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Inside Riverbed’s Plan to Pivot From {Hardware} to Software program


Oct 6, 2022

  • Riverbed is shifting its technique away from {hardware} and into the observability-software market.
  • The IT agency is betting it may well beat opponents like Cisco with the brand new technique, its CEO mentioned. 
  • However it should overcome supply-chain points, a market downturn, and different monetary struggles.

The knowledge-technology agency Riverbed is betting it may well outdo giants like Cisco, value about $172 billion, within the observability-tools house. However it’ll take a giant product pivot to take action. 

In a swap from its networking {hardware} roots, Riverbed, with a market cap of $3.3 billion, is launching extra software program merchandise that use synthetic intelligence and machine studying to observe a agency’s IT infrastructure, referred to as observability instruments. And it is proving fruitful, Daniel Smoot, the CEO of Riverbed, advised Insider. After years of hardship, Riverbed’s suite of observability instruments generates extra gross sales than its {hardware}, making it pivotal to the agency’s restoration technique. Its massive ambitions embody a full market takeover in a hotly contested house, in line with Smoot.

“We’re going to dominate the unified observability market,” Smoot mentioned.

Earlier than Riverbed entered the observability-tools enterprise, the corporate generated most of its income promoting WAN {hardware}, gadgets that firms use to switch knowledge between knowledge facilities and distant areas. However as purchasers moved to the cloud and the COVID-19 pandemic shuttered the agency’s factories, {hardware} gross sales dropped and put the corporate in $1.9 billion value of debt. 

In consequence, Riverbed entered a restructuring-support settlement in 2021 with its lenders and private-equity sponsors to scale back its debt by greater than $1 billion. By way of the settlement, Riverbed acquired $65 million to develop observability merchandise similar to network-performance-management software program.

Riverbed’s give attention to observability software program is very vital now that the chip scarcity is slowing down the manufacturing of its WAN optimization gadgets, one other blow to its {hardware} gross sales, Smoot mentioned. The scarcity has additionally animated public-networking distributors — just like the $1.72 billion Excessive Networks, the $8.57 billion Juniper Networks, the $35.24 billion Arista Networks, and even Cisco — to strengthen relationships with suppliers as they scramble to construct their servers, routers, and different data-center gear in a well timed method. 

Riverbed’s newest product, Alluvio IQ, combines all community knowledge into one place for enterprise use, just like full-stack observability instruments that opponents like Cisco and Datadog, value $29 billion, present. Since Riverbed launched Alluvio IQ’s beta model in late Could, the agency has seen its product income rise by 20% this yr, a big win given its extreme drop in {hardware} gross sales, in line with the agency. 

“The whole obtainable marketplace for that is unbelievable,” Smoot mentioned. “And its not shrinking.”

However it’s a crowded house. Legacy tech firms like Cisco, IBM, and VMware have acquired startups focusing on observability software program. And companies just like the $4 billion New Relic and the $13 billion Splunk that have not been purchased have been specializing their instruments for many years. 

Smoot, who has beforehand labored at Cisco and VMware, mentioned he believes that Riverbed can beat the competitors as a result of it already has a long time of complicated networking knowledge with 1000’s of its clients. Smoot added that Alluvio IQ may also help companies entry that traditionally siloed knowledge, one thing new distributors won’t have. 

“For a brand new startup to come back and say, ‘I’ll go seize all that knowledge,’ that is an unattainable job,” Smoot mentioned. 

However Riverbed now faces its greatest problem but: the market downturn. A lot of its purchasers in finance, healthcare, and prescribed drugs aren’t recession-proof, so the corporate might lose enterprise, Smoot mentioned. That is why it is not discontinuing its {hardware} enterprise regardless of hinging future progress on the observability market. 

“What makes me essentially the most nervous is the unknown,” Smoot mentioned. “I believe each CEO proper now’s frightened about what the recession might deliver. It retains us all up at night time.”

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