Daily Archives: August 8, 2011

F5 Deals with Its Virtual Threat

F5 Networks has done well selling its BIG-IP application delivery controllers (ADCs), the devices formerly known as load balancers. Customers and channel partners clearly have derived a lot of value from F5’s ADCs, too.

It isn’t for nothing, after all, that F5 has established itself as the dominant player in the ADC market. As I have recounted in this space previously, F5 has convincingly and repeatedly repelled attempts by Cisco Systems to dethrone it. Even when it was a the old Cisco, the networking colossus that bestrode the globe, it couldn’t beat F5 at the load-balancing game.

Questions to Answer

Now, though, I have begun to wonder whether the vicissitudes of technological change might do to F5 what Cisco was unable to accomplish. Could the seemingly endless push in data centers for increased virtualization, with its attendant cost savings, cut into F5’s ADC cash cow? Could virtualized ADCs (vADCs), sold at lower prices than purpose-built hardware-appliance ADCs, eat into F5’s top and bottom lines?  To what extent are these vADCs capable of doing the work that physical ADC (pADC) appliances perform today?

F5 has been pondering the same questions, and it has provided some answers in a column written for Enterprise Systems by Alan Murphy, a senior technical marketing manager. To summarize, Murphy acknowledges that vADCs have been considered replacements for pADCs in the data center, but he advises strongly against their adoption. That’s obviously the sort of advice one would expect from F5 — and I’m sure proponents of vADCs will contend that there’s a self-serving element to F5’s guidance — but there’s also plausibility to the points F5 raises.

Fundamentally, F5 argues that pADCs are superior to vADCs in mission-critical scenarios involving application security, optimization, and availability at the data-center edge. According to F5, pADCs’ purpose-built hardware is optimized to perform “application delivery, SSL acceleration, and compression.” In contrast, vADCs, which run on industry-standard hardware and often share computing resources, can’t scale application traffic or perform to the same degree.

More — or the Same — for Less

F5 does concede that vADCs are appropriate for some applications. Their portability, affordability, and ease of deployment make them good candidates, for instance, for application-development environments, where costs and logistics preclude deployment of pADCs. While that might seem like a minor concession to the vADC camp, F5 allows that virtualized load balancers also have their uses alongside application-specific services and virtualized workloads such as SharePoint.

In the end, F5 envisions the coexistence of pADCs and vADCs. In the near term, as F5 contends, it’s likely true that pADCs will retain their grip on mission-critical data-center applications.

Looking further ahead, however, it’s harder to say how markets and technologies will evolve. As today’s tumult on the public markets suggests, IT cost cutting could be the one unvarying constant that drives ongoing change in this industry. In that vein, we should watch not only the progress of virtualized load balancers, but also, on a higher level, the virtualization of network infrastructure represented by software-defined networking and protocols such as OpenFlow.

There’s no question that managers of data centers at enterprises and cloud service providers will be on an endless quest to slash capex and opex. If technologies can do more — or even the same — for less, they figure to find patronage.

Why RIM Takeover Palaver is Premature

Whether it is experiencing good times or bad times, Research in Motion (RIM) always seems to be perceived as an acquisition target.

When its fortunes were bright, RIM was rumored to be on the acquisitive radar of a number of vendors, including Nokia, Cisco, Microsoft, and Dell. Notwithstanding that some of those vendors also have seen their stars dim, RIM faces a particularly daunting set of challenges.

Difficult Circumstances

Its difficult circumstances are reflected in its current market capitalization. Prior to trading today, RIM had a market capitalization of $11.87 billion; at the end of August last year, it was valued at $23.27 billion. While some analysts argue that RIM’s stock has been oversold and that the company now is undervalued, others contend that RIM’s valuation might have further to fall. In the long run, unless it can arrest its relative decline in smartphones and mobile computing, RIM appears destined for continued hardship.

Certainly, at least through the end of this year — and until we see whether its QNX-based smartphones represent compelling alternatives to Apple’s next crop of iPhones and the succeeding wave of Android-based devices from Google licensees — RIM does not seem to have the wherewithal to reverse its market slide.

All of which brings us to the current rumors about RIM and potential suitors.

Dell’s Priorities Elsewhere

Dell has been mentioned, yet again, but Dell is preoccupied with other business. In an era of IT consumerization, in which consumers increasingly are determining which devices they’ll use professionally and personally, Dell neither sees itself nor RIM as having the requisite consumer cache to win hearts and minds, especially when arrayed against some well-entrenched industry incumbents. Besides, as noted above, Dell has other priorities, most of which are in the data center, which Dell sees not only as an enterprise play but also — as cloud computing gains traction — as a destination for the applications and services of many of its current SMB customers.

In my view, Dell doesn’t feel that it needs to own a mobile operating system. On the mobile front, it will follow the zeitgeist of IT consumerization and support the operating systems and device types that its customers want. It will sell Android or Windows Phone devices to the extent that its customers want them (and want to buy them from Dell), but I also expect the company to provide heterogeneous mobile-management solutions.

Google Theory

Google also has been rumored to be a potential acquirer of RIM. Notable on this front has been former Needham & Company and ThinkEquity analyst Anton Wahlman, who wrote extensively on why he sees Google as a RIM suitor. His argument essentially comes down to three drivers: platform convergence, with Google’s Android 4.0 and RIM’s QNX both running on the same Texas Instruments OMAP 4400 series platform; Google’s need for better security to facilitate its success in mobile-retail applications featuring Near-Field Communications (NFC); and Google’s increasing need to stock up on mobile patents and intellectual property as it comes under mounting litigious attack.

They are interesting data points, but they don’t add up to a Google acquisition of RIM.

Convergence of hardware platforms doesn’t lead inexorably to Google wanting to buy RIM. It’s a big leap of logic — and a significant leap of faith for stock speculators — to suppose that Google would see value in taking out RIM just because they’re both running the same mobile chipset. On security, meanwhile, Google could address any real or perceived NFC issues without having to complete a relatively costly and complex acquisition of a mobile-OS competitor. Finally, again, Google could address its mobile-IT deficit organically, inorganically, and legally in ways that would be neither as complicated nor as costly as having to buy RIM, a deal that would almost certainly draw antitrust scrutiny from the Department of Justice (DoJ), the Securities and Exchange Commission (SEC), and probably the European Union (EU).

Google doesn’t need those sorts of distractions, not when it’s trying to keep a stable of handset licensees happy while also attempting to portray itself as the well-intentioned victim in the mobile-IP wars.

Microsoft’s Wait

Finally, back again as a rumored acquirer of RIM, we find Microsoft. At one time, a deal between the companies might have made sense, and it might make sense again. Now, though, the timing is inauspicious.

Microsoft has invested significant resources in a relationship with Nokia, and it will wait to see whether that bet pays off before it resorts to a Plan B. Microsoft has done the math, and it figures as long as Nokia’s Symbian installed base doesn’t hemorrhage extravagantly, it should be well placed to finally have a competitive entry in the mobile-OS derby with Windows Phone. Now, though, as Nokia comes under attack from above (Apple and high-end Android smartphones) and from below (inexpensive feature phones and lower-end Android smartphones), there’s some question as to whether Nokia can deliver the market pull that Microsoft anticipated. Nonetheless, Microsoft isn’t ready to hit the panic button.

Not Going Anywhere . . . This Year

Besides, as we’ve already deduced, RIM isn’t going anywhere. That’s not just because the other rumored players aren’t sufficiently interested in making the buy, but also because RIM’s executive team and its board of directors aren’t ready to sell.  Despite the pessimism of outside observers, RIM remains relatively sanguine about its prospects. The feeling on campus is that the QNX platform will get RIM back on track in 2012. Until that supposition is validated or refuted, RIM will not seek strategic alternatives.

This narrative will play out in due course.  Much will depend on the market share and revenue Microsoft and Windows Phone derive from Nokia. If that relationship runs aground, Microsoft — which really feels it must succeed in mobile and cloud to ensure a bright future — will look for alternatives. At the same time, RIM will be determining whether QNX is the software tonic for its corporate regeneration. If  the cure takes, RIM won’t be in need of external assistance. If QNX is no panacea, and RIM loses further ground to Apple and the Google Android camp, then it will be more receptive to outside interests.

Those answers will come not this year, but in 2012.