In typical analyst fashion, I've often waxed poetically about the ongoing integration between the application and networking layers of the technology stack. Yes, I know that many people take analyst rhetoric with a grain of salt, but fortunately the market keeps backing me up with proof points like Cisco's Application-Oriented Networking (AON) initiative and IBM's acquisition of DataPower.
This week, there was yet another metric pointing to this Pervasive Network Application Processing (PNAP) trend. Seattle-based F5 Networks beat Wall Street revenue and profit estimates. As of this writing, F5's share price is up a 1997-like 25 percent plus in two days.
F5 is actually an interesting industry study. In 2000, competitors ArrowPoint and Alteon were swallowed by Cisco and Nortel for a combined $12.9 billion (note: how's that for a boom era statistic). The prospect of industry heavyweights in the content switching market left F5 looking like the ugliest girl at the dance. Many industry pundits thought the company would never survive the post-Sept. 11, 2001, tech crash.
Why did F5 survive and prosper? The company had an early (and accurate) PNAP vision. Since it was already cracking open IP packets, F5 decided that it could add tons of other services in addition to load balancing. F5 now offers stuff like SSL VPNs, application firewalls, WAN acceleration, traffic shaping, etc., all based on taking some type of action at Layers 4-7. Yes, Cisco, Nortel, Juniper and a whole bunch of others have similar products, but F5 seems to have established itself as a brand leader. The company is now focused on aggregating network application services on common hardware platforms with central policy, management, and administration. Good call.
Here's my take:
1. F5 is another PNAP proof point but this is just the beginning. The SOA architecture will be made up of all kinds of specialized network appliances. With that perspective, companies like F5s, Aventail, Reactivity, and Citrix are sitting pretty.
2. It's hard but not impossible to compete with Cisco, even if you are a relative small fry. Companies like F5, Juniper, and Fortinet have been successful by combining innovation, vision, focus, and rapid execution. Others will follow.
3. A lot of my senior technology industry peers have grown cynical over the past few years. It's not uncommon for someone to comment on how high tech is maturing and the days of innovation and financial gain are over. F5's success proves that there is still upside in the technology game if you can identify the right space, remain focused, and execute at the field level.