F5 Networks Inc. is on a roll. Late last month, the vendor of application traffic management/ optimization tools posted a 67 percent revenue increase for its second fiscal quarter, compared with the same quarter a year ago, and a 13 percent rise from its first fiscal quarter. President and CEO John McAdam, at the helm since 2000, said he believes the company is gaining momentum thanks to the new architecture of its Big-IP platform. eWEEK Senior Editor Paula Musich recently spoke with McAdam about F5s success and where the vendor is going.
Why has F5 been able to compete so effectively against giants like Cisco [Systems Inc.] and Nortel [Networks Ltd.] in the Layer 4 to [Layer] 7 switching market?
Weve always seen that market as driven by functionality. When we architected our product, which was software-based, that tended to differentiate ourselves.
Two years ago, we introduced a universal inspection engine that allows customers using business rules to look at any data in the packet and build rules from that. Since that, we came out with [Big-IP] Version 9 with much more functional rules in how to optimize and deliver applications in the network. Weve always been focused in the application networking space rather than the data center.
One of the drivers for our business is the move to Linux and [Windows] NT. Rather than having all processing power in one space on a large IBM or Sun server, now users have multiple systems based on Intel [Corp.] running NT or Linux. That increases the value proposition of traffic management.
Cisco has identified the network application space as one of the next growth areas it intends to pursue. Do you expect to see renewed competition from Cisco in that space?
I think we will. I do think unless they change their strategy, most of it will come in a different position in the network from where were operating, and we see that as an advantage for us. It would be wrong not to expect more competition from Cisco.
The new version of Big-IP and the Traffic Management/Operating System ... seem to have gotten a great reception from your customers. What is it that has resonated for them?
We totally rearchitected TM/ OS. It is bidirectional. It can look at flows going into and out of the data center. It allows you to do optimization more easily. But the main thing is that it is modular. You can easily add new software modules. We added hardware compression, authentication, IP[v]6 gateway, SSL [Secure Sockets Layer] acceleration, rate shaping and now caching. With the product road map, the next big integration area will be the security products. The application firewall will be a software add-on for TM/OS.
How risky was that move to a new platform for the company?
Very risky. It took just over two years to do it. But our business continued to grow in revenue and market share. We could have seen sizable delays in our revenue. But we havent seen much new product innovation coming from the biggest competitors. Only in the last six months, Cisco started to talk about Layer 4 through Layer 7 [switching]. It is a small market, but now its aggressively growing.
I understand you have a $254 million war chest that could be used for acquisitions. What other technology areas do you expect to invest in?
Were looking at small acquisitions in the Layer 4 to Layer 7 space—easier-to-integrate technology acquisitions that can be integrated on TM/OS. We look at WAN optimization, the XML space, the mobile space.
F5 has also made some forays into the security space with its acquisitions of uRoam Inc. and its FirePass remote access product, and the more recent acquisition of MagniFire [WebSystems Inc.] and its Web application firewall. Will security become integral to Big-IP, or will F5 have two divergent product directions?
It will be integrated, but we will also keep both. As you look out to 2006, the next big hardware architectural change—the "Montreal" project—will introduce a chassis-based solution where a blade can run Big-IP, FirePass and so on. We see a big integration path, but we will maintain separate point boxes because some customers want that.
Where do you see F5 being five years from now? Will it still be a stand-alone company?
Were looking at the three-year horizon. We reckon our addressable market could be $3 billion in size. If we continue to gain market share, we are in a pretty good space. I dont think five years would change dramatically. It is very possible we will still be a stand-alone company. The force of your success makes you look very attractive. Our focus is on that success. Not many companies have a chance, as we do, to build a Layer 7 architecture that could become a standard architecture.