IDG Enterprise CEO Interview Series: Blue Coat Systems CEO Mike Borman

Talk about pressure. Mike Borman had been at Blue Coat Systems as CEO only about three weeks when IDG Enterprise Chief Content Officer John Gallant and InfoWorld.com Editor-in-Chief Eric Knorr pinned him down for an interview on where he plans to take the application delivery technology company. In this installment of the IDGE CEO Interview Series, Borman — who was formerly CEO of Avocent and a top IBM executive, among other roles — talked about new directions for Blue Coat, including moves to capture opportunities in cloud computing and in the market for midsized IT shops. Joined by Chief Product Officer and former CEO Brian NeSmith, Borman also discussed the tough competitive landscape where Blue Coat battles companies like Riverbed and Cisco in WAN optimization and security.

Why did you take this position? What did you see in the company, and why did you think this was the right opportunity?

Borman: I looked at more than 20 different CEO opportunities, some private, some public. Most were software. That’s where my strength is and that’s where I think I can add the most value. I was looking at a number of attributes. The first was: What kind of market are they in? My view of this market, if you abstract it up, is that we’re here to make the Internet faster and more secure. Over the past 20, 30 years, the Internet has been built without many rules. It’s like building roads all over America and having no speed limits and no stop signs. We can add a lot of value in round two of structuring the Internet. I think the surface has just been scratched. There’s so much more that we’ll be able to do, in terms of security and making things faster, but actually making some rules so that people can communicate at the right time, with the right information.

What you’re describing sounds like adding more of a business layer to the Internet.

Borman: Yes, a business and control layer. That has been absent. The first thing was to connect everybody, but then they find out, “We’ve got to do it faster, because now there are more connections — they’re peer-to-peer connections.” Now, all of a sudden, they say, “We’re out of bandwidth,” because you’re communicating too much, and you’re communicating richer content, in different kinds of files. You’re communicating voice over IP, or doing video, or webcasts.” It’s just booming.

I think the opportunity for us is to add some control around what goes on in the Internet — the security piece — and then help accelerate it, and cache it, and manage it so that people can get things done, and think of business differently.

The second element of why I came here was I wanted a company that had intellectual property: a set of patents, software that we can monetize. I don’t think my strength is going into a startup with no intellectual property and creating it.

The third reason I chose here is because of market share. I wanted somebody that had a strong position in a market that I could capitalize on as we build the strategy. These guys have a strong position in the high-end security marketplace.

Define the Blue Coat market position. When customers think of Riverbed, for example, they think WAN optimization. What should they think about Blue Coat?

Borman: Think of the Internet and think of intranets. Companies have their own private networks, and then there’s the broad Internet out there. Networking has many segments that customers will buy into. We’re in the security and the acceleration market segments for the Internet and even for intranets.

Define for readers what makes Blue Coat unique from Cisco or Riverbed in the optimization market, which is very competitive.

Let’s focus on security first. I think [our position] is pretty evident by our market share and the number of top customers in the Fortune 500. We probably have 80 percent or higher of the Fortune 500 using our security appliances for managing policy and managing security on the Internet. It is basically a cloud service. Without getting into a lot of detail, every day our appliances update a cloud system we have that monitors all the URLs that [are clicked] every day — more than a billion, probably close to 2 billion. We monitor them for malware, spyware, and we analyze them in one database. If we don’t find it there, we go to another database. If we don’t find it there, we do it manually. Then we make sure that our customers have access to all the latest information every day. We have 70 million users, and when you talk to our customers they have great success stories on implementing our security appliances, and thwarting tens or hundreds of thousands of malware and spyware viruses in a month.

That’s one segment that we’re in, and many of the readers will know our value there. And that’s a value sale, right? Security is a value. How much value is it to your company to have data loss protection? To have the ability to real-time monitor everything that’s going on out there and make sure that you’re secure from all the cyber crime and cyber theft and things that are going on? That’s a value sale.

The second area I’ll call acceleration, and it’s a broad area. As you know, bandwidth costs a certain amount of money. If you’re New Zealand Telecom and you’re trying to respond to your users that want Web pages from the United States and Web pages from Europe, all of a sudden you’re paying a lot of money to international carriers back and forth for a lot of data.

We’re able to cache data for them and save them a lot of money in terms of bandwidth. On the other hand, companies want to accelerate certain applications. I mean, I want SAP to run, but I don’t want you to be looking at the oil spill with your screen from CNN News in the corner streaming video all the time. I want to be able to parse that out and accelerate the SAP. We can do that for them. That’s a cost savings, as opposed to a value sale, which isn’t bad, it’s just a different value proposition to a customer.

Right. But in terms of the competitive set, the ones you hear about most often — Cisco and Riverbed — what makes your company unique? Is it the strength in the security space? Is it a different set of capabilities on the acceleration side? What’s the unique differentiator?

Borman: I’ve been here 21 days. I’ll answer, and then I’ll ask Brian to help me on this point. We have certain features in our product that are much better than what our competitors have. If you’re streaming video or Flash, we will accelerate that and compartmentalize it much better than our competitors will. So the question is: Where is this industry going? Is it going to more and more video? Or is it going to stick with email compression?

Brian and I are trying to make sure our development teams are going where the puck’s going to be. That’s where we’re focused right now, on trying to make sure I understand in a year from now where are the bandwidth bottlenecks? Where do customers want the acceleration? Where can I really help them?

NeSmith: You have to answer it in really two different contexts. [Compared to the competition] I would still say today that we provide much better price performance; we provide much better scalability, a much richer feature set. And in the end, what you find with the security where we play is the flexibility of the policy. Because every organization has a different view about what they want to do, what they want to take place, and how they want to work that. So we can help an organization drive an experience that’s down to the user, down to the individual action or behavior with any type of traffic that’s coming across in that link.

That was our differentiation six or seven years ago, and it basically remains our differentiation today. Then we augment the appliances with a cloud-based service where we provide a zero-day or zero-minute or zero-second protection against malware and spyware. What’s going to be unique for us going forward is taking that technology, that understanding, and leveraging it into the midmarket, which is a different user experience. They don’t want nearly as much complexity with new products, new cloud services, new appliances.

That’s the area that I would say if anything we’re probably a bit challenged. But we’re looking to actually add to our portfolio capability, and push more aggressively into that midmarket, and expand the market potential.

But it’s that flexible policy when we’re competing with security vendors; it’s what we do. We support every type of authentication. There’s no exception in that. And it’s also just the performance of the platform.

Our roots as a caching and acceleration company play well for us in competing with security vendors. Not only do we not slow down the connections, we actually make things a lot faster.

First and foremost is our ability to handle Web content, and accelerate that, and spec it. I think YouTube and the consumer Internet video phenomenon is starting to have its effect inside the enterprise. We’re ideally positioned as a company, with support for Windows, for QuickTime, for even Real Networks, even though there’s not a lot of that traffic out there anymore. We have a lot of HTML5 capabilities. We had, since 1999, a CDM capability that exists inside of our platforms that a lot of our customers use. And we’ll be announcing some new capabilities around Flash very shortly.  We’re going to remain the preeminent platform for how to deliver video in an organized and a controlled manner inside the enterprise.

As you move into the midmarket, do you anticipate more integration of all this functionality — making more of a turnkey, consolidated system of security and application acceleration all rolled into one at a lower cost? Is that the general product direction for that market?

The midmarket is where I’ve spent a lot of time. There are a few things you have to consider. First, it has to be easier to use and be a solution-oriented approach. I don’t think they have the wherewithal, or the time, the money, the energy, or the skills to dedicate to optimization, security, or moving certain addresses back and forth. They want a combined solution. They would prefer that it’s industry-oriented.

But yes, our product will have a combined feature set that will appeal to small and medium businesses, and we’re going to do it in two ways. One, we’re going to do it via hardware and software — I mean a solution on premise. The second way we’ll do it is offer them a cloud service, so you won’t need any hardware or software on premise.

How does that work? Usually acceleration is point to point — you have a box at either end of the connection. What’s the architecture for the cloud?

Borman: You route all Internet traffic through our network. If it’s a local thing, it gets done locally. If it has to go out to the Internet, it is automatically routed to our cloud that does the security, and comes back. If it’s a remote user, it can have a hard proxy directly to our cloud, or it could have an agent that does it and routes it to the cloud. But regardless, it would be routed to our cloud so that you wouldn’t have to go through an owned appliance.

So is it Blue Coat as the cloud security provider or would you work with other companies that offer managed services to incorporate that kind of security functionality into their managed security services?

Borman: We’ll do both. The way to be successful here is to first have the intellectual property and the capability to do it. But there are a lot of security service providers out there, and we need to partner with them in order to be successful there, too.

How does cloud change the WAN optimization market? We saw Riverbed announce essentially a virtual device that could be housed a service like Amazon EC2, where that could be the other end of your WAN optimization connection, when you roll jobs up to EC2. Is that something you are considering as well? How does cloud affect that market?

NeSmith: What Riverbed has announced, basically, is that you could deliver through software and it’s like a data center. It still requires a symmetrical approach; you’ve got to have equipment on the cloud provider premise and you’ve got to have it on the end customer’s premise. I believe that’s going to become applicable, but we believe we have a better position, since we’re the gateway security point for the vast majority of the world’s largest corporations. We have a WAN optimization functionality on that platform, and we also have a virtual client platform that we sold on the other side. So we’re already in place with the equipment to allow this to be enabled for customers.

I don’t expect it to be a huge market day one. The first provider that goes out and makes the case that, “Hey, to use our service effectively you need to buy this extra thing,” isn’t going to really resonate.

Borman: My view is there’s virtualization and then there’s cloud. I think it’s important that people understand the difference between just virtualizing something on premise, versus doing it off premise on someone else’s machine, where it could be virtualized or it could not be virtualized.

Q: Ultimately, we’re moving toward this world where you’ll have a seamless extension of your own data center into some infrastructure in the cloud. Is that an opportunity specifically for you in terms of supporting that integration without the huge latency that’s inherent in that kind of extension?

NeSmith: We’ve done a lot of partnerships with Oracle, SAP, and the like. They don’t want to highlight that they may have performance problems as they run remote to where their users are, and they might need to buy something incremental to do that. The reality is that that ends up being true, and we see that opportunity. But a lot of the cloud providers go a long way to making sure they’re lightweight in what they can do from a performance standpoint. We absolutely think there’s going to be opportunity there in time, and we’re in a good position with the technology to be able to service that.

Borman: A good example, like Brian said, is SAP BusinessObjects. If you find the right application that has a lot of data requirements, like BusinessObjects does, that’s who we’re partnering with to start accelerating their traffic.

In my last job I would call on a number of different companies, from retail to banking, and all of them had servers in stores. Walgreen’s would have several servers in thousands of stores. Wachovia would have several servers in thousands of bank locations. And you go around the world and think about that. Now, take availability aside for a second, for maybe point of sale. For all the others, the payroll server, inventory server, pharmacy servers, whatever else is going on, they have them there mainly because of response time. They don’t want to have to go through the whole protocol network. With one customer we were able to displace the servers in the store in the locations around the United States with just one appliance. That appliance is able to accelerate and cache information back to the store and back to the main datacenter so that the response time is basically the same as if the server was there. Now that value proposition is tremendous for companies. Not just retail and not just banks, but any place you have servers for a distributed purpose like that.

So we’ve started with security and then with data center consolidation. This is back to the future. This is taking things, and just putting terminals in, and accelerating, and making it look like it’s there. With our technology, because of the intelligent caching that we do on both ends, you don’t need to replicate. Let’s say there were 3,000 servers that Walgreen’s had. You don’t need 3,000 worth of processing servers back in headquarters. You can get by with one-tenth the number of servers or the amount of power because of what we’re able to do. We don’t have to hit the mainframe all the time.

I think that’s a great opportunity for CIOs and businesspeople out there to take a look at where they want to be in three years and say, “I really can be serverless in my stores with this kind of technology.” I think it’s a great thing. They don’t even have room for their servers in the stores. They’re dusty, they’re hot — there are all sorts of issues.

What’s your mission as incoming CEO? What do you need to do with Blue Coat?

Borman: My mission is to grow the company. I’m focused on organic growth, because I think the products we have are tremendous. Matter of fact, we have almost more products than we’re able to sell, to be honest with you. From CacheFlow that we’ve rejuvenated for telcos, to enhancements in the Packeteer area with some cloud service and improved capabilities, to our WAN optimization, and security. The whole networking field, I think, is just primed for us to grow. Probably because of my background in the channel, we use a lot of channels here to go to market, and my background in technical sales, I think that we have a great opportunity.

What will ensure that growth?

Borman: I think number one is having a better go-to-market plan for the products we sell. I think we’ve been somewhat of a technology-driven company. Fabulous products, but by the time you go into product marketing, and then field marketing, and then training the sales, and training the distributors, and training the solution providers, and getting the right air cover, there’s a long list in this go-to-market that I think can be improved. Just doing that will help, because the products are so good.

I think we will need to make some acquisitions, in terms of build versus buy. I got a lot of questions on the analysts call when I was announced. Am I going to do what Avocent did, having Emerson buy us? They asked if that’s my mission here. And I said, “They’re two entirely different subjects.” Avocent was in the KVM business and that business was slowly being embedded on the service processor in the motherboard, so it was slowly declining. We needed a new strategy, and we got the new strategy, but in order to execute it you needed money. Here I don’t need a new strategy. I think more of it is in go-to-market and execution than getting a new strategy around our products.

You’ve mentioned video several times; you mentioned Flash. Obviously, you’re aware of Cisco’s huge emphasis on video now, going all the way to consumer advertising. Where does that fit into your product lines? What are you looking at to accommodate that? In terms of bandwidth and acceleration, that’s an order of magnitude bigger problem than making a terminal appear to be local.

NeSmith: Cisco’s emphasis is on what I would call real-time person-to-person telepresence. Our strength is really on what I would call the YouTube-like video, CDN — more informal stuff that’s stored, that’s going to be moved, that’s going to be repopulated. We do some real-time stuff. One thing you do for real-time support is just provide quality of service capabilities, which we clearly have with the PacketShaper technology. That is a big driver for our PacketShaper business.

A lot of our emphasis is in really driving that kind of consumer Internet-like experience, but inside the enterprise for things like training, education, announcements, CEO videocasts, and those areas.

It’s using Flash, using HTML5, using Windows training technologies, and making sure you can mix and match those things as you would like. It’s doing that in a way where you allow all the existing applications to continue to function like they normally do, because video, especially, takes five people watching some streaming event on the Internet, and the entire corporation’s network can come to a grinding halt.

It’s protecting the existing network, but also enabling the video. So it’s a little bit of both of those things. And that’s where I see us going with video. 

Are there specific product opportunities associated with video that are not out there now?

NeSmith: There’s nothing right now that deals with Flash, I think, in any significant way. None of the vendors can really do caching or support or deal with Flash content, which is, obviously, almost all the YouTube video. HTML5 is taking off. I’ve seen the surveys over the last three years, and video continues to rocket up high on the list as an underlying concern about what they’re going to do with dealing with this consumer Internet video.

[When it comes to] conferencing video, I think they have a construct for managing that. They have rooms set up, they have systems that control that — they can manage that. In some cases they even manage that through the router infrastructure. But there’s consumer Internet as it becomes applicable to the enterprise. What are the tools they’re going to use to manage the distribution? Both enabling it and making sure it doesn’t overwhelm their network. I think that’s what the opportunity’s going to be.

Borman: One of the things Brian touched on is the visibility of what’s going on. I think it’s the next level of analytics that you apply to the data that we get — and can then tell customers ahead of time what’s going to happen, what trends have we seen. As you think about all the focus on analytics, that’s a value-added service that we’ll be able to provide to customers.

What would we expect in the six-month to one-year road map from Mike Borman?

Borman: At a high level you’ll see us refresh a number of our products and come out with some new service offerings. Brian and I work as a team, but with Brian focused on the products, I don’t feel I need to focus so much on the product engineering. I’ve got one of the world’s best experts and we have a really strong team.

I think I can add the most value in 6 to 12 months of having the strongest go-to-market capability out there. That really involves the people that buy. I work from the customer in. The people that buy our security are different people than [those who] buy WAN optimization or acceleration. And they are different from people who might do store consolidation and do servers. So I have to make sure we have a channel. My own salespeople, my own technical sales, our own channel with solution providers all trained and capable of calling on different elements of a company with an enterprise sale. And I need to make sure that we have the marketing and we have the industry because we really haven’t done a lot of [vertical] industry before.

Again, if you think we’ve been a product-driven company, if you can apply the customer-driven mentality, we’ll meet in the middle and we’ll be fabulous.

This article, “IDG Enterprise CEO Interview Series: Blue Coat Systems CEO Mike Borman,” was originally published at InfoWorld.com. Follow the latest developments in business technology news and get a digest of the key stories each day in the InfoWorld Daily newsletter.