In a market dominated by Cisco, can other networking companies hope to get noticed? ProCurve, the networking arm of industry giant HP, thinks it can.
The company's chief executive John McHugh says that since he took charge of the company 10 years ago, ProCurve is now the stand-out competitor to Cisco across the whole range of networking equipment. Its market share may still be small in comparison, but McHugh argues that his company aims to beat the networking stalwart and any other contenders on performance, features, value and indeed any other area.
ProCurve is one of the first companies in the market to introduce a lifetime warranty for its products and comprehensive road-maps on where the company will be in five years' time: McHugh appears to be living up to his word.
However, Cisco is not the only company to beat. New competition in the shape of Juniper Networks is emerging, and the company has to stay on top of its game. And it's not just technology investors who should care how the company is performing: networking equipment is expensive and has a relatively long shelf-life, so customers need reassurance that the company has a healthy future
Q: You have new competition in Juniper Networks. How do you deal with that?
A: Well, ProCurve has to be the road map that Juniper is following. When you look at our road map to see where we got from 10 years ago to rise to number-two, they have to be looking at that. What we have been able to do over that time is singularly unique. We have seen such success and virtually everybody else has lost market share.
The challenge they are going to face is that this is a very difficult market to be in. Unfortunately, it is underestimated by most people. The people who come from the carrier space tend not to get the way enterprise networking works. They tend to be dismissive about enterprise applications and deployment. You really have to get inside the head of the enterprise customer, and this is not about selling a few switches. It takes a lot of persistence and years and years of commitment, stability and focus.
My initial take on it [Juniper] was: "I don't know the market needs another supplier of a complex, proprietary, single vendor, end-to-end solutions at a relatively high price." We will see how things play out, but I think we already have one of those [Cisco] and I don't think customers are looking for another one.
Meanwhile, you have been building up market share against Cisco, correct?
2007 was a spectacular year for ProCurve. We have had a continuous history of growing 20 to 25 percent in revenue year over year. Last year we grew faster than 30 percent worldwide including EMEA where our market share is the strongest and our revenue size is the greatest. That, of course, is pretty amazing for a business unit the size of ProCurve, in the networking space, to be able to put 30 percent on top of that.
We ended up with an annual revenue of about $750m (£350m) worldwide. You will see that the analysts put us at number-two, beside the market leader [Cisco] in the switching equipment category. We are planning for a similar kind of performance going forward. In revenue size and market share that meant we grew at about twice the market.
Our business case is to outgrow the market and in Europe we are approaching 10 percent revenue, market-share growth. In the worldwide picture it is more like five percent. It's small, but those numbers tend to get bigger and bigger as you close in on a billion dollars run rate.
Where is the growth coming from?
A lot of the growth is in the solutions area. Over this past year we kind of painted this picture of this Adaptive Network vision of security, mobility and convergence and all of it unified under our Adaptive Edge architecture. This intelligent edge vision that we had...
...five years ago is allowing us to deploy a tremendous amount of functionality and to open up new capabilities in our technology that, in fairness, most of the other architecture out there can't.
What is your market share in the switch market?
Obviously it differs greatly depending on whether you are looking at ports or revenue. We have almost twice as much market share in ports as we do in revenue, as we tend to be a little bit better value than some of our competitors. In EMEA, when you look at our share in ports, we have been running at 16 or 17 percent.
If you look at the competition [Cisco] for the first time, in revenue terms, and from a port point of view, they have slipped below 50 percent of the market and we believe that trend is going to continue.
Why do you think customers prefer to buy your kit over Cisco's?
The reason, I think, is that there is a complicated buying process you see in this area of the market.
This isn't a commodity purchase for most enterprises. It is not around price. Most people make the mistake of thinking it is price-driven and it's not. They see the network as a strategic asset. The best way I can describe it is as kind of a substrate, to their communications, to their IT, to their security… there are about four or five different strategies that become part of this major buying cycle.
As a result, [customers] tend to buy this infrastructure with a very long capital cycle so they think of it in seven to 10 years. In any buying process like that, you have so many linkages, such as management, service and support and application deployment, they tend to deep-dive into it. So it is really not around price.
I think ProCurve over the past five to 10 years has had those things that really resonate with customers: stability and predictability. We have been very consistent with our message and haven't jumped from one to another. We have been saying "this is where we are going" and it has resonated with customers for the past five years. If I was to put a word around it, that is "safety". Another would be "security".
Is it as easy as that?
If you look at all the people who are predicting what will happen I think you cover a sub-set of what will happen, but there is always about 20 percent that nobody really predicted, nobody saw it coming. That is the biggest challenge.
That is why we took the decision to build an architecture that could handle that, that was capable of having new functionality ignited. So that is why we have an architecture that is able to do packet inspection on the fly, to have encryption onboard, even if that was not built in as a basic function of the product.
Can you give an example of an area that took everybody by surprise?
I think [an example is] a lot of the security architectures that are being sold today. If you think about 2000/2001, we were talking a lot about VoIP, which was the application area that everybody needed to worry about. But there were solutions on the market that did nothing for mobility or security.
The security layer that now must come over voice and mobility was the one thing that most of the industry did not catch. So the architectures that were deployed in 2000/2001 have already been pulled out.
Right now, security and what is happening in that area with access control, trusted computing groups, standardisation and unification around a common architecture, client integrity checking — those are breakthroughs. They are critical in allowing new functionality and better value as well as [being] easier to deploy.
So you think you were right about those things?
Absolutely. I can go back to my slides in 2002 when I was beating a drum about it. It is not about voice, mobility or security, it's about how all three play together.
It's about supporting the portable handset that's secure that can handle all three issues. So the Adaptive Edge architecture, the 5300 and 5400 products that we sell, are completely active with today's access control methods. They interact with our appliances and have anomaly-detection capabilities and network immunity, because we can program them with agents that will create and detect these new capabilities inside of existing protocols and architecture.