Will WAN Optimization Wars Be Decided In The Cloud?

With WAN optimization having transcended "niche" status as a market segment, solution providers are looking to ally with the vendors who will not only keep the technology from becoming a commodity, but also best position the channel to bring WAN optimization into the cloud era.

Those trends are creating a shift, solution providers say. There's no argument that the appetite for WAN optimization is increasing among businesses. Gartner, for example, recently pegged the growth of WAN optimization from a $700 million market it was in 2006 to an expected $1.9 billion market in 2011, and a tenfold increase from that over the next five years.

But does that mean more opportunity for VARs that sell WAN optimization?

"Two years ago I would probably have said yes," said Larry Chaffin, founder and CEO of Pluto Networks, a Lewis Center, Ohio-based solution provider. "But now there are so many partners out there, where before there weren't, and the market is getting saturated just like routing and switching was. If you think about how many people sell routers and switches now, that's happening with WAN optimization. Before it was a specific niche of partners who did it and did it well, and they were the ones driving everything."

What's happening now, Chaffin argued, is that because WAN optimization and acceleration technologies are in the hands of more and more solution providers -- as well as large service providers and systems integrators that can sell WAN op products in discounted volume -- the market is no longer seen as a specialized play.

Vendors, Chaffin said, have to fine-tune their channel programs to make sure the feet-on-the-street VARs get their share of the pie and keep the technology from box-pusher status.

"It's to be expected with the growth of the product," Chaffin said. "So I guess it would really depend on what the vendors are willing to do to step up for the channel."

Like many solution providers that sell WAN optimization, Chaffin partners with Riverbed Technology, which remains the marquee vendor in an increasingly more crowded market. But Pluto also recently added Certeon, a fast-rising WAN optimization startup based in Burlington, Mass. that's aggressively courting channel partners with an all-software WAN optimization platform and big profitability promises for VARs.

His loyalty to Riverbed hasn't waned, Chaffin said, but he sees room for other players on his line card, too. Certeon, which offers a 100 percent software-based WAN optimization that's also hypervisor- and hardware-agnostic, became a particularly compelling option, he said, especially with Certeon pushing aggressive partner incentives.

"For us, it was, we had many customers looking to do more virtually and not wanting to put appliances everywhere," Chaffin said. "Riverbed does have a solution for that and we do have customers there, and you also have your Blue Coats, your Silver Peaks and your Ciscos. But a lot of it came to customers looking at different technologies and different prices, and for whatever reason, they were turned off by Riverbed."

For WAN optimization, Pluto now carries Riverbed, Certeon and also Fastsoft, a provider of Web acceleration software.

"I think all three of them are different plays for our customers," he said. "And it's what's going on in the market. I can give you an instance where I was called by a CIO, and they were looking between Riverbed and Cisco, and I gave my opinion on why he shouldn't buy Cisco because of what he was going to run into, and it came down to price. Riverbed could only go a certain amount off, but Cisco doesn't have that problem -- Cisco will give whatever to win the business."

Next: Who Are WAN Optimization's Best Bets In The Channel?

Pluto Networks' situation -- a mix of vendor partners addressing different WAN optimization scenarios for customers -- is becoming more typical for channel partners who want to tailor the WAN optimization experience as much as possible depending on customer needs.

"The shift toward cloud is about finding the most efficient models for delivering IT --it's the flexibility and the differentiation of the offerings," said Nik Rouda, director of product marketing at Riverbed. "For us it's not just WAN optimization anymore, and our VAR partners are really enjoying the momentum we have."

Riverbed is the best option for partners, Rouda argued, because it has the widest WAN optimization purview, and in the past year, the company has made a number of moves to extend its WAN optimization market lead.

Last November, for example, it launched a cloud-ready version of its popular Steelhead WAN optimization appliances, and also entered the cloud storage market with a product called Whitewater -- two products that Riverbed CEO Jerry Kennelly described at the time as "the nirvana of data processing."

Last month, Riverbed made two aggressive acquisitions: Zeus Technology, a virtual application delivery controller specialist, and Aptimize, a Web content optimization vendor. Earlier this year, Riverbed also confirmed a partnership with Akamai to deliver cloud-based applications more effectively over hybrid cloud networks.

Rouda said Riverbed recognizes that the WAN optimization market has plenty of newcomers. But none, not even networking heavyweights like Cisco, can offer the breadth of on-premise hardware appliances, virtualization- and cloud-ready WAN op, and adjacent technologies that Riverbed can now, he argued.

"Riverbed can do all of these areas better than everyone, which is why partners keep coming after us," Rouda said. "They love that they can pick the technology that fits all of their different requirements."

Riverbed's competitors, of course, don't see the company's dominance in such certain terms.

Certeon's aCelera line is a strong alternative to established WAN optimization players like Riverbed, Cisco and Blue Coat Systems because it's a flexible, virtualization-ready solution that's already significantly cheaper than those vendors' products, said Karl Soderlund, Certeon's senior vice president, worldwide sales and business development.

Soderlund, who came to Certeon in 2010 following two years as vice president and general manager for sales and marketing at HP ProCurve, is also hoping to hit partners in the place they care about most: their profit margins.

In May, Certeon rolled out a new channel program through which there is no longer a standard discount on partner sales of aCelera, but when qualified partners register aCelera deals through Certeon's partner portal, that partner is guaranteed at least a 20 percent margin, as well as the opportunity to work with Certeon using a web-based margin calculator to understand how the final discounts will be awarded. Certeon is guaranteeing at least the 20 percent, and will also provide VARs 10 percent if a VAR registers a Certeon deal but ends up losing that deal to another Certeon partner.

Deal protection and margin pressure are the biggest complaints he hears from partners, Soderlund told CRN at the time.

"Traditionally, you can go out there and promise high margins, but due to competitive pressures … they're dragged down into single digits," Soderlund said. "Most resellers would say you can't run a healthy business on single-digit margins."

Jeff Facer, CEO of Area-Wide Technologies, a Champaign, Ill.-based solution provider, said his company came to Certeon based on how the aCelera platform fit in with Dell-owned EqualLogic storage. Specifically, Area-Wide uses Certeon's aCelera to optimize SAN replication and disaster recovery with EqualLogic SAN.

"I've never had a vendor in all my years doing this that will pay you a margin if you brought the person to the dance but the person didn't end up dancing with you," Facer said. "That is an extremely unique program that no vendor in any IT market we work in offers. So far, they've sot behind everything they said they're going to do."

Many of Facer's clients are banks or other distributed businesses that have several branches but aren't looking to invest in pricey distributed infrastructure and can't afford more bandwidth and business connectivity than they already have.

"It's turned these slow WAN links to a point where we can do almost anything we want," Facer said. "And we can tell them they don't have to buy five more T1 lines but we can do centralized e-mail storage and business continuity."

Next: Virtually Yours?

Hipskind Technology Solutions Group, a Hinsdale, Ill.-based solution provider, also came to Certeon while seeking WAN optimization complements for its EqualLogic business. Wally Lang, Hipskind's general manager, said adding Certeon to many of the storage-led deployment Hipskind does with EqualLogic has opened up more market opportunities for Hipskind, particularly in the midmarket.

"It's not a physical rip-and-replace upgrade -- it's virtualization-based -- and it's pretty straightforward," he said.

As the price of bandwidth connectivity comes down, businesses of smaller and smaller size are able to move much more data around using that connectivity, Lang said. That means that WAN optimization and acceleration technologies are no longer sought only by large enterprises -- it's small and midmarket businesses that are consuming more of their IT as-a-service and able to afford things like disaster recovery and business continuity products.

Lang said that a vendor like Certeon is right to design its program specifically with VAR profitability in mind given how competitive the WAN op space is.

"The guaranteed margin is really unlike any others I've seen because you just don't get guaranteed a big margin that's going to be healthy for a VAR," he said.

Along with Certeon and a host of other competitors, solution providers have also embraced Silver Peak Networks, which is growing its sales behind a 100 percent channel-only strategy.

Silver Peak, currently embroiled with Riverbed in a patent dispute, still does about 80 percent of its WAN optimization revenue in physical devices, but sees that balance shifting to 50 percent physical and 50 percent virtual products as early as next year, said Larry Cormier, senior vice president of worldwide marketing.

"Virtual appliances make it easier for us to dial up the amount of performance a customer wants," Cormier told CRN. "A lot of competitors still claim that a physical appliance will always outperform a virtual appliance, but we're all riding Moore's Law. You can always throw more cores at it to do more de-duplication, or throw more storage at it."

Silver Peak in mid-July launched a new WAN optimization platform, the Virtual Acceleration Open Architecture (VXOA), which adds a software development kit, API and flexible pricing options to its existing NX, VX and VRX Wan optimization products. The goal, according to Silver Peak, is to make its WAN optimization tools a lot more flexible with third party servers, blades, storage arrays and routers to fit comfortably in virtualized environments.

VXOA is offered as subscription, pay-as-you-go licensing starting at $1,600 for one year, as well as an investment protection option where customers pay the difference between smaller and larger licenses -- rather than the full larger-license fee -- as they upgrade their appliances.

Next: WAN Optimization In The Cloud

In an April report, Gartner said the overall size of the WAN op market will grow tenfold over the next five years as cloud-based WAN optimization and acceleration come to the fore, and vendors push WAN op platforms that aren't tied to hardware appliances.

"Vendors are developing innovative approaches that make the deployment of cloud-based communications and networking services more secure, reliable and efficient," Gartner wrote. "Organizations with globally distributed locations should consider WAN optimization services to eliminate the need for distributed WAN optimization appliances."

One of the startup companies looking to catch that wave is Aryaka, a Milpitas, Calif.-based WAN op vendor that bagged $15 million in Series B funding in June. Founded in 2008 by several Speedera and Akamai alumni, Aryaka's hook is that it uses proxy servers, redundancy removal and other techniques over its own private network to power a WAN optimization service managed by 25 globally distributed points of presence.

According to Aryaka, its WAN optimization platform can offer less than 20 millisecond latency for 90 percent of the world's business Internet users, and it has begun opening up the platform for sale, as a cloud-based service, through VARs, referral agents, service provider and IaaS providers, as well as other vendors.

"The market penetration for WAN optimization is only about 5 percent -- only about 300,000 boxes," said Ajit Gupta, Aryaka's founder and CEO, in a June interview with CRN. "We want to work with people who can see the future and who we don't have to convince this is the way to sell WAN optimization."

As cloud computing and mobility shift the paradigms in IT, solution providers will need to position WAN optimization in terms of not only cost-savings, but also flexibility, VARs say.

"I don't think people realize how much it can touch so many different things," Pluto Networks' Chaffin said. "We aren't yet seeing much WAN acceleration in handheld phones and on tablets, but think of how many different things there are that could have a client on them."

The transformation of solution providers' WAN optimization technology practices will need to respond in kind, the vendors say.

"They are building distinct practices around WAN optimization -- the demand is out there," said Riverbed's Rouda. "It's a distinct technology now, which is not the same as saying it's a commoditzed technology. It's an enabler for a lot of different types of approaches. We can help them sell more storage, or virtual machines, or access to applications. Look at it from a solutions point of view, and it's a key enabling technology."