Riverbed Technology’s Jerry Kennelly on turning over $1bn a year making products named after fish
When I meet Jerry Kennelly, the least aggravating part of the eight-hour journey he’s just made was on the tube between Westminster and Bond Street.
His flight from Stockholm to Gatwick had been fraught with issues, it’d taken him the best part of two hours to get into London from Gatwick and, having stopped off in Westminster for a meeting with government, it was the tube that meant he’d managed to make it only a few minutes late.
“Even governments need better networks,” he says, as we go into what is unquestionably the most luxurious office I’ve ever been in. Everything is gilded, except (all) the booze and the titanic walnut table we sit down at. “It’s this nice because it’s private equity. Do you know how these folks make so much money? Leverage.”
The firm owns three of Riverbed Technology’s distributing partners – and Riverbed is Kennelly’s company. Founded in 2002, the Silicon Valley heavyweight makes products that reduce latency and bandwidth limitations on wide area networks that are operating across long distances and to multiple locations. It might not be the sexiest of businesses, but what it does is absolutely vital to all of us.
“My co-founder [Steve McCanne] is this incredible, genius little professor who came up with a technology which shows that the speed of light is not fast enough. Think about it like this: it takes a micro second for an internet packet to get from this side of the table to that side. But from London to San Francisco, it takes a tenth of a second. That’s too slow. Computers were designed to operate in millionths of seconds, not tenths, and those speeds cost time and they cost money.”
Need for speed
Riverbed’s technologies mean its 28,000 users – including all of the Forbes Global 100 and UK firms like Virgin Media and Net-a-Porter – can collaborate with colleagues around the world. “You’re probably too young to remember this, but WWW used to be world wide wait. When Riverbed exploded onto the scene in 2002, we had a technology that cut time and bandwidth. We could make the packet travel seem instantaneous. It was staggering, and that first product is still our main product.” The product is called SteelHead. “My co-founder had an obsession with fly fishing. The most prized trout to catch is called a steelhead [aka rainbow trout]. It’s really strong, 60 per cent trout, 40 per cent salmon. They put up a big fight if you catch one. So we called our first product SteelHead in honour of the fish and his obsession with fly fishing Then we needed a company name, so we went with Riverbed.”
Kennelly, an HP, Motorola, Hitachi and Oracle veteran, arrived in Silicon Valley in 1975. “I’ve seen it beginning to end. Do you know why the Valley looks like it does? When I got there it was all apricot and orange groves. We started building chip factories and putting in warehouses and parking lots. But now that’s not what’s needed – it’s all software, knowledge workers. So companies just stuck a load of carpet down in their factories and moved people in.” While Riverbed has offices in the Valley, its main operations are in San Francisco; “it’s just nicer.”
Beating the Valley
Kennelly, who has offices all over the world, says that nowhere can come close to matching Silicon Valley. “IP is the scarce resource, and what you’ve got in Silicon Valley is a minimal critical mass of engineers, the culture for startups, the VCs and the greed. Then you’ve got the supporting infrastructure – lawyers, bankers, accountants, landlords, schools. It is still the only place in the world where that all comes together.”
That said, Riverbed has focused time and energy on recruiting engineers in India – where it’s also just rolled out its latest product (more on that in a moment). “In the US, whatever you’re willing to pay, the engineers just aren’t there. There are 1.2bn people in India. They have a lot of grey stuff between the ears and are cheap – we pay in rupees, report in dollars. You can hire someone for $30,000 – five times less than in the States. I’m embarrassed we didn’t start working there earlier than we did. I’m spiritually Indian, I think.”
Riverbed’s newest product is called SteelConnect, and it’s the only software-defined WAN – ready to go now – that sits in the cloud. This means complete and secure connectivity across a whole cloud-based network, replacing all WAN management via a centralised console.
SD-WAN technology automatically selects the most cost-efficient range of public internet connections and private links and configures them to behave like a network – which means applications no longer being at the mercy of standardised bandwidth.
“There are about 35 companies building these capabilities right now. The clear winners will emerge soon, and if you’re not in the top three, you’re going to have a miserable time. We will be in the top three, and I think we’ve a chance of being number one.” Riverbed has already signed up Orange Business Services, whose will be integrating SteelConnect into its hybrid network.
I ask him why these technologies are coming to market now. “Because this is how long it’s taken the cloud to arrive. People were talking about it in ‘02, ‘05, but it never came. In 2013, people started buying. In 2015, it was like holy mackerel! Now it’s here with a vengeance.”
Riverbed’s new product will help it achieve double-digit growth – and Kennelly doesn’t intend to stop there. The company floated on the Nasdaq in 2006, before going private again in 2014 after being bought by a private equity firm. Since then, it’s made several key acquisitions and developed SteelConnect.
Next year, Kennelly plans to go public again. “One of the beauties of being a private company is that you can say whatever you want. So I can say we’re looking to IPO the company next year. We want to serve this new cloud networking market. We’d like to have a higher growth rate. An IPO will help us with that.”
We move on to other big topics. “What’s the purpose of tech? To support humanity. How do we pull up the lives of the poor? Technological advances and free and open trade. The former means businesses, and businesses are served best by free trade, including immigration. Immigration is a huge source of wealth for my country. Wherever everyone is moving to – that country is the winner. It’s the ones they’re coming from who are losing. If governments want to solve the productivity puzzle, rather than stimulating the economy, they should be helping to up-skill everybody so we can actually hire people.”
Kennelly says he doesn’t understand peers of his that gripe about paying taxes. “Do they really think that schools, the roads, police – a safe, secure country – played no part in getting them where they are? They should go to countries who don’t have those things and see how far they get.”
Doing your bit extends into the day-to-day running of Riverbed, which Kennelly describes as like a big family. Every year, he gives all his employees a Christmas sweater. “We’re just putting in the order for this year now. It’s a pretty big deal from the firm we order from, making 2,400 of them!” This is because, it transpires, the firm is a small Montana-based company that makes fly fishing equipment. “It’s to continue the theme – ethical, honest, clean business, and fishing.”