Former tough wide-area data service competitor Riverbed Technologies appears to have become nothing more than a has-been competitor, tasked with keeping Cisco on its toes while struggling to remain relevant as a niche player.
Late last Thursday after the stock market closed, an embarrassed Riverbed management hastily arranged a Wall Street conference call (read the call transcript), to inform investors that Riverbed revenue would fall short of previous expectations for the first quarter.
By the next day Friday, Riverbed stock had taken a 12% dive in price. Keep in mind that back on October 17th 2007, Riverbed stock hit a high of $52.81 per share. So in just the past 6 months alone, Riverbed has lost 75% of its stock market value (quite a haircut for Riverbed investors).
Cisco (CSCO) vs. Riverbed (RVBD) Stock Chart Comparison:
During the conference call, Ryan Hutchinson with Lazard Capital Markets brought up that it looks like Cisco is starting to gain some share.
Riverbed CEO - Jerry Kennelly admitted that competitively it has become a 3 horse race, it is Riverbed, Cisco and Juniper. Blue Coat is not in the top three, by Kennelly's metrics.
However most surprisingly, Kennelly insisted that the competitive landscape had not changed.
Cisco revealed on April 4th that according to a recent analyst report, Cisco currently has a 20.0% market share versus a 20.2% market share for Riverbed.
Flabbergasted by Riverbed in their conference call bemoaning lengthening sales cycles, enterprise softness and CFO fear, Douglas Gourlay - Senior Director Marketing and Product Management for the Cisco Data Center Business Unit, asked two pertinent questions of Riverbed in his recent Cisco Data Center blog entry:
Longer Sales Cycles in WAN Optimization
 1. While you used to claim 98% win rate and no competition, could the equality in market share really be more an indication that you are simply not seeing all the opportunity and be a sales coverage issue, or simply that there is now a more superior product and solution in the market?
2. Or was the 98% just bluster and hype designed to pump up the volume so to speak? |
Why do YOU think Riverbed management failed to acknowledge Cisco's market share gains during their conference call to explain Riverbed's First Quarter revenue shortfall?
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Setting the record straight
Brad,
Doug Gourlay tells a dramatic story in his blog about how a Cisco product has caught up to a competitor, and has reduced them to a "has-been." You picked up on that story and amplified some of his questions. Unfortunately Doug's posting has errors, and so your posting is likewise built on some false premises.
First, Riverbed has never claimed a 98% win rate. While our win rate fluctuates a bit, for nine straight quarters it has exceeded 90%. These are numbers we track for our own internal purposes to understand the competitive landscape. And from where we sit, there has been no shift in the landscape. What the win rates tell us right now is that all of our competitors win occasionally, but nobody is a clear challenger.
Yes, Riverbed stock is down. Yes, expected Riverbed revenues for Q1 are lower than the original guidance. No, that is not because we are losing significantly more deals to Cisco (or anyone else). Instead, the problem -- as described on our conference call -- seems to be a lengthening of sales cycles due to concerns about the economy.
Now let's consider market share. The numbers Doug cites are Gartner figures (20.2% vs. 20.0%) However, Gartner measures this market (what it calls WAN Optimization Controllers, or WOCs) two different ways. If you look at the market share for products that directly compete with Riverbed (what Gartner calls WOC-AP), it turns out that Riverbed has a 29.0% share and Cisco has a 22.9% share. There are other circumstances where using the WOC numbers is OK, but for the specific question of Cisco WAAS vs. Riverbed, it's clearly a comparison of two WOC-AP products and it's misleading to use the other market figures.
And just a quick note on how Riverbed can have a 90% win rate against Cisco but both vendors have share in the 20's: the market for wide-area data services is still under-distributed enough that neither Cisco nor Riverbed is exposed to all of the selling opportunities. It's worth being clear what Riverbed's win rate does and doesn't mean. It definitely does mean that when customers make a choice (after evaluation) of Riverbed vs. someone else, Riverbed wins most of the time. It doesn't mean anything about what Cisco's win rate is in the overall market -- just that it's historically been 10% or less against Riverbed.
Finally, let's consider product quality: Doug suggests that "there is now a more superior product and solution in the market". Since Doug considers Gartner a good source of information on this market, we can look at the Gartner WOC Magic Quadrant. For two straight years, Riverbed has been in the "Leaders" quadrant while Cisco has only been rated a "Challenger." In terms of both "ability to execute" and "completeness of vision" Riverbed has ranked well ahead of Cisco.
I worked with Doug when I was at Cisco, and I've even had some entertaining and enlightening conversations with him about WAAS. It's not fun to have to point out these errors publicly, but it's important to get the record straight.
Great products don't come from playing games with the wrong market share numbers. Great products don't come from distorting what competitors actually say. Great products come from enabling customers to succeed, and at Riverbed we are very much focused on the success of our customers.
Mark Day, Chief Scientist, Riverbed Technology
Former Cisco customer
I am a former Cisco WAAS customer. "Former" being the operative word. The WAAS product looked great on paper, but completely tanked in our large infrastructure. After literally thousands of man-hours trying to get WAAS to work (it never did) we switched to Riverbed. We will never look back. If anyone wants 150+ WAAS devices, let me know. You can have them.
Thank you Mark
Thank you Mark for the market share clarification.
Too bad you were not available during the conference call.
Sincerely and gratefully yours,
Brad Reese
http://www.BradReese.Com
This was my reply to Douglas Gourlay on blogs@Cisco.com
Refered to Blog:
http://blogs.cisco.com/datacenter/2008/04/longer_sales_cycles_in_wan_opt.html
Doug Gourlay,
Let's put a few things into fact, and I am more than happy to do that. Also I like the customer comment above that was posted, he was lost with your product and most customers are.
--Riverbed continues to lead the market in technology innovation, awards and market share AND continues to remain at the top of the Gartner Magic Quadrant for wide-area optimization controllers for the second year in a row.
_Last time I looked at the Gartner Magic Quadrant I think Cisco was at the far right in the challenger position behind, Blue Coat, Juniper and Riverbed. That must be a tuff spot for the mighty WAAS to be in.
--Since December 2007, riverbed announced over 3500 customers and dozens of those customers have successfully deployed Riverbed to 50 branch offices or more. Some customers have successfully deployed over 400 appliances. Have you ever heard of a successful CISCO WAAS platform deployment of over 50 boxes? Not WAFS, but on the WAAS product?
-Can you please post a verifiable customer who has a deployment of the WAAS not the WAFS, for at least 50 sites and then 100 sites? I would love to call them and talk to them about the roll out, would be a good story for Networkworld.
--Actually, it's been Riverbed that continues to lead in product innovation with two major releases every quarter since 2004, the first to deliver split-termination SSL optimization, data store sych, configurable auto discovery, Oracle 11i eBusiness Suite optimization, Exchange (MAPI 2K3 and 2K5) optimization, MS SQL, option of 3 WAN visibility modes, Riverbed Services Platform offering best of breed partner virtual edge services. Also, as far as I've seen, Riverbed's new Steelhead mobile software client is the best on the market by far. Nothing else works, including your software offering.
--I went up against CISCO WAAS all the time and Riverbed almost always wins in side by side bake offs because of superior performance; ease of deployment and management and for the broadest application acceleration support. Doug, why don't you put your money where your mouth is and agree to a bake off managed through an objective third party, like InfoWorld and Network World?
--You brag about your 1000 customers. I'm glad you brought that up because I find it embarrassing that mighty Cisco, with a near monopoly position in networking gear, can't even give Cisco WAAS away for free to more than 1000 customers over the last several years.
-If it was not for bad luck, Cisco would have no luck at all. With the failure of the WAAS, you have been giving them away for free, taking 50% plus percent off and using them more as a give me with customer. It is more like if you buy our router and switches, we will throw in this nice WAAS. That's a great way to get market share.
-How about we post some real number for your WAAS Division? Like what were sales, what did you give away, what were the profits, how many real customers purchased it and did not get 50% off or for free?
-I am going to be at Interop, why don't we just have a bake off and I will do it, with everyone present? I will even invite three other companies that are tops in the Gartner Report? We can even do a Mobile Client Bake off and give it to people at Interop to use while they are there and on a Wireless Network we set up? I can have the whole thing set up in a day or two. Put your money where your mouth is?
-By the way before you say anything, I am a Cisco Partner, I sell Cisco, I like Cisco and I service Cisco. I just don't like the WAAS, Cisco purchased a company as always to play in a arena they did not belong in. Now they are paying the price and customerS know it.
Enterprise Spending Cuts
I can only speak for my company but I'm sure it mirrors other enterprises. We've pretty much slashed our IT spending due to the economic outlook. Our action will impact Riverbed as much as it does Cisco or any other vendor. To be honest, we did purchase and implement a small scale Cisco WAAS deployment before the budget cuts but if we could do it all over we would trash Cisco and go with another vendor for a large scale deployment.
Riverbed / Cisco
We are a large Cisco customer with multiple CCIE's working for us. We did extensive testing with Cisco and Riverbed before deciding to buy Riverbed. Someone at Cisco needs to get the word out that there product is not Superior. The SE's continued to spout that out even with clear testing results that proved their product did not work "consistently". Interestingly they did outperform Riverbed in certain optimization tests. However, when we tested writing office documents back to a file share they would work about 75% of the time. The end users who were participating in extended testing clearly developed a favorite and even though Cisco was faster they prefered Riverbed because of the consistent performance. Basically, Cisco just did not work about 25% of the time for several Microsoft applications. Also, I have to say that I am not convinced that the seperate storage areas on the head end for each remote location is a great architecture. They tried to tell me that they did that because of performance but I really never bought it. I am a believer in Cisco's core products but I believe they have stretched themselves a little thin on some of these products. Try to find someone in TAC that knows a darn thing about these devices. Good luck.
This is a BUYING opportunity
It is time, like it was in WLAN, for Cisco to acquire the competitor that is eating their lunch. Cisco got real and bought Airespace. They have been kicking butt in large enterprise WLAN builds ever since.
With Riverbed at 75% off the high, Mr. Chambers and his wise advisors should offer $25 per share for all RVBD outstanding shares and call it done. None of Cisco's acquisitions or organic internal products can stand up to Riverbed (in our internal testing).
We have tons of Cisco gear in our global network and would like to buy some more for WAN Optimization but, unfortunately, we can't as the existing product set doesn't stack up. I like to buy Cisco as there is a global relationship, support, logistics, and sourcing.
So, both myself, my local Cisco account team, and the Channel Partners anxiously await the acquisition of Riverbed. That is what will accelerate the Riverbed business...