     |
Paul Severino not only lived through the major network epochs, his companies helped shape and drive them. And as a private investor he's still at it.By John Dix Network World, 03/26/01 When we went searching for an industry icon that could reflect on 15 years of networking, the name Paul Severino kept popping up. The 54-year-old Severino has seen and done it all. He started his career working on distributed minicomputers, jumped into Ethernet early and rode that wave, saw the routing tsunami coming and founded WellfleetCommunications - what would become one of the biggest routing vendors of the day - and ultimately merged Wellfleet with Synoptics to create the Bay Networks behemoth. Now he's heavily invested in optical companies. Mr. Severino stopped by Network World to talk with Editor in Chief John Dix about where we've been and where we're going. NW: You founded Interlan in 1981 to build 10M bit/sec Ethernet cards. Now Ethernet is pushing 10G bit/sec. Did it ever occur to you Ethernet would make it this far? I grew up in the minicomputer industry where we were always trying to get more out of the computer. So I had this ingrained view about pushing performance. I always felt Ethernet would support more than 10 megabits. Of course at 10 gigabits it really doesn't have much to do with Ethernet any more. There's no more CSMA/CD, it's just switched. It's just sending packets down the line in an Ethernet frame format. You sold Interlan to Micom Systems in 1985 and then in 1986 started Wellfleet, the same year we launched Network World. What problem were you out to solve? Nobody was connecting enterprise local networks to WANs in an effective way. So I recruited some former Interlan folks to do that. From Day One we supported bridging and routing in the same product. That was one of the issues we thought was important because there was certain traffic you couldn't route, like DEC terminal traffic. The reason that was important was because DEC was so pervasive. Most commercial environments had two computing environments. There were Unix workstations, usually Sun, and there were DEC VAXes. PCs were just starting to be installed. What about the whole IBM world?  That
was totally foreign to us in the LAN business. IBM was still building
SNA networks. But that started to change in about '92. Union Carbide
was one of our big customers and they said to us, here's our SNA network,
it's 99.99% reliable, and the traffic on it isn't growing at all.
Here's our multiprotocol network - Unix and VAXes and NetWare - it's
96% reliable but the traffic on it is growing like this [holds arm
up in the air].
They said, "We want to do two things. We want to make this multiprotocol
network more reliable, and we want to take our IBM traffic and put
it on that network." So we became their corporate standard for wide-area
networking, which I thought was a huge breakthrough. And it turns
out it was.
What was Cisco doing at the time?
We started in '86; Cisco started in something like '84. But they started
with a product they took out of Stanford, and they were selling mostly
to universities, a marketplace they knew really well.
Wellfleet, on the other hand, was started by entrepreneurs backed
by funding. We had to start from scratch, and we had a view of the
world that said we needed to support bridging, routing and multiple
protocols, and we needed a multiprocessor architecture to maintain
performance levels as you added more LAN connections. So our development
effort took us about two years. In that time frame, Cisco was continuing
to generate revenue.
Then around 1988 Cisco got its first round of venture capital and
the VC put in senior management, which really focused Cisco on the
whole internetwork market, including the commercial side. That's when
we started to go head-to-head against them.
So when we were zero revenues they were probably almost $20 million.
But over time we actually closed that gap. By the time we merged with
Synoptics they were three times our size, instead of 10 or 20 times
our size.
What would you attribute Cisco's ultimate success to?
I think there are two things. One, they made the transition to Ethernet
switching early, and they did it aggressively. And while we focused
on the enterprise they built this strong position in the Internet.
Most of the early ISPs, they were all buying Cisco. When that took
off it was a given Cisco was going to get that business. But we both
had strong direct sales organizations, and it was very tough competition.
Any good tales?
There are tons. Cisco had some aggressive salespeople. They would
go in and say things that were true but not relevant. For example,
when we were still building our product and raising money, they would
go into an account and say, "You know, if Wellfleet doesn't raise
money they'll go bankrupt." Well, that's true, but it's not relevant
because we were going to raise the money.
 So
it was that kind of stuff. And we did some interesting things. In
1991 or '92 Wellfleet was named the fastest-growing company in the
U.S. by Fortune magazine. Cisco had that position locked, but then
we went public and got on Fortune's radar screen and, because we were
smaller than Cisco, we actually grew faster than they did. That pissed
off Cisco to no end.
So when Cisco had a big user group meeting in Boston, we rented the
sign outside of Logan Airport and we said, "Wellfleet Communications,
America's fastest-growing company, welcomes Cisco users to Boston,"
or something like that. [Laughs.]
I would guess that kind of competition tends to focus your energies.
It forced both companies to really work hard and to continue to innovate.
But I've got to tell you, it was an intense time. Every day you went
in to work and you had to work hard; you had to make sure your customers
were happy. Cisco was so pervasive that even if they lost a deal,
they would show up every quarter and ask the customer how things were
going. So we became very customer-focused. And to this day, I believe
it's the only way to run a company. You have to go the extra mile.
In what sense?
Well, I had BASF as a customer in Germany, and in those days we sold
through a distributor over there. I met the user at a meeting in Europe
and he told me his network was always going down. So I sent some people
out to take a look and they reported the company had old rev hardware,
old rev software and they were running different revs here and there.
When I asked the distributor what was going on he said, "I put a proposal
in for them to upgrade but they didn't want to do it." Well, it turns
out his proposal was raping the customer - he was trying to collect
more than a million dollars for this upgrade. So I told him he was
on thin ice and I was going to fix this problem, which got him all
bent out of shape. We sent in a team between Christmas and New Year's
and upgraded all the equipment. I showed up 30 days later and literally,
when I walked in the room, everybody got up and applauded. [Laughs.]
I charged them $35,000 for a $250,000 upgrade. It was more important
to make that customer happy than to have them throw us out and go
to Cisco.
Fast-forwarding a bit to when you merged Wellfleet with Synoptics
in 1994, why did you see that as a necessity?
Well, we had a strong position in enterprise accounts, and we were
working hard to get into the Internet side of the business. But two
things were going on in the marketplace. One was Ethernet switching
and two was ATM.
We were only a third or a fourth the size of Cisco and our resources
were always focused on our core business, which was routing. The only
way we could move into other business areas was to go on an acquisition
spree or team with a partner.
Synoptics was in the same boat. They had to move beyond hubs and were
developing switching and ATM technology. But they needed routing.
We had to get into switching and ATM more quickly, so we felt putting
all of this together could leapfrog us in the marketplace.
That was all true. Where the problems came up were the ATM and the
switching technologies Synoptics had were not fully developed, so
it took longer to get them to market. As a result we lost an opportunity.
A lot of people thought there was a cultural problem in that merger.
It was less culture and more product. We couldn't get product out
fast enough.
Cisco, on the other hand, went on an acquisition spree.
They did some very successful deals. Crescendo is a good example.
They bought it for $120 million and it's probably the best money they've
ever spent. Whereas they bought Stratacom for $4 billion and it's
probably the worst $4 billion they ever spent.
Going the acquisition route would have been hard for me because culturally
the East Coast at that time was different than the West Coast. If
I went to my board and said I want to buy this company for $150 million
and I've got 10 days to do it in and the only diligence I can do is
this kind of diligence, they would look at me like I was crazy.
Old world?
The Harvard Business School mentality. In California it was, "We've
got to go buy a bunch of companies, and guess what, some of them are
not going to make it but we're going to take those risks." We've changed
a lot [on the East Coast]. But in those days, it was a different culture.
So the SynOptics/Wellfleet merger was strategically well conceived,
although the execution was not as good as it should have been. Having
said that, we more than doubled our business; went from a billion-dollar
company to $2 billion in two years. But it wasn't fast enough because
Cisco was really ramping up their Ethernet switching environment and
the Internet was exploding.
Is there anything you would do differently?
I grew up as an engineer; I worked for the first 10 years developing
products. I've never been a salesperson and I was competing against
CEOs who were salespeople. So their view of their job was different
than my view of my job.
Their view was you have to be out with the customers. If we had an
account like Sprint, Cisco would make it a point to be in there at
the CEO level on a regular basis telling them why they should be doing
business with Cisco. I should have become more of a salesperson.
On the merger thing, I now understand that no matter how compatible
these things may look on the outside, when you put them together the
incompatibilities get magnified.
And the sale of Bay to Nortel - give us some background on how
that came about.
 Well,
Dave House - who had been at Intel 20-odd years - came in and took
over Bay. Although Dave wasn't a networking guy, he came in said,
"Here are the things we have to do," and the board was very much in
sync. Dave executed well and began to show significant gains in a
lot of areas. Our stock went from the 20s to the 60s and 70s again.
So it was good.
But he realized over time it was going to be tough for him to make
the kind of headway against the Cisco machine that he thought he could,
so he said if we have an opportunity to team with a bigger company,
we ought to think about doing it. Nortel was interested in our routing
technology and so that deal came together relatively quickly.
It was a good thing for Nortel and Bay Networks. But that's when I
stopped having an association with Bay Networks.
Given your struggles with Cisco, why do you think Juniper is having
success against them?
That's a good one. After I left Bay, I never would have thought that
would be a good business to go start - high-end routers focused on
the very high end of the network. Cisco had such a strong presence
with those customers.
But a bunch of things happened to make Juniper a success. Good financing,
lots of partners that would bring Juniper's name into major accounts
and Cisco not providing product on time. All of those things had to
go right. That takes nothing away from the fact that the guys at Juniper
built a great product. The vice president of engineering there is
from Wellfleet.
Shifting a bit to look at what you're involved with now. You're
investing in a lot of optical companies. Where do you see this high
bandwidth stuff going?
When the telephone business started, it was basically about being
able to call someone on the telephone. Right? Well, today it's not
much different. The Web is about the ability to do more. The question
is, how much more? In your business, wouldn't it be great to be able
to walk into this room and do a videoconference with Network World
people around the world? Instead of having to deal with ISDN lines
and telephone numbers and all that stuff?
That's what we need. That's what it's going to come to. Both on the
business and consumer side.
How many years away do you think we are from that kind of thing?
Five or 10.
You're now a private venture capitalist. How has the VC community
changed the business of developing and running technology companies?
When I came out of college and went to Digital, Digital was a venture
capital-based business. And when I went to Prime Computer, the board
of Prime Computer was made up of mostly venture capitalists. Over
time I realized that what made these start-ups happen was venture
capitalists and entrepreneurs working together.
Where a lot of entrepreneurs view venture capital as a necessary evil,
I never felt that way at all. I could never have done what I did without
venture capital, period. The amount of venture capital out there is
a big win for the country. Like everything else, there are excesses.
There's probably too much money in venture capital right now for it
to be effective. So the returns will probably come down, just because
there's not going to be that many good deals available.
Besides being a private venture capitalist and sitting on many
company boards, what do you do with your time?
I'm in an interesting situation now. I worked for probably 30 years
full-time, almost taking no time off. I would only take one week a
year. But now we have a house on Martha's Vineyard and I like to disappear
down there for the summer. It turns out there was a lot of high-tech
people down there who are doing what I'm doing.
So you can't even escape down there?
No, no. They're friends. They're not in companies anymore. They're
doing what I'm doing. So it's a great environment. I'm not anxious
to go try to run another company. Once you've built a company like
Wellfleet, it's hard to think that you can do another one of those.
[Laughs.] You're better off making an impact in a different way.
Related
links
Contact Editor in Chief John Dix
Send this article to a colleague
|
|
Responsible for insuring the safety of your network?
NWFusion offers two FREE security e-mail newsletters to help you keep your enterprise network
secure.
Click here to sign-up.
Click here to sign-up.
Three free and easy ways to bring Network World's in-depth editorial content to your own Web site.
Learn more
Learn more