Talk about pressure. Mike Borman had been at Blue Coat Systems as CEO only about three weeks when IDG Enterprise Chief Content Officer John Gallant and InfoWorld.com Editor-in-Chief Eric Knorr pinned him down for an interview on where he plans to take the application delivery technology company. In this installment of the IDGE CEO Interview Series, Borman -- who was formerly CEO of Avocent and a top IBM executive, among other roles -- talked about new directions for Blue Coat, including moves to capture opportunities in cloud computing and in the market for midsized IT shops. Joined by Chief Product Officer and former CEO Brian NeSmith, Borman also discussed the tough competitive landscape where Blue Coat battles companies like Riverbed and Cisco in WAN optimization and security.
Why did you take this position? What did you see in the company, and why did you think this was the right opportunity?
Borman: I looked at more than 20 different CEO opportunities, some private, some public. Most were software. That's where my strength is and that's where I think I can add the most value. I was looking at a number of attributes. The first was: What kind of market are they in? My view of this market, if you abstract it up, is that we're here to make the Internet faster and more secure. Over the past 20, 30 years, the Internet has been built without many rules. It's like building roads all over America and having no speed limits and no stop signs. We can add a lot of value in round two of structuring the Internet. I think the surface has just been scratched. There's so much more that we'll be able to do, in terms of security and making things faster, but actually making some rules so that people can communicate at the right time, with the right information.
What you're describing sounds like adding more of a business layer to the Internet.
Borman: Yes, a business and control layer. That has been absent. The first thing was to connect everybody, but then they find out, "We've got to do it faster, because now there are more connections -- they're peer-to-peer connections." Now, all of a sudden, they say, "We're out of bandwidth," because you're communicating too much, and you're communicating richer content, in different kinds of files. You're communicating voice over IP, or doing video, or webcasts." It's just booming.
Define for readers what makes Blue Coat unique from Cisco or Riverbed in the optimization market, which is very competitive.
Let's focus on security first. I think [our position] is pretty evident by our market share and the number of top customers in the Fortune 500. We probably have 80 percent or higher of the Fortune 500 using our security appliances for managing policy and managing security on the Internet. It is basically a cloud service. Without getting into a lot of detail, every day our appliances update a cloud system we have that monitors all the URLs that [are clicked] every day -- more than a billion, probably close to 2 billion. We monitor them for malware, spyware, and we analyze them in one database. If we don't find it there, we go to another database. If we don't find it there, we do it manually. Then we make sure that our customers have access to all the latest information every day. We have 70 million users, and when you talk to our customers they have great success stories on implementing our security appliances, and thwarting tens or hundreds of thousands of malware and spyware viruses in a month.
That's one segment that we're in, and many of the readers will know our value there. And that's a value sale, right? Security is a value. How much value is it to your company to have data loss protection? To have the ability to real-time monitor everything that's going on out there and make sure that you're secure from all the cyber crime and cyber theft and things that are going on? That's a value sale.
The second area I'll call acceleration, and it's a broad area. As you know, bandwidth costs a certain amount of money. If you're New Zealand Telecom and you're trying to respond to your users that want Web pages from the United States and Web pages from Europe, all of a sudden you're paying a lot of money to international carriers back and forth for a lot of data.
We're able to cache data for them and save them a lot of money in terms of bandwidth. On the other hand, companies want to accelerate certain applications. I mean, I want SAP to run, but I don't want you to be looking at the oil spill with your screen from CNN News in the corner streaming video all the time. I want to be able to parse that out and accelerate the SAP. We can do that for them. That's a cost savings, as opposed to a value sale, which isn't bad, it's just a different value proposition to a customer.
NeSmith: You have to answer it in really two different contexts. [Compared to the competition] I would still say today that we provide much better price performance; we provide much better scalability, a much richer feature set. And in the end, what you find with the security where we play is the flexibility of the policy. Because every organization has a different view about what they want to do, what they want to take place, and how they want to work that. So we can help an organization drive an experience that's down to the user, down to the individual action or behavior with any type of traffic that's coming across in that link.
That was our differentiation six or seven years ago, and it basically remains our differentiation today. Then we augment the appliances with a cloud-based service where we provide a zero-day or zero-minute or zero-second protection against malware and spyware. What's going to be unique for us going forward is taking that technology, that understanding, and leveraging it into the midmarket, which is a different user experience. They don't want nearly as much complexity with new products, new cloud services, new appliances.
That's the area that I would say if anything we're probably a bit challenged. But we're looking to actually add to our portfolio capability, and push more aggressively into that midmarket, and expand the market potential.
But it's that flexible policy when we're competing with security vendors; it's what we do. We support every type of authentication. There's no exception in that. And it's also just the performance of the platform.
Our roots as a caching and acceleration company play well for us in competing with security vendors. Not only do we not slow down the connections, we actually make things a lot faster.
So is it Blue Coat as the cloud security provider or would you work with other companies that offer managed services to incorporate that kind of security functionality into their managed security services?
Borman: We'll do both. The way to be successful here is to first have the intellectual property and the capability to do it. But there are a lot of security service providers out there, and we need to partner with them in order to be successful there, too.
How does cloud change the WAN optimization market? We saw Riverbed announce essentially a virtual device that could be housed a service like Amazon EC2, where that could be the other end of your WAN optimization connection, when you roll jobs up to EC2. Is that something you are considering as well? How does cloud affect that market?
NeSmith: What Riverbed has announced, basically, is that you could deliver through software and it's like a data center. It still requires a symmetrical approach; you've got to have equipment on the cloud provider premise and you've got to have it on the end customer's premise. I believe that's going to become applicable, but we believe we have a better position, since we're the gateway security point for the vast majority of the world's largest corporations. We have a WAN optimization functionality on that platform, and we also have a virtual client platform that we sold on the other side. So we're already in place with the equipment to allow this to be enabled for customers.
I don't expect it to be a huge market day one. The first provider that goes out and makes the case that, "Hey, to use our service effectively you need to buy this extra thing," isn't going to really resonate.
So we've started with security and then with data center consolidation. This is back to the future. This is taking things, and just putting terminals in, and accelerating, and making it look like it's there. With our technology, because of the intelligent caching that we do on both ends, you don't need to replicate. Let's say there were 3,000 servers that Walgreen's had. You don't need 3,000 worth of processing servers back in headquarters. You can get by with one-tenth the number of servers or the amount of power because of what we're able to do. We don't have to hit the mainframe all the time.
I think that's a great opportunity for CIOs and businesspeople out there to take a look at where they want to be in three years and say, "I really can be serverless in my stores with this kind of technology." I think it's a great thing. They don't even have room for their servers in the stores. They're dusty, they're hot -- there are all sorts of issues.
What's your mission as incoming CEO? What do you need to do with Blue Coat?
Borman: My mission is to grow the company. I'm focused on organic growth, because I think the products we have are tremendous. Matter of fact, we have almost more products than we're able to sell, to be honest with you. From CacheFlow that we've rejuvenated for telcos, to enhancements in the Packeteer area with some cloud service and improved capabilities, to our WAN optimization, and security. The whole networking field, I think, is just primed for us to grow. Probably because of my background in the channel, we use a lot of channels here to go to market, and my background in technical sales, I think that we have a great opportunity.
What will ensure that growth?
A lot of our emphasis is in really driving that kind of consumer Internet-like experience, but inside the enterprise for things like training, education, announcements, CEO videocasts, and those areas.
It's using Flash, using HTML5, using Windows training technologies, and making sure you can mix and match those things as you would like. It's doing that in a way where you allow all the existing applications to continue to function like they normally do, because video, especially, takes five people watching some streaming event on the Internet, and the entire corporation's network can come to a grinding halt.
It's protecting the existing network, but also enabling the video. So it's a little bit of both of those things. And that's where I see us going with video.
Are there specific product opportunities associated with video that are not out there now?
NeSmith: There's nothing right now that deals with Flash, I think, in any significant way. None of the vendors can really do caching or support or deal with Flash content, which is, obviously, almost all the YouTube video. HTML5 is taking off. I've seen the surveys over the last three years, and video continues to rocket up high on the list as an underlying concern about what they're going to do with dealing with this consumer Internet video.