Anatomy of Innovation: Exodus Founder B.V. Jagadeesh (Part 7)
SM: How did you determine that was the direction the market was going?
BVJ: We made a bet on the fact that security was becoming more evident after 9/11. Based on my experience at Exodus, we also bet that bandwidth costs were going to be higher. The invention we came up with brought the two technologies together. We integrated that into the existing product line.
From a positioning perspective, we also decided to go in as a complimentary tool to existing infrastructure rather than competing against existing players like Cisco. We offered our customers security and optimization. We offered it at no risk because customers could keep the existing infrastructure, plug in our technology, and instantly save dollars. If they saw problems or did not want to keep us on board, it was very easy to remove.
Customers liked that. Nobody’s job was at stake by bringing in a startup company. That was brilliant in terms of positioning. We had all the functionality of Cisco, Nortel and others, but a startup label would make it hard to compete against those established players. Within six to eight months, after customers had really started to appreciate our value proposition, they said “I bought Cisco four to five years ago and I have not seen any enhancements. I see a lot of innovation in your products, and I see the same functionality in your product, can I pay you for full functionality?” We were able to take over services and compete in that manner. It was also very easy to take it over because we just had to turn on the software license in that product.
SM: How did your revenue ramp look with that model?
BVJ: In 2002 we had $2 million. In 2003 we had $10 million. In 2004 we had $20 million. In 2005, which is when the acquisition happened, we had $45 million. Today NetScaler did $200 milion of revenues and this year should push $300 million. I think that is pretty remarkable.
SM: It is a great ramp. Did you have to stay at Citrix?
BVJ: I did. My goal was not to just hand it off and move on. I honestly wanted the acquisition to become successful. I stayed for almost two years and worked with them very intensely. I evangelized NetScaler to the Citrix channel and their partners. That gave continuity as well. Eventually we brought in a Citrix guy to whom I was able to hand off the responsibilities over time, after which I left.
SM: What was your next step?
BVJ: I took a few months off. We went to the Himalayas. The entire family, 25 to 30 people, went and it was absolutely stunning.
SM: That brings us to 2008?
BVJ: It actually brings us to 2007. That is when I was called to run 3Leaf Systems. I was called by a recruiter about the job. It was the same recruiter I had called to recruit my VP of Marketing at NetScaler. He called me up last year and asked me to take a look at this company. They were in a hot space and looking for a CEO. I was not really ready in April, but then I started to talk to the company. We went through three to four months of discussions and I really liked the value that this technology brings. It has a disruptive nature.
SM: Exodus and NetScaler are hard acts to follow.
BVJ: It had to be compelling, and it is. It takes me back to my original roots in the fundamentals of computing. It is a really fascinating concept. The founder is really brilliant. He is the CTO right now. He started 3Leaf about four years ago. The whole notion behind the idea is that computing power, basically from mainframe to mini-computers to desktops and to commodity servers, is an evolution that has taken us 20 years.
People actually deploy a single application on a single server. VMWare came along and showed us that it is a very inefficient model. The server is on all the time, consuming scare resources such as space and bandwidth. You cannot expand a datacenter infinitely. VMWare solved the problem with a very interesting model. What we are doing is taking the problem to the next level. VMWare solves this problem for a single server, and it will still pose a lot of the same challenges a customer faced. It shifted from where it was several years ago to the new VMWare environment.
What we do is allow you to take the computing resources and we de-construct the resources. You take all of the resources in all of the servers; CPU, memory, I/O, etc. We de-construct those resources and put them in a pool. There is no more physical barrier to a server. A server is x number of CPUs and x amount of memory. What we are doing is taking that barrier of a physical server out.
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This segment is part 7 in a 8 part series
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Well, all sweet talks apart – being challenged by new technologies, thinking of better than Cisco et al – can we have some tough questions???
– Why Exodus went bust?
– Was it the founders fault/no business model/executive leadership fall?
Or the founders had predicted it and had had the exit route already setup?
– Was it something too bloated – at one point 30 Billion dollar!!!
Guess not. I think it will be too hot over a cup of coffee to ask. Is that so?
I have forwarded your comments to Jagadeesh, Jeevan. He can answer if he chooses to.
I don’t think Exodus lacked a business model, but it did have a lot of dotcom customers, so when the dotcom market went bust, all those customers also went bust, and Exodus became saddled with a lot of fixed costs.
Anyway, that’s just my assessment. In 1999, all the internet stocks were hugely bloated. Of course it was too bloated, and you don’t need Jagadeesh to answer that question, you can answer it yourself.
Excellent question.
I believe the biggest blunder Exodus made was to acquire Global Center in late 2000 and transaction completed in May 2001. At a time when the tech world was collapsing and dot com companies busting everyday, acquiring global center which predominantly had dot com customers and taking on liability of tens of new datacenters and thus very quickly draining the $3B cash Exodus had in the bank led to the unfortunate ending. There was no problem with the model, as you can see companies like Equinex, Rackspace and many other datacenter companies flourishing today. Market needs high quality datacenters that provide managed solutions to customers. The model hasn’t dramatically changed today compared to what Exodus was offering then.
BTW, both of us founders had left Exodus by mid 2000.
Sir,
I admire your candour and forthrightness. I guess that it is a quality I definitely see a lot in enterpreneurs. However, with all due respect I am not convinced at all.
– Do not you do any risk evaluation at all? Even if if you took a company under your wings and whose customer base is on fire, could not that company be dropped at as a hot potato (complete shutdown)? I believe it should not have been a problem at all.
– There is a stong claim that the CEO (Bill K) was rewarded handsomely to take the company towards bankruptcy! It looks to me that even in early 2000 (before your departure), the stage was already set!!
– A product company should talk in terms of products, engineering skills, and of course living within its mean. Why Exodus exactly went the other way (sales = 1/3 in the company), unclear responsibilities, too much useless orientation for employee (massage parlor!) etc.
– Why so many data centers when your basket is already full and could not be managed well? I think at one point it went upto 50!!
P.S.: I am not a former Exodus employee or anyway related to them. What pained me the most, a company which could have done a lot went bust as if after staying on steroids (I guess you are still a record holder at NASDAQ for consecutive quarters period) and in turn wasted away billions of dollars. And it is not small a amount.
These are in no way to attack or vilify the founders. Enterpreneurs are makers in today’s economy. They make things happen. I have huge respect for them. But I really want to know the inside view of what happened?
Thank you,
Jeevan