PKI pioneer VeriSign has acquired a dozen companies, including dot-com registry Network Solutions and telephony service provider Illuminet, over the past two years. VeriSign CEO Stratton Sclavos spoke recently with Senior Editor Carolyn Duffy Marsan about how he is merging these far-flung operations into a cohesive set of network services.
It's been two years since VeriSign bought Network Solutions for $21 billion. Describe the progress you've made merging the companies and their products.
What we've been trying to build over the last seven years is a company that can provide a set of infrastructure services that everyone needs and that are a very important component in doing commerce and communications over these networks. There are four building blocks to commerce in a physical or digital world: 1. Finding who to do business with; 2. Setting up a trusted relationship; 3. Being able to communicate securely; and 4. Being able to transact business.Advertisement: |
Finding who to do business with [refers to] domain names and other Network Solutions' services that help companies establish, manage and monitor a presence over the network. On the trust and communications side, that's what's traditionally been VeriSign, with its digital authentication and digital signature services. Once you figure out how to communicate securely, you can transact business through our payment gateway. So tying Network Solutions and VeriSign together has meant being the on-ramp to the Internet with digital identities and linking that with the ability to set up trusted relationships with customers and business partners.
Online exclusive questions
What new products have stemmed from the merger?
We're developing a portfolio of services, so we can offer domain names coupled with certificates or a single managed service that helps you set up and monitor your DNS or your network security. In the second half of this year, we'll be introducing a secure domain name service that ties a certificate to a domain name to make it unspoofable. A few weeks ago, we announced the digital trust services framework ... for making all of VeriSign's identity and transaction services exposed through XML interfaces and callable by Web services platforms from IBM, Microsoft or BEA. From an enterprise customer perspective, this makes building Web services much easier.
Can you give examples of an enterprise customer that has benefited from the merger?
Bank of America started with us in the earliest days as a VeriSign Web server certificate customer and then as a client-side PKI customer. They are a customer of our digital brand management services, where we now give them the ability to manage their portfolio of domain names, do international registration and monitor across the network when someone else might be using a Bank of America name. They also use our consulting services for network and security architecture.
VeriSign has been very acquisitive since the NSI deal. What have you done to combine these companies?
We've done two significant acquisitions: NSI and Illuminet. We've disclosed seven other acquisitions and four asset purchases, but much of that was done for $5 million here or $15 million there. These were to consolidate our position in a market we were already in. About the middle of last year, it became more economic for VeriSign to acquire a few chosen [competitors] then to spend marketing dollars to go after their customers. While that's created a lot of noise ... it was cheaper to do it that way. For example, when we bought the assets of CyberCash we were able to double our payment business.
How well have you absorbed the Illuminet acquisition, which brought you into the telephony arena?
That deal closed Dec. 13. There is a product road map we talk about in terms of bridging voice and data networks. This is very different than convergence. Will voice and data converge some day and everything will be on an IP network? We think that's a true statement, but we think it's a 15-year timeframe. There's a huge opportunity for our company to bridge the two networks, to talk IP on one end and [Signaling System Seven] on the other, to provide fast data lookup services across both worlds and new location-based services. We see trusted network services ... that deliver messages from one client to another regardless of whether it's instant messaging, [secure messaging services] or e-mail. And we add that special VeriSign secret sauce around security to make sure the message wasn't changed along the way. You'll see the first of those services in Q3.
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VeriSign Global Registry Services is your cash cow. What are you doing to drive new technology into the dot-com registry?
When we bought Network Solutions, we said the back-end registry was the crown jewel of the company, and we would do many things with it beyond DNS lookups. [In March] we started rolling out a brand-new infrastructure that can respond to multiple types of look-ups for payment information, caller ID and number portability. This has been a huge R&D project. At the end of last year, we had proven the system could respond to different protocols and scale to 100 billion lookups a day. Today, in our current network, we're handling more than 5 billion lookups a day, which is more than the phone system handles and more than the credit card system handles. It's already the fastest transaction system on earth.
From a capital perspective, we spent $120 million last year and somewhere in the order of $100 million this year and next on the registry. A third of that investment is related to this new infrastructure. We have 13 locations today where DNS queries are handled. We're going site by site and putting the new infrastructure in with the old. We'll have the 13 sites updated by the end of the year. For our enterprise customers, this [investment] gives them the ability to buy a more robust set of directory and lookup services. All the things we talked about in Web services are going to need fast lookups. It plays into the whole notion of the enterprise moving beyond the firewall and using the network for what it's going to be best at: reducing costs and automating business processes.
What do you see as the most exciting Internet technologies on the horizon, and how are you positioning VeriSign to take advantage of them?
Web services will create a new generation of innovation in the industry. The network will become the operating system. Software that is inherently built to talk to other software ... is a fundamental change in the programming model. We're building everything at VeriSign to have XML interfaces. You'll also see VeriSign continue to expand its set of security services for monitoring PKI, firewalls and VPNs.
Coming out of this recession, what's your outlook for VeriSign's market opportunity in the enterprise this year?
The level of activity across the company in terms of who's talking to us and what they want to do with us is higher than it's ever been. What's perplexing is that I don't think it will turn into a near-term upside for us. All our prospects are saying they're going to spend. The question is when they're going to spend.
VeriSign was an early proponent of Enum, a service that translates between telephone numbers and domain names. However, it appears your Enum testbed has stalled and that your position on multiple top-level domains for Enum has been rejected by most of the Internet industry. Are you going to reverse your position on Enum?
The problem with Enum is that from Day One it was proposed as a Holy Grail for convergence. The Enum idea - linking a phone number to a set of Internet addresses and using it to do services - is a great idea. We are in the process of offering services like WebNum [which provides shortcuts to wireless-accessible URLs] and the Voice Registry [which uses voice recognition to connect calls] that are Enum-like services. There's no business in Enum today. It's not until the applications emerge that any of this matters. By that time, we'll already have a new architecture that can handle multiple protocol lookups between voice and data networks. We may be losing the PR battle on Enum, but I don't worry too much about losing the war.
The PKI market has been extremely slow to catch on. How is that market changing since Sept. 11?
PKI was a market in which the technology has never been fully adopted, and it never caught on in the enterprise. We started with a different model because we deliver a service that makes it easier for an enterprise to deploy PKI. So it wasn't about selling PKI technology, but using the technology to roll out secure applications such as e-mail, VPN or extranets. Sept. 11 certainly created more visibility for security services. Interest is at an all-time high, but translating that into purchases is going to take longer than people are thinking. I think it's a second half of the year spend. PKI has been woven into the fabric of many new devices such as cable modems, set top boxes, smart cards, load balancers and accelerators. We keep finding new areas of the market to put PKI into even as the enterprise market is just starting to adopt it.
What is your view of the disarray at the Internet Corporation for Assigned Names and Number (ICANN) and what that means to the overall stability of the Internet?
We're still forming our views on the new proposal [to reform ICANN.] The true charter of ICANN should be to make sure that the domain name system is stable, to make sure there's open competition and to make sure that new features continue to be pushed forward like internationalized domain names and secure domain names. They've spent too much time thinking about new [top-level domains] and too little time thinking about the stability of the Internet. The anarchy has to get out of the system. [The Internet] is a critical piece of infrastructure on a global basis. It needs to be treated as such.
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