Techaisle Blog

While unveiling a very lucid product and service strategy today, Citrix announced several significant products and alliances that fill gaps in the SMB Cloud Computing marketplace. These include:

• An expanded Me@Work mobile applications suite, with new and improved apps,
• A strategic alliance with Microsoft to distribute Windows and Office365 as Cloud Services through XenDesktop,
• A VDI-embedded and secure Ultrabook Client,
• Next generation Gateway and next generation cross-cloud bridge,
• A certified cloud platform developed in collaboration with Apache CloudStack,
• Improvements to the NetScaler line.

And the most consequential announcement of the day - a wide and deep strategic alliance with Cisco that if well executed, will offer a true 1+1=3 result for both sides and have a major impact in the industry.

As the Cloud matures, Techaisle believes that integration is key and the market will coalesce around virtual versions of the client and server concepts – with communication at the core of the client suite and a collaborative, front office multi-user suite in the middle of the Server environment. With today’s announcements, Citrix moves us closer to this concept.

We will focus on three of the announcements with a point of view on how we consider them to be both strategic and timely, and finish up with huge potential impact of the slew of new alliance announcements.

Part of the achieving the vision is to ensure collaboration is possible across all hardware environments, that application objects can be executed regardless of proprietary operating systems and formats. By supporting all the formats shown here through their Receiver, Citrix already enables apps and data on three billion devices, which is expected to grow to ten billion in the next five years – Like many Korean manufacturers, Citrix is thinking in terms of screens, and knows that consumers are driving adoption of connected screens as part of the lifestyle – my teenage daughter has a MacBook, iPhone, and Satellite TV running all at the same time, each screen running multiple applications. When selecting a workplace, surveys show this generation would rather give up a more lucrative employment opportunity than give up their devices or right to use social media. As Kevin Kelly observed in his visionary work, New Rules of the New Economy, back in 1998:

“Because communication—which in the end is what the digital technology
and media are all about—is not just a sector of the economy. Communication is the economy.”
- Kevin Kelly, New Rules for the New Economy, 1998

We could not agree more, and the ME@Work announcement shows Citrix is taking the long view.

The ME@Work mobile app suite includes several productivity and collaborative applications, including the #1 web-conferencing solution, GoToMeeting. We found it interesting that Citrix is simultaneously introducing some competitive products in conjunction with the partnership; an email client – most important component of the collaborative desktop – as well as strong offers in file sharing, personal collaboration, and web conferencing. It is a bold move; for those of us who have been watching the industry for a while,  we remember when there was a triumvirate – Windows, Intel and Novell - and then there was NT with OS-embedded LAN capabilities - and then there were two. And then Netscape came out swinging with a better web browser that seriously pressured Microsoft - and then there was Windows-embedded Explorer - and then there was one.

But Microsoft gets a lot out of these announcements, especially if execution can follow strategy. Microsoft revenue is over 25 times that of Citrix, but they can use the excitement brought by a fast-growing, deeply technical, and cloud-focused next-generation partner. Especially in the SMB space - the 100-249 & 500-999 segments of the mid-market are a real sweet spot for this partnership.

By partnering with Microsoft to bring Windows, Office365 and the SkyDrive to market, Citrix benefits from the practically ubiquitous Windows installed base and opportunity for widespread adoption of Office365, (which we expect to have a banner year in 2013). And access to the most mature global software distribution ecosystem in the world. Microsoft gains an ally that provides substantial support and momentum against Google Apps, a catalyst to move away from packaged software,  additional credibility in collaboration, and adds 10,000 channel partners at the same time.

The Ultrabook client is a strategic offer because it supports the tide of BYOD and it is another route to market for XenDesktop VDI. It also aligns Citrix with Intel and the major OEMs who are looking for returns on large investments in the Ultrabook line.

While the Microsoft news is a big deal, the even larger news was a strategic alliance with Cisco that involves major commitments of joint R&D, integration of product lines and joint manufacturing in the future. Key Points:

Citrix and Cisco announced broad cooperation in three major areas: Mobile WorkStyles, Cloud Orchestration and Cloud Networking.

Mobile WorkStyles
The big idea here is any data on any device (the billions of screens mentioned above) to support the growing BYOD wave, and leveraging joint strengths to deliver a unified secure environment for applications, data, voice and collaboration. Cisco contributes Jabber and substantial collaboration expertise gained from the Webex acquisition, Virtual Experience Infrastructure (VXI) technology, and MediaNet Technology. For Mobile WorkStyles, Citrix brings a new and improved CloudGateway and Receiver, a new and improved ShareFile service and XenApp & XenDesktop. The alliance aims to bring a richer experience with seamless security and a leveraged support infrastructure than covers the entire stack 24x7 on a global basis.

From a business perspective, Citrix can ride on the back of the 800 pound gorilla straight into the Enterprise, leveraging the industrial-strength performance of Cisco’s premium product lines at a reduced price point. As with Microsoft, Citrix is aligning itself with an old-guard industry titan, in this case, one whose revenue is 16 times that of Citrix. And as with Microsoft, the deal looks like a win for both sides. Our opinion is that it could help revitalize Cisco, whose foray in to software based business created some great products in Webex, but the model was different enough to shake them up. We continue to write on the rise of the digital channel at the expense of a traditional HW VAR Channel. When Cisco acquired Webex they entered a software-based, inbound sales, price sensitive, online-marketed, sold and delivered, six-week sales cycle, user-configured business model that was almost the antithesis of what they were best at: premium quality enterprise hardware-based solutions that are differentiated by making the value of the whole network exceed the sum of its’ parts - sold by an enterprise sales force and delivered by top shelf VARs and SIs. Especially within SMBs, the right combination of price and SLA to solve business, not technical problems, are overriding criteria when buying, and traditional hands-on VARs might not even be called - cut out by online marketing and inbound sales teams. In hardware, it is more about scale economies, quality engineering and brand management - software is all about market share and developing accelerating returns and an ecosystem of fellow travelers.

Cloud Orchestration
The second key area of cooperation is in what is being called Cloud Orchestration, where the objective is to manage the traditional data center functions of computing, network, storage, security, and management, delivered across physical, virtual and cloud environments using Unified Computing, Unified Management and Unified Fabric. This is clearly Cisco’s home territory and they bring expertise and technology including Unified Computing System (UCS), Open Network Environment (ONE) and the Nexus Series of switch technologies to bear on these challenges. Citrix contributes the newest CloudPlatform, a new open source CloudStack and the XenServer to this effort. Using Cloud Orchestration, the alliance aims to deploy Public, Private and Hybrid Cloud environments with unified management that reduces complexity and improves agility, something SMB customers will be happy to see. Embracing Open Source is also a good move for Citrix to increase the footprint.

Cloud Networking
The third leg of the alliance is centered on the Citrix NetScaler Cloud Networking Platform. Here the objective is to adopt NetScaler as the go-to technology and jointly develop the next generation through the alliance. This will be accomplished by offering NetScaler as a strategic component within the Cisco Cloud Network Services Architecture, with seamless integration at the product level in areas including Security and WAN optimization. The order of implementation is that Cisco will adopt, sell and market the NetScaler, it will be manufactured according to a certified Cisco Design specification followed by a joint road-map for product interoperability, development and go-to-market strategy over the long term.

Through these announcements, Citrix has taken several steps to advance Cloud-based services and fill gaps in the market; they have introduced a new channel for Windows and Office365, brought to market their own collaborative suite, and a VDI-embedded client to further the VDI and BYO trends in the SMB space. Other technology announcements were also significant but for reasons of brevity we have not covered them in detail. One thing is for sure - no one can accuse Citrix of being timid. Of course, when snuggling up with the big guys the way they are, Citrix themselves said it best in the announcement: "POs are better than PR". It all falls on execution at this point.

I recently attended and "Small Business Analyst" event hosted by Cisco in which the Company talked to us analyst types about their strategy in approaching the SB market on a worldwide basis. The conference lasted a day, the group of attending analysts was small but well represented including leading names in the IT analyst market such as Gartner, Forrester and Yankee Group.

New products were showcased and strategies outlined and while I won't go into detail about new products due to non-disclosure conditions on many of them and also because it wasn't the products that impressed me the most. Make no mistake the products did impress me and my colleague - enough for us to decide that we should evaluate them for our own business.

What impressed me the most was the focus and disciple Cisco has brought to bear. Too often we see companies that are leaders in the enterprise space take on the SB market opportunity under the rationale that what's good for enterprise is good for SBs - with a few changes. Wrong. Too often we have seen it doesn't work and when it doesn't these firm redefine "SB market" to simply mean companies that are a little bit smaller than their traditional market and calling it SB or worse "SMB". The latter often used as a catch all for all those firms that are currently not being sold to be the comapny's sales force which is too boxed in in their thinking of who their customers are and how they should be sold. Its organizational inertia at work.

Cisco, themselves a leader in the enterprise space is approaching the market as any company in it's position should - with a strategy, products and organization designed to address SB needs. Here are some of the key elements

• Cisco has created an entirely new group to not just market products to SBs but to design products that fit SB needs. The product development group will re-think products ranging from simple routers, switches to telephony products keeping SB needs as their sole perspective. For a company used to enterprise style margins on products they have realized that they may not be able to gain the same kind of margins on thee SB products but the important point is that they are incorporating that reality into their strategy. This is a very difficult shift to make for most companies but Cisco realizes it is not just about how products are manufactured but how the organization is structured as well.

• Speaking of organization, the Cisco SB organization is in many ways a company within a company with its own set of priorities and complete in that it has its own sales, marketing, services, support and product development initiatives.
  
  
  • Marketing: Cisco has come to terms with some market realities such as the fact that the Cisco brand is not well known among SBs. Cisco's VP of Small Business Marketing Rick Moran, stressed this point as a major component of their SB marketing strategy. Here again we see Cisco's pragmatism, willingness to adapt and learn come through. For a company traditionally used to talking about speeds and feeds their SB marketing efforts exhibit a focus on SBs and the people running them. The importance of SB to Cisco as a company is evident from the fact that there is a link to a variety of SB related pages on the Cisco home page. Cisco has established a place where SBs can have a conversation with Cisco, its employees and its partners called Cisco Community Central. the site is less used to market Cisco products and more to help SBs learn about the developments relevant to them - technological or otherwise. It's a young site - barely a year old but a promising start.
  
  
  • Sales/Channel Development: Cisco has always relied on a strong network of channel partners to sell, service and support its products. Now Cisco has introduced a special certification for channel partners selling to SBs called "Cisco Select Certification". Achieving that certification requires taking training and an exam. Interestingly, Cisco has laid out the return in investment for a channel partner to help them decide whether it is worth it to achieve that certification or not. Achieving the certification comes with the usual benefits of support and market development funds.
  
  
  • Regional Sensitivity: Cisco is showing a lot of pragmatism by not taking a "one-size-fits-all" approach to SB marketing. The bulk of the current SB effort appears to be targeted towrads countries where Cisco has a leadership position in the enterprise space. In other words, given their penetration of enterprise markets its seems logical to go after SB markets in order to increase revenues from a region. Also not all solutions are being marketed aggressively to SBs in all regions. For example, in countries such as India where are large opportunity still exists among enterprise markets for solutions such as collaboration or enterprise network hardware, the SB market is taking a back seat - for now.
  
  
  • Services and Support: Cisco VP Sherri Liebo introduced the services and support offerings targeted towards SBs. These include add-on warranties and varying levels of support for channel partners as well as end customers. The support solutions range from entry level technical support (branded as Smart Foundation services) to ongoing monitoring of network resources (SmartCare and SmartNET). All have varying levels of support and hardware replacement options. These will also be sold through the burgeoning network of SB channel partners.
  
  
  

Bottom line - I believe Cisco is off to a good start in the SB space exhibiting the focus and discipline required to gain share in this very difficult market.

Abhijeet Rane
Techaisle