likely to grow 100 percent year-over-year for the next few years, Drumwright says. "Customers no longer need [local] file servers and Exchange servers. It saves a tonne of money," Drumwright says, noting that customers can typically spend US$30,000 to US$150,000 per location for local servers.

WAN optimisation and acceleration technologies are helping solution providers push into the data centre, says Keith Zubchevich, vicepresident of business development at Riverbed in the US. "Some VARs have been playing in the SMB and branch offi ce itself. Now for the fi rst time they’re key players [in the data centre], not the big-iron guys," Zubchevich says.