WAN-optimization market continues to shrink

Expand, Packeteer each to buy a competitor.

WAN optimization market continues to shrink

Expand Networks says it is buying DiskSites, a company that makes wide-area file services-enhancing gear and with which Expand already had a reselling agreement.

The purchase means Expand customers can buy combined Expand/DiskSites products at half the price they would be charged under the OEM agreement, says Expand President Amir Chitayat.

For its part, Packeteer is buying Tacit Networks' Ishared appliances to add server consolidation technology to Packeteer's PacketShaper WAN-optimization products.

Over time, Packeteer says it will make new hardware to support both PacketShaper and Ishared software so customers can buy one box and upgrade it as needed.

These purchases are an effort to catch up with other WAN-acceleration vendors that offer more features, says Rob Whiteley, an analyst with Forrester Research. He says Riverbed has the best collection of features and that others are trying to keep pace. Competitors include Certeon, Cisco, Citrix, Juniper, Orbital Data, Silver Peak and Streamcore. Four other companies that sold such products were bought out in the past year (see below).

WAN-acceleration consolidation

Companies that make appliances to speed up transactions over wide-area networks have been gobbling each other up in an effort to get a complete set of features.
Juniper buys Peribit for $337 millionApril 2005
Juniper buys Redline for $132 millionApril 2005
Citrix buys NetScaler for $300 millionJune 2005
F5 Networks buys Swan Labs for $43 millionSeptember 2005
Packeteer buys Tacit Networks for $78 millionMay 2006
Expand Networks to buy DiskSites for an undisclosed amountPending

This class of device is generally deployed in pairs at both ends of WAN connections. They use a variety of technologies - compression, caching, application acceleration, TCP optimization - to decrease the number of bits crossing the WAN and to improve response time for transactions. This can result in better performance and cost savings by making wide-area circuits act as if they have more bandwidth than customers are paying for.

According to Infonetics, the WAN-optimization appliance market increased 49% worldwide in 2005 to $236 million. Infonetics forecasts double-digit annual growth at least through 2009. When ranked by revenue in 2005, Packeteer came in first, followed in order by Expand, Juniper and Riverbed, Infonetics says.

While that is a relatively small market, it is growing in importance because it is bringing about server consolidation, says Joel Conover, an analyst with Current Analysis. As businesses pull servers from branch offices and centralize them they need to respond to complaints from workers in branch offices who find accessing servers over the WAN unacceptably slow, he says.

He says it is essential to speed up these transactions to make server consolidation succeed.

Customers are in a bind, though, Whiteley says. Many are forced to buy one of these products to fix an immediate need. "If you spend millions of dollars on an SAP rollout and it's not working, then a $100,000 investment in a Riverbed box that makes it work might be smart," he says.

But network vendors, notably Cisco and possibly Juniper, seem intent on putting this type of technology in routers within five years, he says. That leaves customers uncertain whether to buy an appliance now, hoping they will evolve to meet new needs, or wait until their next network bandwidth upgrade and hope that fixes the problem, Whiteley says.

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