Assessing Dell’s Layer 4-7 Options

As it continues to integrate and assimilate its acquisition of Force10 Networks, Dell is thinking about its next networking move.

Based on what has been said recently by Dario Zamarian, Dell’s GM and SVP of networking, the company definitely will be making that move soon. In an article covering Dell’s transition from box pusher to data-center and cloud contender, Zamarian told Fritz Nelson of InformationWeek that “Dell needs to offer Layer 4 and Layer 7 network services, citing security, load balancing, and overall orchestration as its areas of emphasis.”

Zamarian didn’t say whether the move into Layer 4-7 network services would occur through acquisition, internal development, or partnership. However, as I invoke deductive reasoning that would make Sherlock Holmes green with envy (or not), I think it’s safe to conclude an acquisition is the most likely route.

F5 Connection

Why? Well, Dell already has partnerships that cover Layer 4-7 services. F5 Networks, the leader in the application-delivery controllers (ADCs), is a significant Dell partner in the Layer 4-7 sphere. Dell and F5 have partnered for 10 years, and Dell bills itself as the largest reseller of F5 solutions. If you consider what Zamarian described as Dell’s next networking priority, F5 certainly fits the bill.

There’s one problem. F5 probably isn’t selling at any price Dell would be willing to pay.  As of today, F5 has a market capitalization of more than $8.5 billion. Dell has the cash, about $16 billion and counting, to buy F5 at a premium, but it’s unlikely Dell would be willing to fork over more than $11 billion — which, presuming mutual interest, might be F5’s absolute minimum asking price — to close the deal. Besides, observers have been thinking F5 would be acquired since before the Internet bubble of 2000 burst. It’s not likely to happen this time either.

Dell could see whether one of its other partners, Citrix, is willing to sell its NetScaler business. I’m not sure that’s likely to happen, though. I definitely can’t envision Dell buying Citrix outright. Citrix’s market cap, at more than $13.7 billion, is too high, and there are pieces of the business Dell probably wouldn’t want to own.

Shopping Not Far From Home?

Who else is in the mix? Radware is an F5 competitor that Dell might consider, but I don’t see that happening. Dell’s networking group is based in the Bay Area, and I think they’ll be looking for something closer to home, easier to integrate.

That brings us to F5 rival A10 Networks. Force10 Networks, which Dell now owns, had a partnership with A10, and there’s a possibility Dell might inherit and expand upon that relationship.

Then again, maybe not. Generally, A10 is a seen as purveyor of cost-effective ADCs. It is not typically perceived as an innovator and trailblazer, and it isn’t thought to have the best solutions for complex enterprise or data-center environments, exactly the areas where Dell wants to press its advantage. It’s also worth bearing in mind that A10 has been involved in exchanges of not-so-friendly litigious fire — yes, lawsuits volleyed back and forth furiously — with F5 and others.

All in all, A10 doesn’t seem a perfect fit for Dell’s needs, though the price might be right.

Something Programmable 

Another candidate, one that’s quite intriguing in many respects, is Embrane. The company is bringing programmable network services, delivered on commodity x86 servers, to the upper layers of the stack, addressing many of the areas in which Zamarian expressed interest. Embrane is focusing on virtualized data centers where Dell wants to be a player, but initially its appeal will be with service providers rather than with enterprises.

In an article written by Stacey Higginbotham and published at GigaOM this summer, Embrane CEO Dante Malagrinò explained that his company’s technology would enable hosting companies to provide virtualized services at Layers 4 through 7, including load balancing, firewalls, virtual private networking (VPN),  among others.

Some of you might see similarities between what Embrane is offering and the OpenFlow-enabled software-defined networking (SDN). Indeed, there are similarities, but, as Embrane points out, OpenFlow promises network virtualization and programmability at Layers 2 and 3 of the stack, not at Layers 4 through 7.

Higher-Layer Complement to OpenFlow

Dell, as we know, has talked extensively about the potential of OpenFlow to deliver operational cost savings and innovative services to data centers at service provides and enterprises. One could see what Embrane does as a higher-layer complement to OpenFlow’s network programmability. Both technologies take intelligence away from specialized networking gear and place it at the edge of the network, running in software on industry-standard hardware.

Interestingly, there aren’t many degrees of separation between the principals at Embrane and Dell’s Zamarian. It doesn’t take much sleuthing to learn that Zamarian knows both Malagrinò and Marco Di Benedetto, Embrane’s CTO. They worked together at Cisco Systems. Moreover, Zamarian and Malagrinò both studied at the Politecnico di Torino, though a decade or so apart.  Zamarian also has connections to Embrane board members.

Play an Old Game, Or Define a New One

In and of itself, those don’t mean anything. Dell would have to see value in what Embrane offers, and Embrane and its backers would have to want to sell. The company announced that in August that it had closed an $18-million Series-financing round, led by New Enterprise Associates (NEA). Lightspeed Venture Partners and North Bridge Ventures also took part in the round, which followed initial lead investments in the company’s $9-million Series-A funding.

Embrane’s product has been in beta, but the company planned a commercial launch before the end of this year. Its blog has been quiet since August.

I would be surprised to see Dell acquire F5, and I don’t think Citrix will part with NetScaler. If Dell is thinking about plugging L4-7 holes cost-effectively, it might opt for an acquisition of A10, but, if it’s thinking more ambitiously — if it really is transforming itself into a solutions provider for cloud providers and data centers — then it might reach for something with the potential to establish a new game rather than play at an old one.

6 responses to “Assessing Dell’s Layer 4-7 Options

  1. nice piece – thx.

  2. Brad,

    you present a very rational analysis, which I will not offer any specific comment on. Nonetheless, I want to congratulate you on the accurate job you do in representing what Embrane is doing and how we are positioning our technology with our customers. We are gearing up for launch and we’ll be able to share more details publicly very soon.

    There is a paradigm shift happening in many areas of IT, which probably begun with server virtualization, but has rapidly expanded to touch many other areas and is often referred to as “cloud computing”. Networking is ripe for change and innovation needs to happen at all layers of the stack. Many of the assumptions that have been done and many of the “safe” decisions that have been made in the past may not be right anymore.

    Lastly, Dario and I are very good personal friends, but as you rightfully point out, our business decisions will obviously be driven by the interests of the companies we represent.

  3. Financial challenges aside, it strikes me as a tough move for Dell to go after F5, assuming the ultimate goal is to sell a fully integrated data center solution delivering at all seven layers. F5’s approach to ADC is so mature and complex with extensions that customers leverage heavily (iRules, iControl, scripts, additional modules beyond LTM), that any tight integration exercise beyond re-branding could be difficult. The F5 solution is going to have to remain functionally as-is to continue to meet the expectations of existing customers. F5 solutions are also well-defined – they are an ADC company, with other bits and pieces bolted onto the LTM core function as extras…generally, as extras that don’t sell well.

    Embrane’s technology seems like a malleable fit by comparison. For Dell, Embrane could become, in effect, whatever Dell needs them to be. And Dante was a bit coy, don’t you think? ;-)

  4. Great points, Ethan.

    You’re right that an acquisition and integration of F5 would be a difficult proposition for Dell technologically as well as financially. Presuming that Dell chooses to acquire and does not expand its existing partnerships, F5 probably won’t be the focus of Dell’s attentions.

    I think Dell might opt for A10 Networks, but, yes, Dante was a touch coy. :-)

    That said, I appreciate his visit and his commentary.

  5. Very informative and an interesting take on Dell’s efforts to compete in the L4-7 market space. Thanks for sharing!

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