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Cisco, Juniper struggle to find, keep place in WAN optimization market

For years, Riverbed Technology and Blue Coat Systems have dominated the WAN optimization market. Cisco Systems has enjoyed success in the market by piggybacking its wide area application services (WAAS) on its dominant Integrated Services Router (ISR) platform, enough to boost it into the top three in market share. Juniper Networks, meanwhile, has struggled in fourth place, with growth in recent quarters earning it only a 4.4% share of the WAN optimization market. The three leaders all enjoy 20% plus shares.

Cisco Systems and Juniper Networks dwarf Riverbed Technology and Blue Coat Systems in terms of revenue, resources and product portfolios, but these two networking giants have struggled to compete with the smaller companies in the WAN optimization market.

For years, Riverbed and Blue Coat have dominated the WAN optimization market. Cisco has enjoyed success in the market by piggybacking its wide area application services (WAAS) on its dominant Integrated Services Router (ISR) platform, enough to boost it into the top three in market share. The three leaders all enjoy shares of more than 20%. Juniper, meanwhile, has struggled in fourth place, with growth in recent quarters earning it only a 4.4% share of the market.

Both Juniper and Cisco were dinged in Gartner's recent WAN optimization controller Magic Quadrant. The firm demoted Juniper to a niche player from a leader and left Cisco Systems in the challenger position.

Juniper recently launched a host of improvements under the umbrella of Adaptive Threat Management Solutions, including a software-based WAN optimization controller (softWOC), an updated network access control (NAC) solution, and an update to the company's Unified Access Control (UAC).

Despite the improvements, however, analysts were not bullish that the networking equipment vendor would be able to close the gap with rival Cisco and WAN optimization specialists Riverbed and Blue Coat.

"When you talk with vendors about their competition, Juniper's often mentioned, but more often you'll see Cisco, Riverbed and Blue Coat," said Matthias Machowinski, directing analyst at Infonetics. "Juniper's been in that [fourth place] position for a pretty long time now, and ... certainly, if you do the math, their market share increased for them, but it's still a small piece."

Tim Richards, Juniper's director of product management for WAN Acceleration, said part of the disparity was due to Juniper's focus on selling full solutions and its focus on major enterprises.

"When we go out with customer announcements, we seek to provide solutions, not provide point products," he said. "The majority of Riverbed's revenues, it comes from very, very small deployments, two to four box deals."

Michael Rothschild, senior manager of solutions marketing for Juniper, pointed to the company's recent deal with the Kingdom of Saudi Arabia's Ministry of Foreign Affairs as an excellent example of Juniper's sales strategy.

"They needed to scale this across the entire kingdom," Rothschild said. "They bought everything, including the kitchen sink." He said Saudi Arabia literally bought every piece of enterprise networking equipment Juniper had to offer in the deal.

Nick Lippis, CEO for consultancy Lippis Enterprises, said few WAN vendors would pass up the opportunity to sell some products if they could not sell the whole, and he felt Juniper's claims to be shooting for total package deals were questionable.

"I don't think their shareholders would love that argument," Lippis said. "I've never heard that a company would walk away from the deal because they weren't getting the entire network."

Meanwhile Cisco has run into some problems of its own.

The networking giant has seen prodigious growth since its 2005 acquisition of Terabit and that company's WAN optimization technology, even briefly capturing first place in the market in Q4 2008. But much of Cisco's success is built upon its installed base.

"Part of Cisco's market share is just because they have so much of the router market," Machowinski said.

Cisco's strong WAN optimization share dips

Despite the good fortune, Cisco's WAAS market share revenues took a disastrous slump in Q1 2009, according to Infonetics data, sliding the vendor to third.

A Cisco representative readily acknowledged the problem but said the company was working hard to solve it.

"It's partly due to the fact that the UCS [Unified Computing System] platform was announced [that quarter], and a lot of our sales teams have been focused on that," said Michael Leonard, a marketing manager with Cisco. "WAAS is sold by the same data center sales teams that sell Nexus and UCS, so that's part of what we figure it is."

Leonard said he was optimistic that, with the sales teams seeing the drop in an otherwise fast growing segment, Cisco would continue to remain a strong player in the WAN optimization market.

"That's something we're addressing. How that will turn out, I guess we'll see," he said. "I expect WAAS to come back. We have a lot of customer demand, and I'm seeing a lot of deals."

Machowinski was upbeat about Cisco's long-term prospects.

"One quarter isn't enough to warrant a trend here," he said. "Shares have shifted back and forth over the last few quarters."

Machowinksi also speculated that Cisco's tight integration of WAAS with its ISR and other networking offerings might have unduly hurt the former market leader's sales as an overall slowdown of IT spending dragged down investments in the expensive hardware that Cisco usually bundles with WAAS. Blue Coat and Riverbed were able to offer their products as relatively cheaper standalone appliances that offer a quick return on investment by cutting costs through reduced bandwidth and improved efficiency.

Managed WAN optimization a potential boon

Both Cisco and Juniper cited partnerships with service providers to offer managed WAN optimization services as a key part of corporate strategy over the next few years.

Global Crossing, for example, has been touting its new deal to resell Juniper's WAN optimization capabilities, and Verizon Business also sells Juniper-based WAN optimization services.

Cisco also emphasizes its close ties with service providers (it partners with Verizon Business as well, for example). Leonard said the company announced nine such partnerships last November, with more in the works.

Lippis cautioned that such deals could be tricky.

"They basically have to train service providers to sell WAN bandwidth optimization," Lippis said. "And the more bandwidth optimization they sell, the less bandwidth they sell. So that's hurt [telecom] sales."

Leonard acknowledged the challenge but said service providers are coming around to see the big picture.

"I will agree that it's a very long sales cycle, of about two to three years," he said. "But service providers are taking a more holistic view now.... The fact is, it doesn't reduce bandwidth overall. It reduces the bandwidth of a given application and removes hiccups, but … customers actually end up using more bandwidth because it works better."

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